Agew Steel Manufacturers Pvt.Ltd., Ahmedabad v. The Dy.CIT.,Circle-3,, Ahmedabad

ITA 488/AHD/2011 | 2005-2006
Pronouncement Date: 22-07-2011 | Result: Allowed

Appeal Details

RSA Number 48820514 RSA 2011
Bench Ahmedabad
Appeal Number ITA 488/AHD/2011
Duration Of Justice 5 month(s) 3 day(s)
Appellant Agew Steel Manufacturers Pvt.Ltd., Ahmedabad
Respondent The Dy.CIT.,Circle-3,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 22-07-2011
Assessment Year 2005-2006
Appeal Filed On 18-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDA BAD D BENCH BEFORE SHRI MUKUL SHRAWAT JM & SHRI A.N. PAHUJA AM ITA NO. 488 /AHD/ 2011 ASSESSMENT YEAR:2005-06 DATE OF HEARING:15.7.11 DATE OF DRAFTING:20.7.11 AGEW STEEL MANUFACTURERS PVT. LTD. 506 ANIKET BULDING C.G. ROAD NAVRANGPURA AHMEDABAD [PAN:AADHD1995G] V/S . DY. COMMISSIONER OF INCOME-TAX CIRCLE-3 AHMEDABAD (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI SURESH GANDHI AR REVENUE BY:- SHRI B.L. VADAV DR O R D E R A.N.PAHUJA:- THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATE D 13-12- 2010 OF THE LD. CIT (APPEALS)-VI AHMEDABAD RAISES THE FOLLOWING GROUNDS:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.1 36 936/- MADE BY THE A.O ON AC COUNT OF DISALLOWANCE OF P.F. & ESIC ON THE GROUND THAT SINC E THERE HAS BEEN DELAY IN PAYMENT FOR THE EMPLOYEES CONTRIBUTION TO PF AND ESIC THE SAME IS NOT ALLOWABLE U/S.36(1)(VA). 2. THE APPELLANT SUBMITS THAT THE LD. A.O AS WELL A S CIT(A) OUT TO HAVE ALLOWED THE CLAIM OF APPELLANT IN VIEW OF THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. 319 ITR 306 RELIED UPON BY THE APPELLANT. THE APPELLANT RESERVES ITS RIGHT TO ADD AMEND ALT ER OR MODIFY ANY OF THE GROUNDS STATED HEREINABOVE EITHER BEFORE OR AT THE TIME OF HEARING. P A Y E R THE APPELLANT THEREFORE RESPECTFULLY PRAYS THAT:- 1. THE DISALLOWANCE OF P.F & ESIC OFRS.1 36 926/- C ONFIRMED BY THE LD. CIT(A) MAY KINDLY BE DELETED. 2. SUCH AND FURTHER RELIEF AS THE NATURE AND CIRCUM STANCES OF THE CASE MAY JUSTIFY. ITA NO.488/AHD/2011 PAGE 2 2. FACTS IN BRIEF AS PER THE RELEVANT ORDERS ARE THAT RETURN DECLARING NIL INCOME FILED ON 30-10-2005 BY THE ASSESSEE MANUFACTURING IRON AND STEEL DOORS WINDOWS ETC. AFTER BEING PROCESSED U/S.143(1) OF THE INCOM E-TAX ACT 1961 (HEREINAFTER REFERRED TO AS ACT) WAS SELECTED FOR SCRUTINY WIT H THE SERVICE OF A NOTICE U/S.143(2) OF THE ACT ON 05-07-2006. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT ASSESSE E DEPOSITED EMPLOYEES CONTRIBUTION OF RS.50 338/- TOWARDS PF FOR THE MONT H OF APRIL04 AFTER THE DUE DATE STIPULATED UNDER THE RELEVANT ENACTMENT WHILE THE AMOUNT OF RS.11 86 724/- FOR THE MONTH OF MAY04 TO MARCH05 WAS SUO MOTU ADDED BACK HAVING NOT BEEN PAID ON OR BEFORE THE DUE DATE STIPULATED UNDER THE RELEVANT P ROVISIONS OF PF ACT. LIKEWISE THE ASSESSEE MADE THE PAYMENT OF RS.86 598/- TOWARDS ES I BEYOND THE DUE DATE STIPULATED UNDER THE RELEVANT ENACTMENT. SINCE THE AMOUNT OF RS.50 338/- + RS.86 598/- TOTALLING TO RS.1 36 936/- WAS PAID BEY OND THE DATE STIPULATED UNDER THE RELEVANT ENACTMENTS THE AO DISALLOWED THE CLAIM FO R DEDUCTION U/S 36(1)(VA) READ WITH SEC. 2(24)(X) OF THE ACT. 3. ON APPEAL THE LLD. CIT(APPEALS) UPHELD THE DISA LLOWANCE IN THE FOLLOWING TERMS:- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE ASSES SMENT ORDER AND APPELLANT'S SUBMISSION. A.O. MADE ADDITION OF EMPLOYEE'S CONTRI BUTION AMOUNTING TO RS. 136936 TO P.F AND ESIC NOT PAID WITHIN DUE DATES PR ESCRIBED IN PF AND ESIC ACT. EMPLOYEE'S CONTRIBUTION IS ALLOWABLE U/S 36(1) (VA). THE AMENDMENT IN SEC. 43B ON WHICH JUDICIAL DECISION AS REFERRED BY THE APPELLANT IS NOT APPLICABLE TO EMPLOYEE'S CONTRIBUTION. ON A PLAIN READING OF SEC. 43B IT CAN BE SEEN THAT IT RESTRICTS THE ALLOWANCE OF EXPENSES WHICH ARE OTHERWISE ALLOWABLE UNDER THE ACT. THE ITEMS COVERED U/S 43B ARE LISTED FROM CLAUSE-A TO F. EMPLOYEE'S CONTRIBUTION TO PF. OR OTHER EMPLOYEES' WELFARE FUND IS NOT COVERED IN ANY OF THE CLAUSE MENTIONED IN SEC. 43B. EMPLOYER'S CONTRIBUTION IS MENTIONED IN CLAUSE-B AND THEREFORE EMPLOYER'S CONTRIBUTION IS ONLY SUBJECT TO SEC. 43B. SINCE IT IS OTHERWISE AL LOWABLE U/S 37(1) OF IT. ACT. SINCE PROVISION OF SEC. 43B IS NOT AT ALL RELEVANT FOR EMPLOYEE'S CONTRIBUTION; THE DECISIONS BASED ON AMENDMENT TO SEC. 43B CANNOT BE APPLIED TO EMPLOYEE'S CONTRIBUTION. IT IS NOT IN DISPUTE THAT FOR EMPLOYEE'S WELFARE BOTH EMPLOYEE AND EMPLOYER CONTRIBUTE. EMPLOYER'S CONTRI BUTION IS ALLOWABLE AS DEDUCTION ONLY IF THE SAME IS PAID BEFORE THE DUE D ATE OF FILING THE RETURN. HOWEVER EMPLOYEE'S CONTRIBUTION IS TREATED AS INC OME U/S 2(24) (X) AND THE SAME IS ALLOWED AS EXPENSE IF IT IS PAID WITHIN DUE DATE PROVIDED IN PF. ACT. IF THE PAYMENT IS NOT MADE WITHIN DUE DATE THEN THE EX PENSES IS NOT ALLOWABLE U/S 36(1) (VA). SINCE THE EMPLOYEE'S CONTRIBUTION IS ALLOWABLE ONLY WHEN THE PAYMENT IS MADE WITHIN DUE DATE MENTIONED IN PF ACT THE SAME BECOMES DISALLOWABLE IF