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TMI Blog2023 (5) TMI 1360X X X X Extracts X X X X X X X X Extracts X X X X ..... action of the AO in making the adjustment in the intimation u/s 143(1) which are outside the purview of Section 143(1)(a). The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the entire disallowance of Rs.53,538/-. 2. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the AO in not allowing the expenditure of Rs.53,538/- on account of payment of ESI/PF u/s 36(1)(va) of Income Tax Act. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the entire disallowance of Rs.53,538/-. 2.1 Apropos Ground No. 1 and 2, brief facts of the case are that the assessee is a Company registered under the provisions of Companies Act, 1956. The assessee company manufactures of modular furniture and is a wholly subsidiary company Dhabriya Polywod Limited which is a public limited company and listed at Bombay Stock Exchange (BSE). The assessee company filed its return of income on 15-02-2021 for the A.Y. 2020-21 declaring total income at Rs.93,26,560/-. The return of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act unless the employer credits such contribution to the employees account in the relevant fund within the due date applicable for that relevant fund. iv) On this issue the Hon ble Supreme Court after considering all the divergent decision of various High Courts has given a judgement in the case of Commissioner of Income Tax-1vs Checkmate Service Pvt Ltd. , Civil Appeal No. 2833 of 2016 vide order dated 12-10-2022. The concluding para no. 54 of decision in the case of Checkmate Service Pvt. Ltd. (supra) is reproduced as under:- 54. In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer s obligation to deposit the amounts retained by it or deducted by it from the employee s income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the case in hand. (vi) Therefore in view of the above discussion and respectfully following the decision of Hon ble Court in the case of Checkmate Service Pvt. Ltd.(supra) the addition of an amount of Rs.14,091/- towards delay in deposit of employees contribution to ESI and Rs.39,477/- towards PF totaling to Rs.53,538/- as disallowed by the AO i.e. ADIT, CPC, Bengaluru is confirmed and the ground of appeal raised by the appellant is dismissed. 2.3 During the course of hearing, the ld. AR of the assessee prayed that the ld.CIT(A) has erred in not allowing the expenditure of Rs.53,538/- on account of payment of ESI/PF u/s 36(1)(va) of the Act which should be allowed. To this effect, the ld. AR of the assessee relied on following decisions.. 1. M/s. JKS Employee s Welfare Fund vs ITO (SB Civil Writ Petition No., 699 of 1991 dated 27-03-1992 (Raj High Court Jaipur Bench) 2. M/s. Paris Elysees India (P) Ltd. Vs DCIT, Circle-7, Jaipur (ITA357/JPR/2022 dated 20-02-2023) 2.4 On the other hand, the ld. DR supported the order of the ld. CIT(A) and also the decision of ITAT Delhi Bench in the case of Savleen Kaur vs ITO, [2023] 147 taxmann.com 402 (Delhi-Trib). 2.5 We have heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and justified. The non- obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees contributions- which are deducted from their income. They are not part of the assessee employer s income, nor are they heads of deduction per se in the form of statutory pay out. They are others income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the Respondnet Assessee. 3. Mr. Balbir Sharma, learned Additional Solicitor General appearing for the appellant submits that the issue involved in this appeal is squarely answered in favour of the Revenue by a Three-Judge Bench of this Court vide judgement dated 12-10-2022 in Checkmate Services (P) Ltd. vs CIT [2022] 143 taxmann.com 178/[2023] 290 Taxman 19/[2022] 448 ITR 518/2022 SCC Online SC 1423 4. In view of the above, the impunged judgement dated 22-03-2019 passed by the High Court of Judicature at Bombay is set aside and the appeal is allowed in terms of the cited decision. It may be mentioned that similar issue has also been decided by the ITAT Delhi Bench in favour of the Revenue in the case of Salveen Kaur Vs Income Tax Office vide its order darted 9th January 2023 (in IT Appeal Nos. 2197,2249, 2250 and 2293 (Delhi) of 2022 A.Y. 2017-18 to 2019-20 [2023] 147 taxmann.co. 402 (Delhi-Trib) by observing as under:- 4. The undisputed fact in the captioned appeals is that there was a delay in depositing the employees contribution and the contribution has been deposited beyond the date stipulated under the relevant Fund Act. 5. Though the quarrel is no more res integra, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for example, subject to the rider except in a situation in which the audit report has taken a stand contrary to the law laid down by Hon'ble Courts above . That is where the quasi judicial exercise of dealing with the objections of the assessee against proposed adjustments under section 143(1), assumes critical importance in the processing of returns, also important to bear in mind the fact that what constitutes jurisdictional High Court will essentially depend upon the location of the jurisdictional Assessing Officer. While dealing with jurisdiction for the appeals, rule 11(1) of the Central Processing of Returns Scheme, 2011 states that Where a return is processed at the Centre, the appeal proceedings relating to the processing of the return shall lie with Commissioner of Income Tax (Appeals) [CIT(A)] having jurisdiction over the jurisdictional Assessing Officer Then situs of the CPC or the Assessing Office CPC is thus irrelevant for the purpose of ascertaining the jurisdictional High Court. Therefore, in the present case, whether the CPC is within the jurisdiction of Hon'ble Bombay High Court or not, as for the regular Assessing Officer of the assessee and the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were to be part of the employer/assessee s income. Since these amounts were not receipts that belonged to the assessee, but were held by it, as trustees, as it were, Section 36(1)(va) was inserted specifically to ensure that if these receipts were deposited in the EPF/ESI accounts of the employees concerned, they could be treated as deductions. Section 36(1)(va) was hedged with the condition that the amounts/receipts had to be deposited by the employer, with the EPF/ESI, on or before the due date. The last expression due date was dealt with in the explanation as the date by which such amounts had to be credited by the employer, in the concerned enactments such as EPF/ESI Acts. Importantly, such a condition (i.e., depositing the amount on or before the due date) has not been enacted in relation to the employer s contribution (i.e., Section 36(1)(iv)). 