Pentiar Sanmar Limited, CHENNAI v. DCIT Company Circle III(2), CHENNAI

ITA 2680/CHNY/2017 | 2006-2007
Pronouncement Date: 27-11-2019 | Result: Allowed

Appeal Details

RSA Number 268021714 RSA 2017
Assessee PAN AAACT7409H
Bench Chennai
Appeal Number ITA 2680/CHNY/2017
Duration Of Justice 2 year(s) 19 day(s)
Appellant Pentiar Sanmar Limited, CHENNAI
Respondent DCIT Company Circle III(2), CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-11-2019
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 27-11-2019
Last Hearing Date 15-05-2018
First Hearing Date 15-05-2018
Assessment Year 2006-2007
Appeal Filed On 08-11-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI ! '!# $ % BEFORE SHRI GEORGE MATHAN JUDICIAL MEMBER AND SHRI INTURI RAMA RAO ACCOUNTANT MEMBER ! ./ ITA NO.2680/CHNY/2017 & /ASSESSMENT YEAR: 2006-07 M/S. PENTIAR SANMAR LIMITED (EARLIER KNOWN AS TYCO SANMAR LIMITED) NO.9 CATHEDRAL ROAD CHENNAI 600 086. VS. THE DEPUTY COMMISSIONER OF INCOME TAX COMPANY CIRCLE III(2) 121 MAHATMA GANDHI HIGH ROAD CHENNAI 600 034. [PAN: AAACT 7409H] ( ' /APPELLANT) ( ()' /RESPONDENT) ' * + / APPELLANT BY : MR. R. VIJAYARAGHAVAN ADVOCATE ()' * + /RESPONDENT BY : MS. R. ANITHA JCIT * -. /DATE OF HEARING : 27.11.2019 /0& * -. / DATE OF PRONOUNCEMENT : 27.11.2019 1 / O R D E R PER SHRI GEORGE MATHAN JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -11 CHENNAI (HEREINAFTER CALLED AS CIT(A)) IN I.T.A. NO.316/C IT(A)-11/2014-15 DATED 20.09.2017 FOR THE ASSESSMENT YEAR 2006-07 . ITA NO.2680/CHNY/2017 :- 2 -: 2. MR. R. VIJAYARAGHAVAN ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE AND MS. R. ANITHA JCIT REPRESENTED ON BEH ALF OF THE REVENUE. 3. IT WAS SUBMITTED BY THE LEARNED AUTHORIZED REPRE SENTATIVE THAT THE ONLY ISSUE IN THE ASSESSEES APPEAL WAS AGAINST THE ACTI ON OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE OF PROVISION FOR GRATUI TY WHICH WAS OTHERWISE ALLOWABLE U/S.40A(7)(B) OF THE INCOME TAX ACT 1961 BY APPLYING THE PROVISIONS OF SECTION 43B OF THE ACT. IT WAS SUBMI TTED THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR IMMEDIATELY SUCCEEDING ASSESSMENT YEAR IN I.T.A. NO.1551/MDS/2014 DATED 12.12.2014 WHEREIN T HE CO-ORDINATE BENCH HAS HELD AS FOLLOWS: 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION RELIED ON. THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR 2007-08 CREATED PROVISION OF RS.32 54 120/- TOWARDS GRATUITY WITH LIC OF INDIA. THIS FUND WAS APPROVED BY THE COMMISSIONER OF INCOME TAX. THE ASSESSING OFFICER DISAL LOWED THE SAID PROVISION FOR GRATUITY FOR THE REASON THAT ASSESSEE DID NOT PAY THE SA ID GRATUITY DURING THE ASSESSMENT YEAR 2007-08. THE ASSESSING OFFICER WAS OF TH E VIEW THAT SINCE THE ASSESSEE HAS MADE ONLY PROVISION THE SAME IS NOT ALLOWABLE IN VIEW OF THE SPECIFIC PROVISIONS OF SECTION 43B OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE FOLLOWING THE ORDER PASSED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2005-06 & 2006-07 BY ORDERS DATED 01.1 2.2011 & 01.02.2013 RESPECTIVELY. IT WAS THE SUBMISSION OF THE COUNSEL THAT NO FURTHER APPEAL WAS PREFERRED BY THE REVENUE AND THE ORDER OF THE COMMI SSIONER OF