PAYMENT IS MADE AFTER DUE DATE AND ACCORDINGLY THE SEC. 43B ITA NO.488/AHD/2011 PAGE 3 CANNOT BE APPLIED. THEREFORE MIXING EMPLOYEE'S CON TRIBUTION TO PF ALONG WITH EMPLOYER'S CONTRIBUTION IS DISREGARDING THE CLEAR A ND UNAMBIGUOUS PROVISIONS OF IT. ACT. EVEN OTHERWISE IF PROVISIONS OF SEC.43B ARE APPLIE D TO EMPLOYEE'S CONTRIBUTION IT WILL MAKE SEC. 36(I)(VA) REDUNDANT . FOR EXAMPLE U/S 36(1)(VA) ANY PAYMENT MADE AFTER 20 DAYS FROM THE END OF THE MONTH IS NOT ALLOWABLE WHICH MEANS PAYMENT OF EMPLOYEE'S CONTRIBUTION TO P F AFTER 20 TH APRIL FOLLOWING THE END OF PREVIOUS YEAR WILL NOT BE ALLO WABLE WHEREAS IF THE EMPLOYEE'S CONTRIBUTION IS CONSIDERED U/S 43B THEN THE SAME IS ALLOWABLE TILL THE DUE DATE OF FILING THE RETURN. IN VIEW OF THIS IF SEC. 43B IS APPLIED TO EMPLOYEE'S CONTRIBUTION IT WILL MAKE PROVISIONS OF SEC. 36(I)(VA) REDUNDANT. THE RULE OF HARMONIOUS CONSTRUCTION REQUIRES THAT I NTERPRETATION TO THE STATUTE SHOULD BE SUCH THAT IT SHOULD NOT RENDER ANY PROVIS ION REDUNDANT. SINCE THERE IS A CLEAR PROVISION FOR DISALLOWANCE OF EMPLOYEE'S CONTRIBUTION; THE SAME CANNOT BE MADE REDUNDANT BY LINKING IT WITH SEC. 43 B. IN VIEW OF THIS IT IS CLEAR THAT ALL THE DECISIONS INTERPRETING THE APPLICABILI TY OF SEC. 43B WHERE EMPLOYEE'S CONTRIBUTION IS ALSO LOOSELY MENTIONED DO NOT APPLY TO EMPLOYEE'S CONTRIBUTION COVERED U/S 36(I)(VA). IT I S TRUE THAT THERE ARE CONFLICTING DECISIONS WHEREIN EMPLOYEE'S CONTRIBUTI ON IS ALSO CLUBBED WITH THE EMPLOYER'S CONTRIBUTION. HOWEVER THERE IS NO JURISD ICTIONAL HIGH COURT DECISION ON THIS ISSUE AFTER AMENDMENT TO SECTION 43 B. ON T HE ISSUE OF RULE OF INTERPRETATION OF STATUTE THERE ARE SEVERAL DECISI ONS HOLDING THE VIEW THAT THERE SHOULD BE HARMONIOUS CONSTRUCTION WHILE INTER PRETING STATUTE. SOME OF THIS ARE- 1.ASSAM CO. LTD VS STATE OF ASSAM AND OTHERS 248IT R 567 (SC) 2-LIC OF INDIA VS C1T 219 ITR 410 (SC) 3-CIT VS S E UPPER SILERU 152 ITR 752 (AP) IF THE ABOVE RATIONAL AND LOGIC IS FOLLOWED THERE IS CONFUSION OVER APPLICABILITY OF THE CORRECT PROVISION TO EMPLOYEES CONTRIBUTION . IN VIEW OF THE CLEAR PROVISIONS AND LEGISLATIVE INTENT THE EMPLOYEES C ONTRIBUTION IS ALLOWABLE ONLY IF THE SAME IS PAID WITHIN DUE DATES UNDER PF ACT O R OTHER RELEVANT ACT. SINCE THERE HAS BEEN DELAY IN PAYMENT FOR THE EMPLOYEES CONTRIBUTION TO PF AND ESIC THE SAME IS NOT ALLOWABLE US/ 36(1) (VA). ADDI TION IS THEREFORE CONFIRMED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF LD. CIT(APPEALS).THE LD. AR ON BEHALF OF THE RELIED UPO N THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF CIT V. ALOM EXTRUSIONS LTD.