33. The significance of this is that Parliament treated contributions under Section 36(1)(va) differently from those under Section 36(1)(iv). The latter (hereinafter, employers contribution ) is described as sum paid by the assessee as an employer by way of contribution towards a recognized provident fund . However, the phraseology of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the employees to the various funds which are deducted by the employer from the salaries and wages of the employees will be taxed as income within brackets insertion of new [clause (x) in clause (24) of Section 2] of the employer, if such contribution is not credited by the employer in the account of the employee in the relevant fund by the due date. Where such income is not chargeable to tax under the head profits and gains of business or profession it will be assessed under the head income from other sources. XXXXXX 44. There is no doubt that in Alom Extrusions, this court did consider the impact of deletion of second proviso to Section 43B, which mandated that unless the amount of employers contribution was deposited with the authorities, the deduction otherwise permissible in law, would not be available. This court was of the opinion that the omission was curative, and that as long as the employer deposited the dues, before filing the return of income tax, the deduction was available. 45. A reading of the judgment in Alom Extrusions, would reveal that this court, did not consider Sections 2(24)(x) and 36(1)(va).Furthermore, the separate provisions in Section 36(1) for em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute is that if a deduction or exemption is available on compliance with certain conditions, the conditions are to be strictly complied with. Eagle Flask Industries Ltd Vs. Commissioner of Central Exercise 2004Supp (4) SCR 35. This rule is in line with the general principle that taxing statutes are to be construed strictly, and that thereis no room for equitable considerations. 49. That deductions are to be granted only when the conditions which govern them are strictly complied with. This has been laid down in State of Jharkhand v Ambay Cements as follows: 23 . In our view, the provisions of exemption clause should be strictly construed and if the condition under which the exemption was granted stood changed onaccount of any subsequent event the exemption would not operate. 24. In our view, an exception or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in the industrial policy and the exemption notifications. 25. In our view, the failure to comply with the requirements renders the writ petition filed by the respondent liable to be dismissed. While mandatory rule must be strictly observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. 10. In our understanding, the aforementioned binding observations of the Hon'ble Supreme Court cannot be brushed aside simply because the decision was rendered in the context where the assessment was framed u/s 143(3) and not u/s 143(1)(a) of the Act. In our considered opinion, the decision of the Hon'ble Supreme Court is in the context of allowability of deposit of PF/ESI after due date specified in the relevant Act. 11. The Hon'ble Supreme Court has categorically held that the employees contribution deposited after respective due date cannot be allowed as deduction, and, therefore, it would be incorrect to say that the decision of the Hon'ble Supreme Court is applicable only in the case of an assessment farmed u/s 143(3) of the Act. In our considered view, the ratio decidendi is equally applicable for the intimation framed u/s 143(1) of the Act. 12. Now coming to the challenge that the impugned adjustment is beyond the powers of the CPC Bengaluru u/s 143(1) of the Act is also not correct. In light of the aforementioned decision of the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under paid the tax in any manner. 14. If any narrow interpretation is given to the decisions of the Hon ble Supreme Court in the case of Checkmate Services Pvt Ltd [supra], it would not only defeat the very purpose of the enactment of the provisions of section 143(1) of the Act but also defeat the very purpose of the Legislators and the decision of the Hon'ble Supreme Court would be made redundant because there would be discrimination and chaos, in as much as, those returns which are processed by the CPC would go free even if the employees contribution is deposited after the due date and in some cases the employer may not even deposit the employees contribution and those whose returns have been scrutinized and assessed u/s 143(3) of the Act would have to face the disallowance. 15. This can neither be the intention of the Legislators nor the decision of the Hon'ble Supreme Court has to be interpreted in such a way so as to create such discrimination amongst the tax payers. Such interpretation amounts to creation of class [tax payer] within the class [tax payer] meaning thereby that those tax payers who are assessed u/s 143(3) of the Act would have to face disallowance becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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