2019 (6) TMI 1223 - HC - Income Tax

Allowability of deduction for payment EPF, LWF and ESI after due date of respective Act u/s 36(1)(va) - Non remittance of employees' contribution and not employers' contribution - HELD THAT - In the light of the aforesaid dictum laid down by the Division Bench of this Court in Popular Vehicles and Services 2018 (8) TMI 133 - KERALA HIGH COURT hold that, in order to claim the benefit of deduction under Section 36(1)(va) of the Act, payment of employees' contribution to Employees' Provident Fund, Labour Welfare Fund and Employees' State Insurance has to be made before the due date prescribed under the relevant statute. The substantial question of law is answered in favour of the revenue and against the assessee. The Tribunal has found that payments have to be made only before the due date prescribed u/s 139(1) for filing return of income to claim the benefit u/s 36(1)(va). The finding of the Tribunal in this regard is liable to be set aside. Moreover, the Tribunal has directed that the issue regarding deduction u/s 36(1) (va) has to be reconsidered by the assessing officer. In the instant case, the assessee has got no plea that the remittance of employees' contribution to Employees' Provident Fund, Labour Welfare Fund, Employees' State Insurance had been made before the due date prescribed in the respective enactments. Therefore, the direction given by the Tribunal remitting this issue for reconsideration by the assessing officer is also liable to be set aside. Sale of old and unyielding rubber trees - whether exigible to tax in the light of Rules 7 and 7A of the Income Tax Rules? - sale proceeds of grevellea trees can be treated as capital gains and brought to tax or not? - Whether the provision for gratuity can be added in computing the income u/s 115JB - HELD THAT - Questions are covered by the decision of the Division Bench of this Court in Commissioner of Income Tax v. Harrisons Malayalam Limited 2019 (1) TMI 1359 - KERALA HIGH COURT against the revenue.

Summary

Issues Involved:
1. Delayed payments made to EPF, LWF, and ESI for deduction under Section 36(1)(va) of the Income Tax Act, 1961.
2. Allowability of license fee paid to RPG Enterprises Limited under Section 37 of the Act.
3. Taxability of consideration obtained on the sale of old and unyielding rubber trees.
4. Treatment of sale proceeds of grevellea trees as capital gains.
5. Addition of provision for gratuity in computing income under Section 115JB of the Act.

Analysis:

Issue 1 - Delayed Payments to EPF, LWF, and ESI:
The court considered whether delayed payments made to Employees' Provident Fund, Labour Welfare Fund, and Employees' State Insurance are allowable as deductions under Section 36(1)(va) of the Income Tax Act. Referring to a previous case, the court held that payments must be made before the due date prescribed under the relevant statute to claim the deduction. The tribunal's finding that payments should be made before the due date for filing the return of income was set aside, and the direction to reconsider the issue was also overturned. The court ruled in favor of the revenue, stating that the assessee did not make the required payments before the due date.

Issue 2 - License Fee Paid to RPG Enterprises:
The court noted that the issue of license fee paid to RPG Enterprises was not pressed by the Standing Counsel for the Government of India (Taxes). Consequently, the tribunal's decision on this matter did not require any interference.

Issues 3 to 5 - Taxability of Sale Proceeds and Gratuity Provision:
The court found that the questions related to the consideration obtained on the sale of rubber trees, sale proceeds of grevellea trees, and the addition of provision for gratuity in income computation were covered by a previous decision against the revenue. Citing the judgment in Commissioner of Income Tax v. Harrisons Malayalam Limited, the court ruled against the revenue on these issues. As a result, the appeals were partly allowed, setting aside the tribunal's decision on delayed payments to EPF, LWF, and ESI, while confirming the tribunal's decision on the other issues raised in the appeals.

In conclusion, the court's judgment addressed various issues related to income tax assessment for the years 2007-08 to 2010-11, providing detailed analysis and rulings on each issue based on legal precedents and interpretations of relevant tax laws.