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TMI Blog2007 (8) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... employees contribution to the Provident Fund PF, etc., paid by the assessee-employer after the expiry of the due date. On appeal, the ld. CIT(A) has taken note of the fact that the aforesaid payments have been made by the assessee before the expiry of the due date for filing the return of income under section 139(1) and therefore, has directed the Assessing Officer to allow them. The Department is aggrieved by the orders of the CIT(A) in this behalf and is therefore in appeal before this Tribunal against them. 3. Two issues distinctly arise in the present bunch of appeals filed by the Department, namely, ( i ) Whether the CIT(A) is justified in directing the Assessing Officer to allow the employer s contribution and also employees contribution to the Provident Fund, etc., paid by the assessee-employer after the expiry of due date but before the expiry of the grace period prescribed for making such payment under the respective statutes; and ( ii ) Whether the CIT(A) is justified in directing the Assessing Officer to allow the aforesaid payments made after the expiry of the grace period but before the due date prescribed for filing the return of income under section 139(1). We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction of any sum received by him from his employees towards the aforesaid funds but credited by him to the employees account in the relevant fund after the expiry of the due date but before the expiry of the grace period allowed under the relevant Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. 5. In CIT v. Shri Ganapathy Mills Co. Ltd. [2000] 243 ITR 879 (Mad.), followed in CIT v. Salem Co-operative Spg. Mills Ltd. [2006] 284 ITR 621 , the Hon ble Madras High Court has held that the payments towards provident fund and ESI having been made within the grace period allowed under the relevant statute are required to be deducted in the computation of total income of the assessee. We are in respectful agreement with the aforesaid decisions. In fact, this Tribunal has also consistently been taking similar view. In this view of the matter, we hold, that any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. Several other clauses, namely, clause ( c ), ( d ), ( e ) and ( f ) were subsequently inserted in section 43B. We are however not concerned with them in these appeals. Two provisos to section 43B were inserted by the Finance Act, 1987 with effect from 1-4-1988, i.e., for and from the assessment year 1988-89. During the years under appeal, both the provisos were operative. First proviso was inserted to provide that a deduction otherwise allowable under the Income-tax Act in respect of the sums referred to in clause ( a ) or clause ( c ) or clause ( d ) or clause ( e ) of section 43B shall not be disallowed in respect of the previous year in which the liability to pay such sum was incurred provided that such sum is paid by the assessee on or before the due date applicable in his case for furnishing the return under section 139(1) and the evidence of such payment is furnished by the assessee along with such return. Second proviso with which we are concerned in the present bunch of appeals was inserted to provide that no deduction shall, in respect of any sum referred to in clause ( b ) of section 43B, be allowed unless such sum has actually been paid in the previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also when second proviso was available on the statute book. In view of the difference of opinion between various Benches of this Tribunal in the matter, the issue was referred to a Special Bench of this Tribunal at Madras in Kwality Milk Foods Ltd. v. Asstt. CIT [2006] 100 ITD 199 (Chennai) (SB). In the said matter, the Special Bench has held that the amended proviso inserted with effect from 1-4-2004 has retrospective effect and therefore if the payment of any sum, which is otherwise allowable under the Income-tax Act, is eligible for deduction if it is paid by the due date prescribed for filing the return under section 139(1). 9. In CIT v. Synergy Financial Exchange Ltd. [2006] 205 CTR (Mad.) 481, the aforesaid issue has been considered by the Hon ble Madras High Court in whose jurisdiction the Special Bench at Madras is located. The Hon ble Madras High Court has held that the amended proviso to section 43B effective from 1-4-2004 is not retrospective. In view of the judgment of the Hon ble Madras High Court in Synergy Financial Exchange Ltd. s case ( supra ), it is no longer possible to hold that the view taken by the Special Bench in Kwality Milk Foods Ltd. s c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond proviso existed on the statute book and therefore it is required to be followed and this is more particularly so when we are also in respectful agreement with the aforesaid judgment. The view that we are taking in the matter is also supported by the decision of the Hon ble Bombay High Court in CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589 . Simply because the judgment in Synergy Financial Exchange Ltd. ( supra ) has been rendered by a non-jurisdictional High Court, it does not mean that it is not entitled to any respect by the Tribunals located outside the jurisdiction of the said High Court or that its value in terms of precedent is less than the value attached to the orders of the Tribunal. We are well aware of the judgment in CIT v. Thana Electricity Supply Ltd. [1994] 206 ITR 727 (Bom.) in which it has been held: The decision of one High Court is neither binding precedent for another High Court nor for Courts or Tribunals outside its territorial jurisdiction. . . . . In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect . As stated earlier, we are greatly persuaded by the judgment of the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in the context of section 43B( a ) and the first proviso to section 43B read with Explanation 2 thereto. There is nothing in this judgment also to indicate that the said judgment has been rendered in the context of the provisions of section 43B( b ) and the second proviso to section 43B. The ld. Authorized Representative for the assessee has relied upon the judgment of Hon ble Gujarat High Court in CIT v. Alembic Glass Industries Ltd. [2005] 279 ITR 331 which has been rendered for assessment year 1984-85. There is no discussion about the second proviso to section 43B in the said judgment. It is thus quite clear that none of the aforesaid judgments relied upon by the learned AR for the assessee is directly in the context of section 43B( b ) and second proviso to section 43B or the effect of omission of the second proviso and consequential amendment in the first proviso to section 43B in years prior to the omission of the second proviso. The judgment in Synergy Financial Exchange Ltd. s case ( supra ) is the only judgment, which deals comprehensively with the issue under appeal. It is for this reason that we consider it appropriate to follow the judgment of the Hon ble Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpiry of the grace period, if any, allowed under the relevant law, whichever is later shall also be eligible for deduction, for the reasons given in paragraph 5 of this Order. Second proviso does not hit such payments made within the grace period. 15. In view of the foregoing, we hold as under : ( i )Payment of any sum received by the assessee from any of his employees to which section 2( 24 )( x ) applies shall not be eligible for deduction under section 36(1)( va ) unless it is credited by the assessee to the employee s account in the relevant fund or funds on or before the due date or the grace period, if any, allowed under the relevant law, whichever is later. Since the aforesaid sums are liable to be disallowed under section 36(1)( va ) the provisions of section 43B will not come into play as they come into play only when a deduction is otherwise allowable under the Income-tax Act. ( ii )Any sum paid by the assessee as an employer by way of contribution to a provident fund etc., falling under section 36(1)( iv ) ( v ) by the due date or the grace period, if any, allowed under the relevant law, whichever is later, will be eligible for deduction in terms of the second ..... X X X X Extracts X X X X X X X X Extracts X X X X
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