2015 (1) TMI 974 - HC - Income Tax

Disallowance of belated payment of PF and ESIC - Tribunal deleted the addition made u/s. 43B - Held that - In view of the subsequent decision of this Court in the case of Commissioner of Income Tax v. Gujarat State Road Transport Corporation, reported in 2014 (1) TMI 502 - GUJARAT HIGH COURT all these appeals are required to be remanded to the appropriate authority for deciding the issue afresh. In the said decision, this Court held that any sum received by the assessee-employer from his employees as contribution to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948, or any other fund for the welfare of such employees shall be treated as an income . Under Section 36(1)(va), the assessee shall be entitled to the deduction in computing the income referred to in section 28 with respect to any sum received by the assessee from his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employees' accounts in the relevant fund or funds on or before the due date . As per the Explanation to section 36(1)(va) for the purpose of clause (x), due date means the date by which the assessee is required as an employer to credit the employees' contribution to the employees account in the relevant fund under the Act, rule, order or notification issued thereunder or under any standing order, award, contract or service or otherwise. Section 43B is with respect to certain deductions only on actual payment. The deletion of the second proviso to Section 43B and the amendment in the first proviso to section 43B by the Finance Act, 2003, is required to be confined to section 43B alone and the deletion of the second proviso to section 43B by the amendment pursuant to the Finance Act, 2003, cannot be made applicable with respect to section 36(1)(va) of the Act. Accordingly, all these matters are remanded to the Assessing Officer for deciding the matters afresh - Decided in favour of revenue for statistical purposes.

Issues Involved:
1. Proviso to Section 43B of the Income Tax Act and its retrospective application.
2. Addition of Rs. 6,30,314 due to discrepancy in stock declaration.
3. Deletion of disallowance of belated payment of PF and ESIC.
4. Deletion of addition of Rs. 4,72,986 under Section 43B for provident fund paid after the due date but before filing the Income Tax Return.

Detailed Analysis:

1. Proviso to Section 43B of the Income Tax Act and its Retrospective Application:
The core issue in Tax Appeal Nos. 248 of 2007 and 251 of 2007 was whether the proviso to Section 43B, as amended by the Finance Act, 2003, is curative and retrospective in nature. The Tribunal had directed the Assessing Officer to verify the payments made to Provident Fund (P.F.) and Employees' State Insurance (ESI) and allow the same as per the amended provisions. The Court referred to the decision in Commissioner of Income Tax v. Gujarat State Road Transport Corporation, which clarified that the amendment in Section 43B by the Finance Act, 2003, applies only to Section 43B and not to Section 36(1)(va). Therefore, the assessee must credit the employees' contributions to the relevant fund on or before the "due date" as defined under the respective Acts. The Court remanded the matter to the Assessing Officer for fresh consideration.

2. Addition of Rs. 6,30,314 Due to Discrepancy in Stock Declaration:
In Tax Appeal No. 401 of 2007, the issue was whether the Tribunal was correct in upholding the addition of Rs. 6,30,314 due to discrepancies between the stock declared to the bank and the stock recorded in the books of account as on 30.4.1992. The Tribunal had upheld the addition, stating that the appellant was given an opportunity to explain the discrepancy but failed to produce evidence. The Court referred to the decision in Alliance Industries v. Income Tax Officer, which held that inflated statements furnished to banking authorities for availing larger credit facilities should not lead to additions if there is a satisfactory explanation for the discrepancy. The Court remanded the matter to the Assessing Officer for fresh consideration.

3. Deletion of Disallowance of Belated Payment of PF and ESIC:
In Tax Appeal Nos. 651 of 2007, 652 of 2007, and 654 of 2007, the issue was whether the Tribunal was right in deleting the disallowance of belated payment of PF and ESIC. The Tribunal had allowed the appeals for statistical purposes. The Court referred to the decision in Commissioner of Income Tax v. JMC Projects (India) Ltd., which held that the omission of the second proviso to Section 43B by the Finance Act, 2003, applied retrospectively from April 1, 1988. Therefore, the Court remanded the matter to the Assessing Officer for fresh consideration.

4. Deletion of Addition of Rs. 4,72,986 Under Section 43B for Provident Fund Paid After the Due Date but Before Filing the Income Tax Return:
In Tax Appeal No. 706 of 2007, the issue was whether the Tribunal was correct in deleting the addition of Rs. 4,72,986 made under Section 43B for provident fund paid after the due date but before the filing of the Income Tax Return. The Court referred to the decision in Commissioner of Income Tax v. Alom Extrusions Ltd., which held that the omission of the second proviso to Section 43B by the Finance Act, 2003, was retrospective. Therefore, the Court remanded the matter to the Assessing Officer for fresh consideration.

Conclusion:
The High Court of Gujarat remanded all the matters to the Assessing Officer for fresh consideration in light of the aforementioned decisions. The Court quashed and set aside the orders of the Commissioner of Income Tax (Appeals) and the Tribunal, clarifying that it did not express any opinion on the merits of the matters.

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