(2009) 319 ITR 306 (SC) AND CIT VS. VINAY CEMENT LTD. 213CTR 268(SC) BESIDE S DECISIONS IN CIT VS. GEORGE WILLIAMSON(ASSAM) LTD. 284 ITR 619(GAU.) CIT VS. DHARMENDAR SHARMA 297 ITR 320(DEL) CIT VS. PM ELECTRONICS LTD. 313 ITR 161(DEL.)ALLIED MOTORS (P) LTD. VS. CIT 224 ITR 677(SC) CIT VS. AIM IL LTD.& OTHERS(DELHI)IN ITA NO. 1063 OF 2006 & OTHERS AND NEW ASARWA CHEMICALS P LT D VS. DCIT IN ITA ITA NO.488/AHD/2011 PAGE 4 NO.2757/AHD./2010 DATED 13.1.2011.AND CONTENDED TH AT DISALLOWANCE MADE BY ASSESSING OFFICER WAS NOT JUSTIFIED. ON THE OTHER H AND THE LD. DR SUPPORTED THE FINDINGS OF THE LD. CIT(APPEALS). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS. AS REGARDS EMPLOYE RS AND EMPLOYEES CONTRIBUTION TOWARDS PF WE FIND THAT THE ITAT AHMEDABAD BENCH ES HAVE BEEN CONSISTENTLY FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH CO URT IN THE CASE OF CIT V. P.M.ELECTRONICS LTD. 220 CTR 635 (DELHI) WHEREIN RELYING UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. VINAY C EMENT LTD. 213 CTR (SC) 268 THE HONBLE COURT CONCURRED WITH THE VIEW TAKEN BY THE HONBLE MADRAS HIGH COURT IN NEXUS COMPUTER (P) LTD. 219 CTR(MAD) 54 IN HOLD ING THAT EMPLOYER/EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND PAYMENTS MADE A FTER THE DUE DATE PRESCRIBED UNDER THE EMPLOYEES PROVIDENT FUND ACT AND RULES M ADE THEREUNDER AND BEFORE THE DUE DATE FOR FURNISHING THE RETURN OF INCOME UN DER SUB SEC. 1 OF SEC. 139 OF THE ACT ARE ALLOWABLE UNDER S.36(1)(VA) READ WITH SEC. 2(24(X) AND SEC. 43B OF THE ACT. 5.1 MOREOVER RECENTLY HONBLE APEX COURT IN THE CASE OF CIT VS ALOM EXTRUSIONS LTD. 319 ITR 306 (SC) HELD THAT THE OMISSION OF TH E SECOND PROVISO TO SECTION 43B OF THE ACT BY THE FINANCE ACT 2003 OPERATED RETROSP ECTIVELY WITH EFFECT FROM APRIL 1 1988 AND NOT PROSPECTIVELY FROM APRIL 1 2004. HON BLE COURT OBSERVED THAT EARLIER UNDER THE SECOND PROVISO TO SECTION 43B AS AMENDED BY THE FINANCE ACT 1989 THE ASSESSEES WERE ENTITLED TO DEDUCTION ONLY IF THE CO NTRIBUTION STOOD CREDITED ON OR BEFORE THE DUE DATE GIVEN IN THE PROVIDENT FUNDS AC T. THIS CREATED FURTHER DIFFICULTIES AND ON A REPRESENTATION MADE TO THE FINANCE MINISTR Y ONE MORE AMENDMENT WAS MADE BY THE FINANCE ACT 2003. THOUGH THIS AMENDME NT WAS MADE APPLICABLE WITH EFFECT FROM APRIL 1 2004 THE AMENDMENT WAS CURATI VE IN NATURE AND APPLIED RETROSPECTIVELY WITH EFFECT FROM APRIL 1 1988.IT W AS CLARIFIED THAT WHEN A PROVISO IN A SECTION IS INSERTED TO REMEDY UNINTENDED CONSEQUENC ES AND TO MAKE THE SECTION WORKABLE THE PROVISO WHICH SUPPLIES AN OBVIOUS OMI SSION THEREIN IS REQUIRED TO BE READ RETROSPECTIVELY IN OPERATION PARTICULARLY TO GIVE EFFECT TO THE SECTION AS A WHOLE. 