2023 (1) TMI 137 - SCH - Income Tax

Delayed payments made to EPF and ESI - Whether allowable as a deduction under Section 37? - HELD THAT - The first question stands covered by a judgment of this Court delivered in Checkmate Services P.Ltd. 2022 (10) TMI 617 - SUPREME COURT This appeal was dismissed along with four other appeals by a common judgment. The first question has been answered against the assessee(s) in the aforesaid judgment. We, thus, grant leave to the appellant in this proceeding but such leave shall be confined to examining the judgment under appeal only on the second question. The appeal shall be heard on this question alone.

Summary

Issues:
1. Deductibility of delayed payments to EPF and ESI under Section 37 of the Income Tax Act.
2. Exclusion of profit on sale of estates from computing book profit under Section 115JB as agricultural income and treatment of rubber income.

Issue 1: Deductibility of delayed payments to EPF and ESI under Section 37 of the Income Tax Act

The Supreme Court addressed the issue of whether delayed payments made to EPF and ESI, totaling Rs.4 Crores, are allowable as a deduction under Section 37 of the Income Tax Act. Referring to a previous judgment in Civil Appeal No. 2833/2016, the Court noted that the first question had been answered against the assessee in that judgment. Consequently, the Court granted leave to the appellant to examine the judgment under appeal only on the second question, excluding the first question which had already been decided against the assessee.

Issue 2: Exclusion of profit on sale of estates and treatment of rubber income

Regarding the second issue, which involved the exclusion of profit on the sale of two estates from computing book profit under Section 115JB as agricultural income and the treatment of rubber income, the Court referred to a joint submission by the advocates appearing for the petitioners and respondents. They collectively acknowledged that the points involved in the cases had already been addressed in the judgment of Civil Appeal No. 2833/2016. As the point of law urged by the petitioners had been decided against them in the previous judgment, the Court dismissed the present set of petitions in line with the earlier decision. Consequently, any pending applications were disposed of, and no costs were awarded in the matter.

This Supreme Court judgment clarified the deductibility of delayed payments to EPF and ESI under Section 37 of the Income Tax Act and addressed the exclusion of profit on estate sales from computing book profit under Section 115JB. The decision relied on a previous judgment and reiterated that the first question had been resolved against the assessee, while the second question would be examined separately. The Court's ruling emphasized the importance of prior legal precedents in determining the outcomes of tax-related issues.