9911796707
TMI Blog2015 (9) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... 011. It was found by the Assessing Officer that remittance of employees' contribution to Provident Fund and ESI has been delayed beyond the due date of payment prescribed under the respective Acts and therefore the cumulative figure of all defaulted payments amounting to Rs. 34,41,659/- was proposed to be disallowed under Sec.36(1) (va) r/w Sec.2(24)(x) of the Income Tax Act, 1961 (for short, "the Act"). Thereupon, objections were invited and overruling the objections raised, Assessing Officer disallowed deduction of the aforesaid amounts under Sec.36(1)(va) r/w Sec.2(24)(x) of the Income Tax Act. 3. Aggrieved by the order of the Assessing Officer, Respondent took up the matter before the Appellate Authority, basically contending that the Assessing Officer was not justified in disallowing the expenditure of employees' contribution invoking provisions of Sec.36(1)(va). It was further contended that the ratio of the decision of the Hon'ble Apex Court in the case of 'C.I.T. v. Alom Extrusions Ltd.' [(2009) 319 ITR 306 (SC)] was not followed by the Assessing Officer. After evaluating the facts and circumstances, following the decision of the Hon'ble Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Respondent had not credited the sum received towards the employees contribution to the employees' account in the relevant fund on or before the due date prescribed under Explanation to Sec.36(1)(va) and therefore the Respondent shall not be entitled to deduction as such, though they deposited the amount before the due date prescribed under Sec.43B, i.e. before filing of return under Sec.139(1). It was his further contention that the decision of the Hon'ble Apex Court in 'Vinay Cement Ltd.' case (supra) relied on by the Tribunal was not applicable to the facts of this case, since the Hon'ble Apex Court considered therein only the question of Sec.43B of the Act which deals with contribution payable by the employer. The learned Senior Counsel, on the other hand, relied on the principles laid down by the Gujarat High Court in 'Commissioner of Income-Tax v. Gujarat State Road Transport Corporation' [(2014) 366 ITR 170 (Guj)]. 7. Learned Senior Counsel for the Revenue has invited our attention to paragraph 7 of the judgment in 'Gujarat State Road Transport Corporation's case' (supra) and contended that the issue involved therein was with res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to paragraph 7.06 of the judgment in 'Gujarat State Road Transport Corporation's case' which read thus: "7.06. Considering the aforesaid provisions of the Act, as per section 2(24)(x), any sum received by the assessee from his employees as contribution to any provident fund or superannuation fund or any fund set up under the provisions of the ESI Act or any other fund for the welfare of such employees shall be treated as an "income". Section 36 of the Act deals with the deductions in computing the income referred to in section 28 and as per section 36(1)(va) such sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, the assessee shall be entitled to deduction of such amount in computing the income referred to in section 28 if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the "due date", i.e. date by which the assessee is required as an employer to credit the employee's contribution to the employee's account in the relevant fund, in the present case, the provident fund and the ESI Fund under the Provident Funds Act and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Sec.43B on actual payment and such deduction would be admissible for the accounting year. However, it is required to be noted that as such there is no corresponding amendment in section 36(1)(va). Deletion of the second proviso to section 43B, vide the Finance Act, 2003, would be with respect to section 43B and with respect to any sum mentioned in section 43B(a) to (f) and in the present case, the employer's contribution as mentioned in section 43B(b). Therefore, the deletion of the second proviso to section 43B and the amendment in the first proviso to section 43B by the Finance Act, 2008 is required to be confined to Section 43B alone and the deletion of the second proviso to section 43B, vide the amendment pursuant to the Finance Act, 2003, cannot be made applicable with respect to section 36(1)(va) of the Act. Therefore, any sum with respect to the employees' contribution as mentioned in section 36(1)(va), the assessee shall be entitled to the deduction of such sum towards the employees' contribution if the same is deposited in the accounts of the concerned employees and in the concerned fund such as provident fund, ESI contribution fund, etc., provided the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned in the Explanation to section 36(1)(va), the assessee shall not be entitled to deductions of such amount in computing the income referred to in section 28 of the Act." 10. It was further contended that, on a reading of the above extracted portion of the judgment of the Gujarat High Court, it was clear that so far as the amount recovered by assessee towards contribution of the employees to the Provident Fund and ESI are concerned, Sec.36(1)(va) was applicable and if the contributions are not paid within the period specified under the relevant statute as provided under Explanation-1 thereto, the assessee would not be entitled to deduction. It was also contended that there was no amendment made to Sec.36(1)(va) and the Explanation to Sec.36(1)(va) was not deleted and was still on the statute book and therefore the same was required to be complied with, and further that merely the second proviso to Sec.43B which provided that the assessee was entitled to credit the employer's contribution under Sec.43B(b) in the relevant fund for the welfare of the employees on or before the due date under the relevant Act, was deleted, it cannot be said that Sec.36(1)(va) was also amende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te". Therefore, it cannot be said that payment made beyond the due date also qualifies for deduction, in view of the prescription in the main provision itself. Had that been the legislative intent, there was no necessity to enact the proviso. The Legislature in its wisdom has incorporated the proviso and it cannot be said to be without a purpose. There is nothing repugnant between the main provision and the proviso. They operate in different situations. The view of the Tribunal that payment having been made before the close of the financial year, qualifies for deduction is indefensible." 