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TMI Blog2022 (12) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... in Rambhau Pawar Versus ITO, Ward-8(3), Pune And Wirtgen Indian Pvt. Ltd. Versus DCIT, CPC, Bengaluru And Chitale Bandhu Mithaiwale Versus DCIT, Circle 12, Pune And Melzer Chemicals Pvt. Ltd. Versus DGIT (Investigation), Circle 7, Pune And Sparkline Equipments Pvt. Ltd. Versus DCIT, Circle - 5, Pune And Sai Control System Versus ITO, Ward 8(3), Pune And Shrimati Supriya Avinash Ranade Versus ITO, Ward 1, Ichalkaranji And Richfield Fertilisers Pvt. Ltd. Versus ACIT, Circle -1, Nashik And Kelkar Dynamics LLP Versus ITO, Ward 1(1), Pune Shri R.S. Syal, Vice President And Shri S.S. Viswanethra Ravi, Judicial Member For the Assessees : Shri Pramod Singte, Ms. Deepa Khare, Sh. Sanket Joshi, Sh. Sharad A. Vaze, Sh. Mahavir Jain, Sh. M.K. Kulkarni, Sh. S.N. Puranik and Sh. Burhanuddin Vora For the Revenue : Shri Suhas Kulkarni ORDER PER R.S.SYAL, VP : These appeals by different assessees are directed against the confirmation of disallowance u/s.36(1)(va) of the Income-tax Act, 1961 (hereinafter also called 'the Act') made in the Intimations issued u/s.143(1) of the Act or thereafter its confirmation in the respective rectification orders for the assessment years 2017-18 to 2020-21. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would be apposite to take note of the relevant statutory provision in this regard. Section 2(24) provides that `income' includes: `(x) 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 employees'. Thus, contribution by employees to the relevant funds becomes income of the employer. Instantly, there is no dispute as to the taxability of such income in the hands of the assessee. Once such an amount becomes income of the employer-assessee, then section 36(1)(va) comes into play for providing the deduction. This provision provides that: `(va) any 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, 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.'. The term `due date' for the purposes of this clause has been defined in Explanation 1 to this provision to mean: `the date by which the assessee is required as an employer to cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is allowed even if the assessee deposits the employees' share in the relevant funds before the date of filing of return u/s.139(1) of the Act. This was on the analogy of treating the employee's share as having the same character as that of the employer's share, becoming deductible u/s 36(1)(iv) read in the hue of section 43B(b). Recently, the Hon'ble Supreme Court in Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. (2022) 448 ITR 518 (SC) has threadbare considered this issue and drawn a distinction between the parameters for allowing deduction of employer's share and employees' share in the relevant funds. It has been held that the contribution by the employees to the relevant funds is the employer's income u/s.2(24)(x), but the deduction for the same can be allowed only if such amount is deposited in the employee's account in the relevant fund before the date stipulated under the respective Acts. The hitherto view taken by some of the Hon'ble High Courts in allowing deduction even where the amount was deposited in the employee's account before the time allowed u/s.139(1), ergo, got overturned. The net effect of this Apex Court judgment is that the deduction u/s.36(1)(va) can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... talks of 'an incorrect claim, if such incorrect claim is apparent from any information in the return". The expression "an incorrect claim apparent from any information in the return" has not been generally used in the provision. Rather, it has been specifically defined in Explanation (a) to section 143(1) as under: `Explanation.-For the purposes of this sub-section,- (a) "an incorrect claim apparent from any information in the return" shall mean a claim, on the basis of an entry, in the return,- (i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction;' 9. Clause (i) of Explanation (a) refers to a situation in which there is a claim of income or expenditure at two places in the return of income and there is inconsistency in them. For example, if deduction is claimed under a specific section for a sum of Rs.100/- in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report clearly points out that as against the due date of payment of the employees' share in the relevant fund on 15.7.2017 for deduction u/s 36(1)(va), the actual payment is delayed and deposited on 20.7.2017. The legislature, for the disallowance under sub-clause (iv) of section 143(1)(a), has used the expression `indicated in the audit report'. The word `indicated' is wider in amplitude than the word `reported', which envelopes both the direct and indirect reporting. Even if there is some indication of disallowance in the audit report, which is short of direct reporting of the disallowance, the case gets covered within the purview of the provision warranting the disallowance. However, the indication must be clear and not vague. If the indication in the audit report gives a clear picture of the violation of a provision, there can be no escape from disallowance. Turning to the facts of the case, it is clear from the mandate of section 36(1)(va) that the employees' share in the relevant funds must be deposited before the due date under the respective Acts. If the audit report mentions the due date of payment and also the actual date of payment with specific reference in column no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual date of payment indicate about `disallowance of expenditure' if the assessee does not make suo motu disallowance in computing total income. Right now, there is no case of `increase in income' because the AO did not make adjustment for non-offering of income of the `Sums received from employees', but made the adjustment for `disallowance of expenditure' with the remarks that :`Amounts debited to the profit and loss account, to the extent disallowance under section 36 due to non-fulfillment of conditions specified in relevant clauses'. Thus, it is evident that it is a case of `disallowance of expenditure' and not `increase of income'. Further, the entire challenge by the assessee throughout has been to the disallowance of expenditure made by the AO. It set up a case before the authorities below, including the ld. CIT(A), taking shelter of section 43B of the Act by arguing that the disallowance cannot be made because such payment was made before the due date u/s.139(1) of the Act. As such, the contention of adjustment u/s 143(1)(a)(iv) due to `increase in income' is jettisoned. 12. Another argument point was put forth on behalf of the assessee that the assessee did not claim any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit of employees' share to the relevant funds beyond the date prescribed under the respective Acts. 16. Both the sides are agreeable that the facts and circumstances of all the appeals except the two, which will be taken up hereinafter, are similar. We, ergo, countenance the disallowance. 17. The first case which involves some different facts is IT Cube Solutions Pvt. Ltd. (ITA No.702/PUN/2022). The ld. AR submitted that the information in audit report in point 20(b) was wrongly given pertaining to preceding year. He pointed out this fact from the audit report for the financial year 2016-17, which refers to due date of payment as 15-05-2015 and the actual date of payment as 12-05-2016. This shows that inadvertently the auditor recorded due dates for payment as pertaining to the preceding year and actual date of payment for the current year for the purposes of indicating the disallowance of expenditure u/s.36(1)(va). The AO is directed to verify this fact and make the disallowance u/s.36(1)(va), if warranted, as per the correct figures. 18. The second case is Exfo Electro Optical Engineering (I) Pvt. Ltd., (ITA No.523/PUN/2022). The ld. AR contended that the auditor inadverte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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