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TMI Blog2018 (3) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... the first time before us. Hence we restore this plea of the assessee to the file of the AO for deciding the same in accordance with the law Rejection of depreciation claimed by the assessee on EDP equipments taken on lease from M/s HCL Infosystems Ltd - Held that:- We notice that the CIT(A) has, however, proceeded to examine the terms and condition of the Contract and has given a finding that the assessee was only a lessee and the ownership has remained with lessor only. He has also given a finding that the assessee had got the right to use the equipments only and the lessor continued to have legal possession over the assets. The Ld CIT(A) has also observed that the assessee did not furnish any information about similar claim made in the succeeding years. Under these set of facts, the Ld CIT(A) has confirmed the rejection of claim for depreciation. The assessee did not furnish any document to contradict the interpretation given by the Ld CIT(A). The ld A.R disputed the observations of the AO by stating that the supplier of equipment and lessee were one and the same. What is required to be shown is that the ownership of the equipments has transferred from M/s HCL infosystems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer noticed that the employees‟ contribution to Provident Fund pertaining to the period from April 2004 to August 2004 amounting to ₹ 115.41 lakhs was paid beyond the due date prescribed under the respective heads, even though it was paid before the completion of relevant financial year. Accordingly, he took a view that the above said amount is liable to be disallowed under section 36(1)(va) of the Act. Accordingly the AO disallowed the above said amount. The AO further noticed that the assessee had paid the Employees‟ contribution to PF pertaining to FY 2003-04 relevant to Asst. Year 2004-05 amounting to ₹ 326.58 lakhs in the succeeding year, i.e., in FY 2004-05 relevant to AY 2005-06. The assessee claimed deduction of the above said amount in assessment year 2005-06 on payment basis. Since the payments have been made beyond the due dates prescribed under P F Act, the Assessing Officer held that the amount of ₹ 326.58 lakhs referred to above is also not allowable as deduction in Assessment Year 2005-06. Accordingly he disallowed the claim of ₹ 326.58 lakhs also. 4. In the appeal filed before Ld CIT(A), the first appellate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the employees contribution for the period April 2004 to August 2004 amounting to Rs . 1,15,41,061 /- was deposited into PF account on 21 . 10 . 2004, much after the due date prescribed under the PF Act but before the due date of filing of the return of income for the said year . In this regard it is relevant to refer to the following judicial pronouncements . In the case of Essae Teraoka ( P ) Ltd . Vs . DCIT 43 Taxmann 33, the Hon'ble Karnataka High Court took the view that the word contribution occurring in Sec . 43B of the I . T . Act would include employees contribution to PF, in the light of the definition of the word, 'contribution' by Sec . 2 ( c ) of P . F . Act, as per which contribution would mean both the employers contribution and employees contribution . Accordingly, it was held that the provision of Sec . 43B allowing deduction for payment made before the filing of the income tax return cannot be ignored . In the case of CIT Vs . Kichha Sugar Co . Ltd . 35 Taxmann 54, the Hon'ble High Court of Uttarakhand held that the due date referred in Sec . 36 ( v )( a ) should be read in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Departmental Representative placed reliance on the circular issued by the Board, wherein it was stated that the decision rendered by the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. (319 ITR 306) was applicable only to employer‟s contribution of PF and not to employees‟ contribution. Ld.Departmental Representative also placed reliance on the decision rendered by the Hon'ble Kerala High Court in the case of CIT vs.Merchem Ltd. (2015) 378 ITR 443 and also the decision rendered by the Hon'ble Gujarat High Court in the case of CIT vs. Gujarat State Road Transport Corporation (Tax Appeal Nos. 1711 2577/2009 others, dated 26/12/2013), wherein it was held that the time limit prescribed under section 43B of the Act would apply to employees‟ contribution and only the provisions of section 36(1)(va) shall apply to the employees contribution. He further submitted that, in both the above said cases, the decision rendered by the Hon'ble Supreme Court in the case of Alom Extrusions Ltd., (supra) has been distinguished. 