13. On the contrary learned counsel for the Respondent contended that the Respondent was paying the salary and wages during the second week of every month and in the case of contribution towards PF and ESI, the amount would become due for payment within 15 days plus 5 days towards grace period from the end of the month in which wages or salary were paid. Thus, for the Respondent, due dates for the payment of such contribution arose in the month subsequent to the month in which wages/salary actually disbursed and therefore the liability to deduct employees' contribution arises only on paying sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paid before the filing of the return under Sec.139(1) of the Act. Learned counsel has invited our attention to paragraph 10 of the judgment and contended that even though in the decision cited supra, the Hon'ble Apex Court was considering the question of retrospective operation of the amendment so made to Sec.43B as per the Finance Act, 2003, the Court considered the said question after appreciating the entire scheme of the Act, as it existed prior to 01.04.1984 and therefore the application of Sec.43B read with Sec.36(1) (va) was considered by the Apex Court and in such circumstances the findings rendered thereunder is a binding precedent so far as the question considered in this case was concerned. 16. Learned counsel has also invited our attention to 'Commissioner of Income Tax v. AIMIL Ltd. & Ors.' [(2010) 321 ITR 508 (Del.)], 'Commissioner of Income-Tax v. State Bank of Bikaner & Jaipur' [(2014) 363 ITR 70 (Rajasthan)], Essae Teraoka (P) Ltd. v. Deputy Commissioner of Income Tax' [(2014) 366 ITR 408 (Karn.), 'Commissioner of Income-Tax v. South India Corporation Ltd.' [(2000) 242 ITR 114 (Ker.], 'Commissioner of Income Tax v. Ghatge Patil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return." 18. On a reading of Sec.36(1)(va), what we find is that any sum received by the assessee from his employees to which the provisions of sub-clause (x) of clause (24) of Sec.2 apply was credited by the assessee to the employees' Account in the relevant Fund or Funds on or before the due date prescribed under Explanation 1 to Sec.36(1)(va), is entitled to deduction. According to us, it thus means that Sec.36(1)(va) takes care of contribution received on account of the employees and credited by the assessee to the employees' account in the relevant Fund or Funds on or before the due date as provided under the relevant statute alone will be entitled to get deduction. In this context, the definition of income contained under Sec.2(24) (x) is relevant, which read thus: "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 such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1983 or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him." Therefore, according to us, since the Respondent has admittedly not paid the deduction so made within the due date as provided under Sec.36(1)(va), the Respondent was not entitled to get deduction of the amounts deducted thereunder for and on behalf of the employees. 20. In view of the reliance placed by various High Courts in 'Alom Extrusions' (supra), to arrive at a conclusion that the assessees therein were liable to pay both the employees as well as employer's contribution on or before filing of return under Sec.139(1) only, we thought that if 'Alom Extrusions' (supra) is discussed in detail, the question raised in this case can be made clear. In paragraph 3 of the said judgment, the question consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his uniformity came into force w.e.f. 1st April, 2004. x x x x x x x x x x x x x x x x" 22. Therefore, on a reading of the afore-extracted portion of the judgment, it is clear that the Apex Court had considered only the question relating to the effect of the amendment so made and found that amendment was curative in nature and therefore that it operated retrospectively from 1st April, 1988. 23. Thereafter, in paragraph 15 of the judgment, it was held that the amendments were brought about under the Finance Act, 1983 for the purpose of ensuring that the relaxation/incentive was restricted only to tax, duty, cess and fee under Sec.43B in order to ensure that it did not apply to contributions to labour welfare funds. Further, it was held that the reason appears to be that the employers should not sit on the collected contributions and deprive the workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the welfare funds. It was also held that consequent to the implementation problems of the second proviso to Sec.43B resulted in enactment of Finance Act, 2003, deleting the second proviso and bringing about uniformity in the first pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 'Alom Extrusions' (supra) did not consider the question involved in this case. 25. So also, in paragraph 16 of the judgment supra, the Apex Court had quoted with approval the judgment in 'Commissioner of Income Tax v. J.H. Gotla' [(1985) 156 ITR 323 (SC)], which read thus: "We should find out the intention from the language used by the legislature and if strict literal construction leads to an absurd result, i.e. a result not intended to be subserved by the object of the legislation found in the manner indicated before, then if another construction is possible apart from strict literal construction, then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction." 26. Therefore, in our view, when Sec.43B as it stood prior to the amendment and Sec.36(1)(va) Explanation 1 thereto r/w Sec.2(24)(x) are considered together, it is clear that they operate in different fields. So far as the employee's contrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tterances are made in the setting of the facts of a particular case, said Lord Morris in 'Harrington v. British Railways Board'. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases." 28. We are also conscious of the fact that if the intention of a particular provision of a statute can be gathered from the language used by the legislation, then we are bound to abide by the language used therein in order to ascertain the intention. We are also of the opinion that there was a clear logic behind Sec.36(1)(va) and Explanation thereto since the Legislature intended that the amount received towards contribution of the employee was money belonging to the employee and the assessee was not entitled to utilise the said fund and enrich himself. So also, both the provisions supra will co-exist harmoniously without disturbing each other. Therefore, the distinction drawn to credit the amount of the employer and the employee was with a clear objective and there is no illegality or other legal infirmity in classifying the contributions of employees and employer in the matter of crediting the same to the appropriate st ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