INCOME TAX (APPEALS) WAS ACCEPTED. ON A PERUSAL OF THE DECISIONS RELIED ON B Y THE ASSESSEE WE FIND THAT THIS ISSUE HAS BEEN CONSIDERED BY VARIOUS HIGH COURTS AND HELD THAT THE PROVISIONS MADE BY THE ASSESSEE TOWARDS CONTRIBUTION TO APPROVED G RATUITY FUND IS AN ASCERTAINED LIABILITY AND IS ALLOWABLE AS DEDUCTION UN DER SECTION 40A(7)(B) OF THE ACT. IT WAS FURTHER HELD THAT THE PROVISIONS OF SECTION 40A( 7)(B) OVERRIDES SECTION 43B OF THE ACT. SIMILAR VIEW WAS ALSO TAKEN BY THE THIRD MEMBER OF JAIPUR BENCH OF THIS TRIBUNAL IN CASE OF MEWAR SUGAR MILLS LTD. VS. DCIT (SUPRA). 6. THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. COMMON WEALTH TRUST (P) LTD. & ANR. (SUPRA) HELD AS UNDER:- SECTION 40A(7) OF THE INCOME-TAX ACT 1961 WAS INTR ODUCED BY THE FINANCE ACT 1975 WITH RETROSPECTIVE EFFECT FROM APRIL 1 1973 AND SECTION 43B WAS INTRODUCED BY THE FINANCE ACT 1983 W ITH EFFECT FROM APRIL 1 1984. SECTION 40A SAYS THAT THE PROVISIONS O F THIS SECTION SHALL HAVE EFFECT NOTWITHSTANDING ANYTHING TO THE CONTRARY CON TAINED IN ANY OTHER PROVISION OF THE ACT RELATING TO THE COMPUTATIO N OF INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION . SIMILARLY ITA NO.2680/CHNY/2017 :- 3 -: SECTION 43B OPENS WITH A NON-OBSTANTE CLAUSE SECTION 40A (7) PROVIDES THAT IN CASES COVERED BY THE PROVISIONS OF CLAUSE (A) NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF ANY PROVISIONS WHETHER CALLED AS SUCH OR BY ANY OTHER NAME MADE BY THE ASSESSEE FOR THE PAYMENT OF GRATUITY OF HIS EMPLOYEES ON THEIR RETIREMENT OR ON TERMINATION OF T HEIR EMPLOYMENT FOR ANY REASON. HOWEVER CLAUSE (B) OF SECTION 40A(7) CLEAR LY PROVIDES THAT TO ANY PROVISION MADE BY THE ASSESSEE FOR THE PURPOSE OF PAYMENT OF A SUM BY WAY OF ANY CONTRIBUTION TOWARDS AN APPROVED GRA TUITY FUND OR FOR THE PURPOSE OF PAYMENT OF ANY GRATUITY THAT HAS BECOME PAYABLE DURING THE PREVIOUS YEAR CLAUSE (A) WILL NOT APPLY. THIS MEANS EXCEPTION HAS BEEN CARVED OUT IN RESPECT OF PAYMENT OF SUMS BY WAY OF ANY CONTRIBUTION TOWARDS AN APPROVED GRATUITY FUND. THUS THE LEGISLATURE WANTED TO GIVE A SPECIAL TREATMENT TO PRO VISION MADE BY AN ASSESSEE FOR THE PURPOSE OF PAYMENT BY WAY OF ANY CONTRI BUTION TOWARDS AN APPROVED GRATUITY FUND. THIS HAS TO BE T REATED AS A SPECIAL PROVISION. THE MARGINAL NOTE TO SECTION 43B CLEARLY S AYS CERTAIN DEDUCTIONS TO BE ONLY ON ACTUAL PAYMENT. IT DEALS WIT H VARIOUS ITEMS. SECTION 43B(B) DEALS GENERALLY WITH ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDEN T FUND AT SUPERANNUATION FUND OR GRATUITY FUND OR ANY OTHER FU ND FOR THE WELFARE OF THE EMPLOYEES. OF COURSE THE GRATUITY FUND IS ALSO REFERRED TO SECTION 40A(7) CLAUSE (B) PARTICULARLY SUB-CLAUSE (I) THEREOF IS A SPECIAL PROVISION IN REGARD TO A CLAIM FOR DEDUCTION BASED ON A PROVISION MADE FOR PAYMENT TOWARDS THE APPROVED GRATUITY FUND. THE RE IS NO CLEAR INCONSISTENCY BETWEEN THE TWO PROVISIONS VIZ. SECTIO NS 40A(7) AND 43B. SECTION 40A(7) IS IN NEGATIVE TERMS AND SECTION 4 3B IS IN POSITIVE TERMS THE EFFECT OF BOTH THESE PROVISIONS IS THAT IN O RDER TO CLAIM DEDUCTION IN RESPECT OF PAYMENT TO A GRATUITY FUND THER E MUST BE ACTUAL PAYMENT AND THAT