2018 (1) TMI 145 - HC - Income Tax

Disallowance u/s 43B - delay in payment - retrospectivity - Held that - The issue raised in this appeal is squarely covered by the decision in Industrial Security and Intelligence India Private Limited 2015 (7) TMI 1063 - MADRAS HIGH COURT wherein held omission of second proviso to Section 43B and amendment to first proviso by Finance Act 2003 are curative in nature and are effective retrospectively i.e. with effect from 1.4.1988 i.e. the date of insertion of first proviso. If the assessee had deposited employee s contribution towards Provident Fund and ESI after due date as prescribed under the relevant Act but before the due date of filing of return under the Income Tax Act no disallowance could be made in view of the provisions of Section 43B as amended by Finance Act 2003. In the present case the assessee had remitted the employees contribution beyond the due date for payment but within the due date for filing the return of income. Hence following the above-said decisions we find no reason to differ with the findings of the Tribunal. - Decided against revenue

Summary

Issues:
1. Exclusion of investments made from own funds while computing disallowance under Section 14A of the Income Tax Act.
2. Justification of directing the Assessing Officer to consider investments made from own funds under Section 14A.
3. Deletion of addition towards delayed payment of PF/ESI.
4. Justification of deleting the addition related to PF contributions under Section 2(24)(x) and Section 36(1)(va) of the Income Tax Act.

Analysis:
1. The appeal challenged the order of the Income Tax Appellate Tribunal regarding the exclusion of investments made from own funds while calculating disallowance under Section 14A of the Income Tax Act for the assessment year 2010-11. The Tribunal's decision was based on the case law CIT Vs. Industrial Security and Intelligence India Private Limited. The Tribunal's reliance on this precedent was found to be appropriate by the High Court, and the appeal was dismissed accordingly.

2. The second issue raised was the justification for directing the Assessing Officer to consider investments made from own funds under Section 14A. The High Court noted that the Tribunal's decision was in line with the Supreme Court's ruling in CIT Vs. Alom Extrusions Ltd. The High Court emphasized that the omission of Second Proviso to Section 43B and Amendment to First Proviso by Finance Act, 2003 were curative in nature and effective retrospectively from 01.4.1988. Citing relevant case law, including CIT Vs. Amil Ltd., the High Court upheld the Tribunal's decision, leading to the dismissal of the appeal.

3. Regarding the deletion of addition towards delayed payment of PF/ESI, the High Court concurred with the Tribunal's decision, which was based on the provisions of Section 43B as amended by Finance Act, 2003. The High Court reiterated the legal position that if the employees' contributions towards provident fund and ESI were deposited after the due date prescribed under the relevant Act but before the due date of filing the return under the Income Tax Act, no disallowance could be made.

4. The final issue involved the deletion of the addition related to PF contributions under Section 2(24)(x) and Section 36(1)(va) of the Income Tax Act. The High Court upheld the Tribunal's decision, emphasizing that the sums collected from employees towards PF contribution could be allowed as a deduction under Section 36(1)(va) only if paid before the due date under the PF Act. The High Court found the Tribunal's decision to be legally sound and in accordance with the provisions of the Income Tax Act, resulting in the dismissal of the appeal.