2014 (11) TMI 641 - HC - Income Tax

Deduction made for PF & ESIC contribution of employees Failure to deposit in relevant fund within prescribed time Held that - The AO had disallowed the sum u/s 2(24)(x) r.w.s.e 36(1)(va) - following the decision in COMMISSIONER OF INCOME TAX II Versus GUJARAT STATE ROAD TRANSPORT CORPORATION 2014 (1) TMI 502 - GUJARAT HIGH COURT wherein it has been held that there is no amendment in Section 36(1)(va) as it stands, with respect to any sum received by the assessee from any of his employees to which the provisions of clause (x) of sub-section (24) of section 2 applies, assessee shall not be entitled to deduction of such amount in computing the income referred to in section 28 if such sum is not credited by the assessee to the employees account in the relevant fund or funds on or before the due date as per explanation to section 36(1)(va) of the Act - By deleting Second Proviso to section 43B by Finance Act, 2003, it cannot be said that Section 36(1) (va) is amended and/or explanation below clause (va) of sub-section (1) of section 36 is deleted, which is with respect to employees contribution in favour of revenue.

Summary

Issues:
1. Disallowance of TDS payment under Section 40(a)(ia) of the Income-tax Act, 1961.
2. Disallowance of employees' contribution towards P.F. and ESIC.

Analysis:

Issue 1: Disallowance of TDS payment under Section 40(a)(ia) of the Income-tax Act, 1961:
The appellant challenged the order of the Income-tax Appellate Tribunal (ITAT) regarding the disallowance of TDS payment under Section 40(a)(ia) for the assessment year 2009-2010. The appellant raised questions regarding the retrospective application of amendments to Section 40(a)(ia) by the Finance Act, 2010. The ITAT upheld the deletion of disallowance made by the CIT(A) based on the timing of TDS payment. The High Court, in a previous order, had already decided against the Revenue on similar issues. The appellant argued that the Tribunal erred in disregarding the Assessing Officer's findings and relevant case law. However, the High Court, citing its previous decision, ruled in favor of the Department, upholding the disallowance of the TDS payment.

Issue 2: Disallowance of employees' contribution towards P.F. and ESIC:
The Assessing Officer disallowed the employees' contribution towards P.F. and ESIC, along with provisions for the same, as the payments were not deposited within the prescribed time limit. The CIT(A) deleted these disallowances, relying on precedents like the case of ALOM EXTRUSIONS Ltd. reported in 319 ITR 306 (SC). The ITAT dismissed the Revenue's appeal, stating that the issue was covered by previous court decisions. The appellant contended that the Tribunal erred in its reliance and should have considered the Assessing Officer's findings. The High Court, following its earlier decision in Tax Appeal No. 637 of 2013, ruled in favor of the Department, upholding the disallowance of employees' contributions towards P.F. and ESIC. The appeal was allowed in favor of the Department concerning this issue.

In conclusion, the High Court upheld the disallowances of TDS payment and employees' contributions towards P.F. and ESIC, ruling in favor of the Department based on previous decisions and legal interpretations. The judgment provided clarity on the application of relevant provisions of the Income-tax Act, 1961, and emphasized adherence to statutory timelines and requirements for tax deductions and contributions.