2019 (7) TMI 1043 - HC - Income Tax

Employee's contribution to PF and ESI funds beyond the due dates - Addition u/s 36(va) read with Section 2(24)(x) - HELD THAT - A Division Bench of the Kerala High Court in the case of CIT Vs. M/s.Merchem Lt 2015 (9) TMI 560 - KERALA HIGH COURT held in favour of the Revenue. Similarly, another Division Bench of the Kerala High Court in the case of Popular Vehicles Services Private Limited Vs. CIT, Ernakulam 2018 (8) TMI 133 - KERALA HIGH COURT has recently taken note of all the earlier decisions including the decisions, which have been referred to by the Tribunal and the CIT(A) and held in favour of the Revenue. Considering these facts, we are of the view that the matters should be remanded to the CIT(A) for a fresh consideration. We propose to send the matters back to the CIT(A) for the reason that the CIT(A) did not give a reasoned finding on this aspect while deleting the addition on account of the delay in payment of provident fund and delayed payment of the employees state insurance. Hence, we deem it appropriate that the matters should be remanded to the CIT(A) for a fresh consideration

Summary

Issues Involved:
Appeals filed by Revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal regarding disallowance of employee's contribution to PF and ESI funds beyond due dates.

Analysis:

1. Disallowance of Employee Contributions:
The Revenue filed appeals challenging the Tribunal's decision regarding the disallowance of employee contributions to PF and ESI funds beyond the prescribed due dates. The key question raised was whether such disallowance is justified under Section 36(1)(va) of the Income Tax Act. The Tribunal upheld the CIT(A)'s decision in favor of the assessee, citing the decision in a previous case. However, the Revenue argued that the CIT(A) did not consider relevant grounds and legal provisions, including the requirement to pay employee contributions within due dates specified by the PF and ESI Acts.

2. Lack of Representation and Liquidation Status:
During the proceedings, it was noted that the respondent-assessee was not represented before the Tribunal due to pending liquidation proceedings before the National Company Law Tribunal (NCLT). This non-representation led to the Tribunal dismissing the appeals filed by the Revenue. The Court acknowledged the absence of the assessee and the need to address the issue of disallowance in light of subsequent decisions by other High Courts.

3. Need for Fresh Consideration:
Considering the conflicting decisions by different High Courts on similar issues, the Court decided to remand the matters to the CIT(A) for a fresh consideration. The Court emphasized the importance of reviewing the legal principles established in various judgments post the initial decision in the case of CIT Vs. Amil Limited. The CIT(A) was instructed to issue a notice to the respondent-assessee and make a fresh decision taking into account the evolving legal landscape.

4. Decision and Remand:
Ultimately, the Court allowed the tax case appeals, setting aside the common order of both the CIT(A) and the Tribunal. The matters were remanded to the CIT(A) for a fresh consideration, leaving the substantial questions of law open for further examination. The connected CMP was closed as a result of this decision.

This comprehensive analysis outlines the key issues, arguments, and the Court's decision to remand the case for a fresh consideration, considering the evolving legal interpretations and the absence of representation by the respondent-assessee.