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TMI Blog2018 (10) TMI 1386X X X X Extracts X X X X X X X X Extracts X X X X ..... d Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT] and Commissioner of Income Tax vs Merchem Ltd [2015 (9) TMI 560 - KERALA HIGH COURT]. Consequently, with great respect, in agreement with the other decisions rendered by the High Courts of Karnataka, Punjab and Haryana and Allahabad, which in my view, did not consider the distinction of the scope and ambit of Section 36(1)(va) and Section 43B. Accordingly, find no error apparent on the face of the order passed by the Assessing Authority, based on the admitted facts. Accordingly, the writ petition fails and the same is dismissed. - W.P.No.5264 of 2018 And WMP No.6461 of 2018 - - - Dated:- 23-10-2018 - Mr. Justice K. Ravichandrabaabu For the Petitioner : Mr.K.Sakthivel For the Respondents : Mr.Rajkumar Jhabakh Standing Counsel (I.T.) ORDER The petitioner is aggrieved against the assessment order of the respondent passed under Section 143(3) of the Income Tax Act dated 29.06.2017 and consequential letter of the respondent dated 16.02.2018. 2.The case of the petitioner is as follows: The petitioner is a Company registered under the Companies Act. It is an assessee under the respondent. For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner company not having complied with Section 36(1)(va) read with the provisions of Section 2 (24)(x) of the Act in accordance with the Circular No.22 of 2015 dated 17.12.2015, the belated payment made towards the contribution was credited back to the total income of the petitioner company. In the present case, there can be only one view that can be carved out taking into consideration the applicability of the said circular dated 17.12.2015 and therefore, reliance placed on several other High Court Judgments is incorrect, since interpretation of the circular is not taken into consideration at all in those cases. 4. Learned counsel for the petitioner Mr.K.Sakthivel submitted as follows: Even though the petitioner did not pay the contribution before the concerned authority within the due date stipulated under the relevant enactment, admittedly, the petitioner had paid the same before filing the return of income before the respondent/Assessing Officer. Therefore, as contained in the proviso to Section 43B(b) of the Income Tax Act, the petitioner's interest is protected for getting deduction. Even otherwise, the delayed payment of the contribution before the concerned a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n towards EPF and ESI, on the reason that such payment was made beyond the due date stipulated under the relevant enactment for making such payment. The core contention of the petitioner is that since the payment was made before filing the return, even though beyond the due date stipulated under the relevant enactment, the petitioner is entitled for deduction of such payment in view of amendment brought to Section 43B of the Income Tax Act, 1961. On the other hand, it is contended by the Revenue that the petitioner is not entitled to take shelter under Section 43B, which pertains to employer's contribution and on the other hand, the assessee's case would fall only under the purview of Section 36(1)(va), which specifically deals with employees contribution . In other words, the contention of the Revenue is to the effect that the benefit of amendment brought to Section 43B cannot be extended to unamended provision under Section 36(1)(va). 8.No doubt, on this issue, the petitioner heavily sought to rely upon decision of the Apex Court reported in 2010(1)SCC 489, Commissioner of Income Tax vs. Alom Extrusion Ltd., and the decisions made by the High Court of Karnataka, P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees. Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of Section 139 in respect of the previous 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. 14. A careful perusal of Section 2(24)(x) would show 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 or any other fund for welfare of such employees, shall be treated as income at the hands of the assessee. It is crucial to note at this juncture that the contribution towards the welfare funds scheme such as ESI or EPF is by two components viz., one by the employee and other by the employer. Therefore, the employee has to pay his part of contribution towards such scheme to the employer, who in turn, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When such payment is made in accordance with Section 43B(b), then the same is entitled for deduction. Therefore, there is a clear distinction between the scope of Section 43B(b) and Section 36(1)(va). 17.It is true that Section 43B was amended and consequently the deduction is to be allowed based only on the actual date of payment. But the facts of the present case is otherwise. The belated payment made by the assessee in this case is not employers contribution and on the other hand, it is employees contribution , which they received already. Therefore, the Assessing Officer is justified in disallowing the said payment on the reason that the same was made beyond the due date and consequently, treating the same as an income at the hands of the assessee in view of Section 2(24)(x). While Section 36(1)(va) has to be read along with Section 2(24)(x), in my considered view, Section 43B cannot be read into Section 36(1)(va), as both are operating on different obligatory field. 