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TMI Blog2018 (12) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... o.768/Lkw/2017 - - - Dated:- 16-11-2018 - SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER For The Appellant : Shri P. K. Kapoor, C. A. For The Respondent : Shri C. K. Singh, D. R. ORDER PER T . S . KAPOOR, A . M . This is an appeal filed by the assessee against the order of learned CIT(A)-II, Kanpur dated 19/09/2017 pertaining to assessment year 2013-14. In this appeal the assessee has taken six grounds however, the crux of the grounds of appeal is the action of learned CIT(A) by which he has sustained addition which the Assessing Officer had made on account of disallowance u/s 14A of the Act and u/s 36(1)(va) of the Act for delay in deposit of employees contribution to PF /ESIC. 2. At the outset, Learned A. R. stated that ground No. 1 to 4 relate to disallowance u/s 14A of the Act whereas ground No. 5 relates to disallowance on account of delay in deposit of employees contribution to PF/ESIC. As regards the first issue, Learned A. R. submitted that assessee Appellant by Shri P. K. Kapoor, C. A. Respondent by Shri C. K. Singh, D. R. suo motu had made a disallowance u/s 14A which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited vs. CIT in Income Tax Appeal No. 87 of 2006. 3. Learned D. R. , on the other hand, supported the orders of the authorities below. 4. We have heard the rival parties and have gone through the material placed on record. We find that the assessee, while filing the income tax return, made a disallowance of ₹ 5,74,985/- u/s 14A which the Assessing Officer enhanced by ₹ 1,65,368/- as per the provisions of Rule 8D of the Act. Before learned CIT(A) the assessee filed appeal against the enhanced amount of disallowance whereas before us the assessee agitated the whole disallowance including that made by the assessee itself. Learned A. R. argued that since there was no exempt income earned by the assessee, therefore, the disallowance was not warranted at all. We also noted that this contention of the assessee is correct as the Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT [2015] 61 Taxmann. com 118 (Delhi) and Hon'ble Allahabad High Court in the case of CIT vs. Shivam Motors (P. ) Ltd. has made similar findings and has held that in the absence of tax free income earned by the assessee, disallowance u/s 14A cannot be made. For the sake of com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration before Gujrat High Court in Commissioner of IncomeTax Vs Gujrat State Road Transport Corporation, 5 ( 2014) 366 ITR 170 . Therein Assessee collected Rs . 51,06,02,712/- from its employees towards provident fund contribution but deposited Rs . 21,16,61,582/- with provident fund trust . Thus there was a short fall of Rs . 24,89,41,130/- . This amount of short fall was treated by Assessing Officer as income of Assessee vide Section 2(24)(x) read with Section 36(1)(va) of Act 1961 . Assessing Officer also added Rs . 1,93,55,580/- being the amount of short fall towards employers contributory provident fund and disallowed the same under Section 43B of Act 1961 . He also disallowed the said amount of Rs . 1,93,55,580/- from expenses claimed by Assessee for the A . Y . in question i . e . 2005-06 as per provisions under Section 43B . Dissatisfied with assessment order, Assessee preferred appeal before CIT(A) who vide order dated 25 . 06 . 2009 partly allowed the same and deleted disallowance of Rs . 24,89,41,130/- (short fall in employees contribution to provident fund) and Rs . 1,93,55,580/- (short fall in emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the second proviso to Section 43B which provided that even with respect to the employer s contribution (Section 43B(b)), the Assessee was required to credit the amount in the relevant fund under the PF Act or any other fund for the welfare of the employees on or before the due date under the relevant Act, is deleted, it cannot be said that Section 36(1)(va) has been deleted and/or amended . 19 . That is how Gujrat High Court held that Section 43B would not be attracted in a case where dispute relates to employees contribution only . Section 43B would be confined only to employers contribution . It further said: Therefore, with respect to the employees contribution received by the assessee if the assessee has not credited the said sum to the employees account in the relevant fund or funds on or before the due date mentioned 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 . 20 . Gujrat High Court distinguished judgment of Commissioner of IncomeTax Vs Alom Extrusions Ltd . ( supra) on the ground that therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Gujrat High Court . The Division Bench judgment delivered by Hon ble Dilip B . Bhosale, (as his lordship then was) held, if the contribution of employees fund is deposited within due date the Assessee is straightaway entitled for deduction under Section 36(1)(va) . However Section 43B provides for certain deductions allowable only on actual payment . It gives an extension to the employer to make payment of contribution to provident fund or any other fund, till due date applicable for furnishing of Return under Section 139(1) of Act 1961, in respect of previous year in which liability to pay such sum was incurred, and evidence of such payment is furnished by Assessee along with such Return . Court then said: In short, this provision states, notwithstanding anything contained in any other provision contained in this Act , a deduction otherwise allowable in this Act in respect of any sum payable by the assessee as an employer by way of contribution to any fund such as provident fund shall be allowed if it is paid on or before the due date as contemplated under Section 139(1) of the Income-Tax Act . This provision has nothing to do with the consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fund for welfare of such employees constitute 'income' . This is the reason why every Assessee/Employer was entitled to deduction even prior to April, 1, 1984, keeping books on mercantile system of accounting, as a business expenditure, by making provision in his 9 books of account in that regard . Assessee was capable of keeping money with him and just by mentioning in accounts, was able to claim deduction as business expenses . Section 43B was inserted to check this practice and it resulted in discontinuing mercantile system of accounting with regard to tax, contributions etc . With induction of Section 43B an Assessee could claim deduction on actual payment basis . By Finance Act, 1988 Parliament inserted first proviso w . e . f . 01 . 04 . 1988 which inter alia provides that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive, being curative in nature and apply from 01 . 04 . 1988 . In the result when contribution had been paid, prior to filing of return under Section 139(1), Assessee/employer 10 would be entitled for deduction and since deletion of Second Proviso and amendment of First Proviso is curative and apply retrospectively w . e . f . 01 . 04 . 1988 . 28 . From the aforesaid judgment, we find that irrespective of the fact that deduction in respect of sum payable by employer contribution was involved, but Court did not restrict observations, findings and declaration of law to that context but looking to the objective and purpose of insertion of Section 43B applied it to both the contributions . It also observed clearly that Section 43B is with a non-obstante clause and therefore over ride even if, anything otherwise is contained in Section 36 or any provision of Act 1961 . 29 . Therefore, we are clearly of the view that law laid down by High Courts of Karnataka, Rajasthan, Punjab Haryana, Delhi, Bombay and Himachal Pradesh have rightly applied Section 43B in respect to both contributions i . e . employer and employee . Otherwise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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