10. On the contrary, ld. Authorised Representative of the assessee submitted that the Hon'ble Calcutta High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and accordingly claimed the deduction of the above said amount in AY 2005-06 on payment basis. The AO rejected the claim of the assessee in the order passed u/s 154 of the Act and the Ld CIT(A) also confirmed the same. 14. The Ld A.R submitted that even though the provisions of sec. 36(1)(va) governs the deduction of employees contribution to Provident Fund, yet the provisions of sec.43B should also be applied to employees‟ contribution also. The Ld A.R contended that the distinction between employees contribution and Employers contribution made out by the Act has been diluted by Hon‟ble Supreme Court in the case of CIT Vs. Alom Extrusions Ltd (2009)(319 ITR 0306). He submitted that the Hon‟ble Apex Court has discussed about the object of inserting these provisions, in paragraph 15 of its order, by observing that these provisions were brought to curb the practice of claiming deduction by passing a book entry based on mercantile system of accounting. Accordingly these provisions have intended to allow deduction on payment basis. He submitted that identical view was expressed by the Special bench of ITAT in the case of Kwality Milk Foods Ltd vs. ACIT (2006)(100 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld A.R submitted that the impugned deduction should have been allowed in AY 2004-05 itself. He submitted that the due date for filing return of income for assessment year 2004-05 u/s 139(1) of the Act was extended, inter alia, for Corporate assessees to 31-10-2004. He submitted that the assessee has paid the above said amount of ₹ 326.58 lakhs on 21.10.2004, i.e., before the due date for filing return of income for AY 2004-05 u/s 139(1) of the Act. Accordingly he submitted that, without prejudice his original contentions, the above said amount should be allowed in AY 2004-05. Accordingly he prayed that a suitable direction may be given to the AO, if the Tribunal is not convinced with his original arguments. 19. The Ld D.R, on the contrary, submitted that the time limit for making payment of employees contribution is prescribed in the respective Acts and the deduction of the same is governed by the provisions of sec. 36(1)(va) of the Act. The various decisions relied upon by Ld CIT(A) for deleting disallowance of employees‟ contribution were related to the cases, where payments have been made by the assessees along with employer‟s contribution. Further, both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and accordingly hold that the amount of ₹ 326.58 lakhs is not allowable as deduction in AY 2005-06 on payment basis. 22. We notice that the Ld CIT(A) has expressed the view that the above said payment was not made into PF account before the due date of filing the return for the subject year. The Ld CIT(A) has further observed that various decisions have liberally interpreted the provisions of and have laid down the principle that the employees‟ contribution paid before the due date for filing return of income is allowable as deduction. Since the employees‟ contribution is income of the assessee u/s 2(24(x) of the Act, the Ld CIT(A) held that the same is allowable as deduction only if it is paid before the due date for filing return of income. Accordingly the Ld CIT(A) has rejected the claim of the assessee. 23. In view of the discussions made by us in the preceding paragraphs, we are of the view that the Ld CIT(A) was justified in confirming the disallowance made by the AO. 24. Before us, the Ld A.R took an alternative plea that the impugned amount is allowable as deduction in AY 2004-05 itself, as it has been paid within the extended time limit prescr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reon. 27. The Ld CIT(A) also confirmed the same and hence the assessee has filed this appeal before the Tribunal. 28. The Ld A.R submitted that the assessee has purchased the EDP equipments under Finance lease only and it has wrongly claimed the lease payments as deduction. He submitted that the lessee is entitled to claim depreciation under Finance lease. He submitted that there will be usually three parties in case of lease agreements, viz., the lessor, the lessee and the supplier of equipments. In that case, the lease agreement shall be entered between the lessor and lessee. However, in the instant case, the supplier of equipments and the lessor are one and the same person, viz., M/s HCL Infosystems Ltd. He submitted that the intention of supplier of equipments will also be to sell the equipments. Accordingly he submitted that M/s HCL Infosystems Ltd has actually sold the EDP equipments under Finance lease. Accordingly he submitted that the assessee has become owner of the EDP equipments and is entitled to claim depreciation thereon. The Ld A.R further submitted that the Ld CIT(A) has observed that the assessee, in its capacity as lessee, is entitled to terminate the agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said agreement would clearly show that the assessee was only a lessee over the Agreement, the lessor had the obligation to insure the assets over the lease period and only - after the expiry, of the lease period the lessee gets a right to acquire the leased assets . The lessee also has right to terminate the agreement if the lessor fails to perform the services or deliver the equipments within the agreed time . Thus as per the terms of the agreement, the lessee has only right to use the assets without any ownership rights over the assets . The claim of exclusive possession is not legally tenable as the lessor continues to own and have legal possession over the assets . Thus even as per the terms of the agreement, the assessee cannot be construed as owner of the assets and would not be entitled for depredation over the said assets . 5 . 3 . 2 It was also pleaded that the claim 0' depreciation was not made in the return of income due to inadvertence . But no information was furnished as to whether claim of depreciation was made in regard to these assets in the returns filed for subsequent years . Hence this plea is also liable for rejection ..... X X X X Extracts X X X X X X X X Extracts X X X X
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