18. It is a known fact that the employees contribution towards the welfare fund is being deducted by the employer periodically from the salary of such employee. Therefore, such accumulated contri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or furnishing the return, no disallowance can be made under Section 43B of the said Act. Therefore, it is evident that the said Circular has specifically dealt with the employers contribution and the scope of Section 43B after amendment, specifically excluding the extension of such scope to the employees contribution governed by Section 36(1)(va) of the said Act. Neither the said provision under Section 36(1)(va) nor the said Circular is challenged by the petitioner. In such circumstances, the petitioner is not entitled to contend otherwise. 20. Learned counsel for the petitioner strongly relied on Alom Extrusion Ltd.'s case of the Supreme Court. However, as rightly pointed out by the Gujarat High Court in (2014) 366 ITR 170 (Guj), Commissioner of Income Tax-II vs Gujarat State Road Transport Corporation, the Hon'ble Supreme Court in the Alom Extrusion Ltd.'s case, did not have an occasion to consider the scope of Section 36(1)(va) and the said decision was purely by considering the scope of amendment made to Section 43B only. Moreover, the issue before the Apex Court was whether the amendment made to Section 43B has any retrospective effect. 21. In 2010(1) SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviso, then, in our view, the Finance Act , 2003, which is made applicable by the Parliament only with effect from 1st April, 2004, would become curative in nature, hence, it would apply retrospectively with effect from 1st April, 1988. 22. In (2008) 298 ITR 141 (KAR), Commissioner of Income Tax vs Sabari Enterprises , it is held at paragraphs 1 and 8 as follows: ..1. Whether the Tribunal was correct in holding that the contributions made by the assessee to PF and ESI are allowable deduction even though it is made beyond the stipulated period as contemplated under the mandatory provisions of Section 36(1)(va) read with Section 2(24)(X) and Section 43B of the Act as the same was paid by the assessee on or before the due date for furnishing the return of income as per Section 139(1) of the Act? ..8.The learned Counsel Sri Parthasarathy and Dr.Krishna, appearing for respondents, also drew our attention to the deletion of second proviso to Section 43B of the Income Tax Act by Finance Act, 2003 which provision has come into force, with effect from 1-4-2004. The reliance placed upon the decision of the Apex Court in Allied Motors (P) Ltd. v. CIT (supra) and also on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore following a particular view when there is divergence in views of different High Courts, we find it appropriate to examine Supreme Court judgment in Commissioner of Income-Tax Vs Alom Extrusions Ltd. (supra) to find out whether it can be confined only in respect to employers' contribution or is applicable to both 'contributions', whether by employer or employee. 26.The question, whether benefit under Section 43B, as a result of amendment of Finance Act, 2003, is retrospective or not, came to be considered in Commissioner of Income-Tax Vs Alom Extrusions Ltd. (supra). Court considered the intent, purpose and object in the historical back drop of insertion of Section 43B and its progress by way of various amendments. Referring Section 2(24)(X) it said, income is defined under Section 2(24) which includes profits and gains. Further in clause (x) of Section 2(24) any sum received by Assessee from employees as 'contributions' to any provident fund/superannuation fund or any fund set up under Act 1948, or any other Assessee/Employer was entitled to deduction even prior to April, 1, 1984, keeping books on mercantile system of accounting, as a business expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the PF Act and/or ESI Act. ...6.11. Now, so far as the reliance placed upon the decision of the Himachal Pradesh High Court in the case of Nipso Polyfabrics Ltd. (supra); decision of the Karnataka High Court in the case of Spectrum Consultants India (P) Ltd. (supra); decision of the Rajasthan High Court in the case of Udaipur Dugdh Utpadak Sahakari Sandh Ltd. (supra) and decision of the Punjab and Haryana High Court in the case of Hemla Embroidery Mills (P) Ltd. (supra) taking view that where the assessee deposited employees' contribution to ESI and Provident Fund before the due date of filing the return under section 139(1) of the Act, the same would be allowable as deduction, are concerned, With respect and for the reasons stated hereinabove, we are not in agreement with the view taken by the aforementioned High courts. As discussed hereinabove, as there is no amendment in Section 36(1)(va) of the Income Tax Act and considering section 36(1)(va) of the Income Tax Act as it stands, with respect to any sum received by the assessee from any of his employees to which the provisions of clause (x) of sub-section (24) of section 2 applies, assessee shall not be entitled to ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... astly, we may point out the hardship and the invidious discrimination which would be caused to the assessee(s) if the contention of the Department is to be accepted that Finance Act, 2003, to the above extent, operated prospectively. Take an example-in the present case, the respondents have deposited the contributions with the R.P.F.C. after 31st March (end of accounting year) but before filing of the returns under the IT Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under s.43B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right upto 1st April, 2004, and who pays the contribution after 1st April, 2004, would get the benefit of deduction under s.43B of the Act. According to us, it is thus clear that the decision rendered by the apex Court in Alom Extrusio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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