5.2 HONBLE KARNATAKA HIGH COURT IN THEIR DECIS ION IN ANZ INFORMATION TECHNOLOGY P LTD. 318 ITR 123 WHILE FOLLOWING THEIR EARLIER D ECISION IN CIT VS. SABARI ENTERPRISES 298 ITR 141(KAR.) CONCLUDED THAT DEPOS ITS MADE BY THE EMPLOYER OF THE ITA NO.488/AHD/2011 PAGE 5 EMPLOYEES CONTRIBUTION BELATEDLY AND CONTRIBUTION TOWARDS ESI & PF UNDER THE RELEVANT ENACTMENTS CAN NOT BE TREATED AS INCOME OF THE ASSESSEE U/S 36(1)(VA) READ WITH SEC. 2(24)(X) IN VIEW OF PROVISIONS OF S EC. 43B OF THE ACT. 5.3 HONBLE DELHI HIGH COURT IN ANOTHER DECISION DATED 23.12.2009 IN CIT VS. AIMIL LTD.(DELHI)IN ITA NO. 1063/2008 OBSERVED THAT SEC. 2(24)(X) PROVIDES THAT AMOUNTS RECEIVED BY AN ASSESSEE FROM EMPLOYEES TOWA RDS PF CONTRIBUTIONS ETC. SHALL BE INCOME. S. 36 (1) (VA) PROVIDES THAT IF SUCH SUMS ARE CONTRIBUTED TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND ON OR BEFORE THE DUE DATE SPECIFIED IN THE PF LEGISLATION THE ASSESSEE SHALL BE ENTITLED TO A DE DUCTION. THE SECOND PROVISO TO S. 43B (B) PROVIDED THAT ANY SUM PAID BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND SHALL BE ALLOWED AS A DEDUCTION ONLY IF PAID ON OR BEFORE THE DUE DATE SPECIFIED IN 36(1)(VA) OF THE A CT. AFTER THE OMISSION OF THE SECOND PROVISO W.E.F 1.4.2004 THE DEDUCTION IS ALL OWABLE UNDER THE FIRST PROVISO IF THE PAYMENT IS MADE ON OR BEFORE THE DUE DATE FOR F URNISHING THE RETURN OF INCOME. THE HONBLE HIGH COURT WHILE CONSIDERING WHETHER T HE BENEFIT OF S. 43B CAN BE EXTENDED TO EMPLOYEES CONTRIBUTION AS WELL WHICH ARE PAID AFTER THE DUE DATE UNDER THE PF LAW BUT BEFORE THE DUE DATE FOR FILING THE R ETURN HELD THAT ( I) THOUGH THE REVENUE HAS ARGUED THAT A DISTINCTION IS TO BE MADE BETWEEN EMPLOYERS CONTRIBUTION AND EMPLOYEES CONTRIBUT ION AND THAT EMPLOYEES CONTRIBUTION BEING IN THE NATURE OF TRUST MONEY IN THE HANDS OF THE ASSESSEE CANNOT BE ALLOWED AS A DEDUCTION IF NOT PAID ON OR BEFORE THE DUE DATE SPECIFIED IN THE PF ETC LAW THE SCHEME OF THE ACT IS THAT EMPLOYEES C ONTRIBUTION IS TREATED AS INCOME U/S 2 (24) (X) ON RECEIPT BY THE ASSESSEE AND ALLOW ED AS A DEDUCTION U/S 36 (1) (VA) ON MAKING DEPOSIT WITH THE CONCERNED AUTHORITIES. S . 