DEDUCTION CANNOT BE ALLOWED ON THE BASIS OF ANY PROVISION. THE ONLY EXCEPTION TO THE ABOVE RULE IS WITH REGARD TO THE PROVISION FOR PAYMENT TO AN APPROVED GRATUITY FUND. IT CANNOT BE INTERPRETED THAT THE LATER PROVISION IN SECTION 43B B Y INTRODUCING HE NON- OBSTANTE CLAUSE WOULD ABROGATE THE SPECIAL PROVISION WI TH REGARD TO THE PROVISION MADE FOR PAYMENT TO AN APPROVED GRATUITY FU ND CONTAINED IN SECTION 40A(7)(B)(I). THIS IS ALL THE MORE SO SINCE NO P ATENT CONFLICT OR INCONSISTENCY CAN BE SPELT OUT. BOTH THE PROVISIONS CAN CO-EXIST. A HARMONIOUS CONSTRUCTION OF THE TWO PROVISIONS WOULD CLEAR LY INDICATE THAT THE LEGISLATURE NEVER INTENDED TO TAKE AWAY THE BENEFIT CONFERRED UNDER CLAUSE (B) OF SECTION 40A(7) BY THE PROVISIONS O F SECTION 43B(B). 7. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V S. BECHTEL INDIA (P) LTD. (SUPRA) HELD AS UNDER:- 6. FURTHER WE ARE IN AGREEMENT WITH THE TRIBUNAL THAT SECTION 40(7)(B) OF THE ACT WILL HAVE AN OVERRIDING EFFECT OVER SECTION 43B OF THE ACT. IN THE FIRST PLACE SECTION 40A(1) IS AN UNEQUIVOCAL NON-OBSTA NTE CLAUSE AND SINCE SECTION 40A(7)(B) SPECIFICALLY PERMITS A DEDUCTI ON OF A SUM CONSTITUTING THE PROVISION TOWARDS AN APPROVED GRATUITY FUND THE SAID PROVISION WILL TAKE PRECEDENCE OVER A COMPARATIVELY GEN ERAL PROVISION LIKE SECTION.43B. SECONDLY SECTION 40A(7)(A) WHICH DISALLOWS DEDUCTION OF ANY PROVISION OF GRATUITY TO EMPLOYEES ON THEIR R ETIREMENT IS ITSELF MADE SUBJECT TO SECTION 40A(7)(B) WHICH ALLOWS SUCH DE DUCTION AS LONG AS IT IS MADE TOWARDS AN APPROVED GRATUITY FUND. THER E IS NO DISPUTE THAT IN THE INSTANT CASE THE PROVISION MADE IS TOWARDS CONT RIBUTION TO AN APPROVED GRATUITY FUND. THEREFORE THE CLAIM BY THE ASSESSEE FOR DEDUCTION ON THIS SCORE WAS CLEARLY JUSTIFIED. WE ARE AC CORDINGLY OF THE OPINION THAT NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS REGARD AS WELL. ITA NO.2680/CHNY/2017 :- 4 -: 8. RESPECTFULLY FOLLOWING THE SAID DECISIONS WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE DISA LLOWANCE MADE FOR APPROVED GRATUITY FUNDS. 4. IN REPLY THE LEARNED DEPARTMENTAL REPRESENTATIV E VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICE R AND THE LEARNED CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PERUSED THE MATERIALS AVAILABLE ON RECORD. 6. AS IT IS NOTICED THE ISSUE IS NOW SQUARELY COVE RED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE S OWN CASE FOR IMMEDIATELY SUCCEEDING ASSESSMENT YEAR AS EXTRACTED ABOVE RESP ECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE REFERRED TO SUPRA THE ASSESSING OFFICER IS DIRECTE D TO GRANT THE ASSESSEE THE BENEFIT OF DEDUCTION U/S.40A(7)(B) OF THE INCOME TA X ACT 1961 OF THE PROVISION FOR GRATUITY TO THE APPROVED GRATUITY FUND MAINTAIN ED WITH THE LIFE INSURANCE CORPORATION OF INDIA. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER 2019 IN CHENNAI. SD/- SD/- ( '!# $ ) (INTURI RAMA RAO) . /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER /CHENNAI 2! /DATED: 27 TH NOVEMBER 2019 . IA SR. P.S 1 * (-34 54&- /COPY TO: ITA NO.2680/CHNY/2017 :- 5 -: 1. ' /APPELLANT 2. ()' /RESPONDENT 3. 6- ( )/CIT(A) 4. 6- /CIT 5. 4 78 (- /DR 6. 89 : /GF