43B (B) STIPULATES THAT SUCH DEDUCTION WOULD BE PERMISSIBLE ONLY ON ACTUAL PAYME NT; (II) THE QUESTION AS TO WHEN ACTUAL PAYMENT SHOULD BE MADE IS ANSWERED BY VINAY CEMENTS 213 CTR 268 WHERE THE DELETION OF THE SECON D PROVISO TO S. 43B W.E.F 1.4.2004 WAS HELD APPLICABLE TO EARLIER YEARS AS WE LL. AS THE DELETION OF THE 2ND PROVISO IS RETROSPECTIVE THE CASE HAS TO BE GOVERN ED BY THE FIRST PROVISO. DHARMENDRA SHARMA 297 ITR 320 (DEL) & P.M. ELECTRON ICS 313 ITR 161 (DELHI) FOLLOWED; (III) IF THE EMPLOYEES CONTRIBUTION IS NOT DEPOSIT ED BY THE DUE DATE PRESCRIBED UNDER THE RELEVANT ACTS AND IS DEPOSITED LATE THE EMPLOY ER NOT ONLY PAYS INTEREST ON DELAYED PAYMENT BUT CAN INCUR PENALTIES ALSO FOR W HICH SPECIFIC PROVISIONS ARE MADE IN THE PROVIDENT FUND ACT AS WELL AS THE ESI ACT. T HEREFORE THE ACT PERMITS THE EMPLOYER TO MAKE THE DEPOSIT WITH SOME DELAYS SUBJ ECT TO THE AFORESAID CONSEQUENCES. INSOFAR AS THE INCOME-TAX ACT IS CONC ERNED THE ASSESSEE CAN GET THE BENEFIT IF THE ACTUAL PAYMENT IS MADE BEFORE TH E RETURN IS FILED AS PER THE PRINCIPLE LAID DOWN IN VINAY CEMENT. ITA NO.488/AHD/2011 PAGE 6 5.4 IN VIEW OF THE FOREGOING AND IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID DECISIONS WE HAVE NO HESITATION IN HOLDING THAT THE EMPLOYE ES CONTRIBUTION TOWARDS PF & ESI PAID BY THE ASSESSEE BEFORE THE DUE DATE OF FI LING OF RETURN U/S 139(1) OF THE ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IS ADMI SSIBLE. THEREFORE WE HAVE NO HESITATION IN VACATING THE FINDINGS OF THE LD. CIT( A) AND CONSEQUENTLY DIRECT THE AO TO ALLOW PAYMENT MADE ON ACCOUNT OF EMPLOYEES CON TRIBUTION TOWARDS PF & ESI ON OR BEFORE THE DUE DATE OF FILING OF THE RETURN U/S 139(1) OF THE ACT. WITH THESE DIRECTIONS GROUND NOS. 1 & 2 IN THE APPEAL ARE AL LOWED. 6. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE U S IN TERMS OF RESIDUARY GROUND IN THE APPEAL ACCORDINGLY THIS GROUND IS DISMISSED. 7. IN THE RESULT APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 22 /07 /2011 SD/- SD/- (MUKUL SHRAWAT) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD DATED : 22/07/2011 *DKP COPY OF THE ORDER FORWARDED TO:- 1. AGREW STEEL MANUFACTURERS PVT. LTD. 506 ANIKE T BULDING C.G. ROAD NAVRANGPURA AHMEDABAD 2. DY. COMMISSIONER OF INCOME-TAX CIRCLE-3 AHMED ABAD 3. CIT (APPEALS)-VI AHMEDABAD 4. THE CIT CONCERNED. 5. THE DR ITAT D BENCH AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD