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TMI Blog2007 (8) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... econd proviso to section 43B by Finance Act, 2003 with effect from 1-4-2004 has no retrospective operation so as to make it applicable to the earlier period and, therefore, the P.F. payments made after the due date under Provident Fund Act, were not deductible in view of second proviso to section 43B than in force. We have considered the judgments rendered by the Apex Court in the case of Dunlop India Ltd.[ 1984 (11) TMI 63 - SUPREME COURT] and other judgments of different High Courts on the subject and we are of the view that if all these judgments are read conjointly, only one inference would be drawn that a due respect should be given to the judgment of the non-jurisdictional High Court and it should ordinarily be followed by other subordinate judicial or non-judicial bodies situated outside the jurisdiction of that High Court, unless and until, subordinate authorities have strong reasons to deviate from the view taken by the non-jurisdictional High Court. If it is not done, the hierarchical judicial system would collapse. In the case of CIT v. Vegetable Products Ltd.[ 1973 (1) TMI 1 - SUPREME COURT] held that if two contrary views are taken by different High Courts, vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne by the sub-contractors nor was able to give the whereabouts of the sub-contractors, despite a string of opportunities given by the Assessing Officer. 2. Further the learned CIT(A) has erred in deleting the aforesaid addition, despite the fact that the assessee-company had not adduced even a shred of evidence regarding the actual services having been rendered by the sub-contractors. 3. On the facts and the circumstances of the case and in law, the ld. CIT(A)-XIV, Mumbai, has erred in deleting the amount of Rs. 4,57,000 being fixed payment made to M/s. S.N. Raj Co. (Rs. 3,60,000) and to M/s. D.K. Brushing Co. (Rs. 97,000) for the repairs and maintenance of the plant and machinery, despite the fact that there was no written agreement for making the aforesaid payments and also despite the fact that the assessee-company had neither been able to produce any evidence regarding any services having been rendered by those twin parties. Another factor which paves the way for disallowability is that the assessee-company had neither deducted TDS on these payments made to these two parties nor had produced the details of the work done, and hence the disallowance made by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that this ground is squarely covered by the judgment of the Madras High Court in the case of CIT v. Synergy Finance Exchange Ltd. [2007] 288 ITR 366 in which it has been held that the omission of the second proviso to section 43B by Finance Act, 2003 with effect from 1-4-2004 has no retrospective operation so as to make it applicable to the earlier period and, therefore, the P.F. payments made after the due date under Provident Fund Act, were not deductible in view of second proviso to section 43B than in force. The learned DR further invited our attention to the order of the Special Bench in the case of Kwality Milk Foods Ltd. with the submissions that it has been overruled by the Madras High Court in the case of Synergy Finance Exchange Ltd. Further, the judgment referred to by the assessee in the case of George Williamson (Assam) Ltd. of Gauhati High Court is not rendered on the impugned issues. While deciding the issue they have followed earlier judgments in the case of CIT v. Bharat Bamboo Timber Suppliers [1996] 219 ITR 212 and CIT v. Assam Tribune [2002] 253 ITR 93 and in those judgments, the impugned issue was not involved. These judgments were rendered with respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. With regard to payment of sales tax their Lordship have held that if it is paid before the filing of the return, it is to be allowed under section 43B of the Income-tax Act, after holding that its introduction is retrospective. The relevant observations of the Hon'ble High Court of Gauhati is extracted hereunder: "The following question has been referred by the Tribunal at the instance of the revenue under section 256(1) of the Income-tax Act, 1961. Whether, on the facts and in the circumstances of the case and in view of the Explanation 2 to section 43B as inserted by the Finance Act, 1989, giving retrospective effect from 1-4-1984, the Tribunal has not erred in law in directing the Assessing Officer to allow relief to the extent of the sales tax amount paid even after the close of the accounting period but before the due date of filing the return of income under section 139(1) of the Income-tax Act, 1961? We have heard Mr. G.K. Joshi, senior standing counsel for the Income-tax Department, and Dr. A.K. Saraf, counsel for the assessee. Dr. A.K. Saraf submits that the question has been answered by different High Courts, namely, the Andhra Pradesh High Court in Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 1) [2007] 292 ITR 198 (Punj. Har.). But, from its careful perusal we find that this judgment was also rendered with regard to payment of sales tax which falls within clause (a) of section 43B of the Income-tax Act. Their Lordships of the Punjab and Haryana High Court have again held that the 1st proviso to section 43B and Explanation 2nd have to be read together as giving effect to the true intention of section 43B and if the Explanation 2nd is with retrospective effect, the 1st proviso will have to be so construed, following the judgment of the Apex Court in the case of Allied Motors (P) Ltd. v. CIT [1997] 224 ITR 677 through which the controversy in this regard has been set at rest. The Hon'ble Punjab and Haryana High Court have held that the amendment by the Finance Act, 1987 was thus held to remedial in nature. The question of law raised before the Hon'ble Punjab and Haryana High Court is with regard to applicability of the 1st proviso to section 43B of the Income-tax Act. For the sake of reference, we extract the question of law raised before the Hon'ble Punjab and Haryana High Court as under: "Whether on the facts and in the circumstances of the case, the Income-tax Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Section 43B(b) of the Act provides that any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. 4.3 During the relevant assessment year, namely, 1994-95, the second proviso to section 43B, as then in force, of course, which stands omitted by the Finance Act, 2003 with effect from 1-4-2004, imposed a further condition that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date. 4.4 Explanation to clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, an express provision be made to make a statute retrospective and the presumption against the retrospective operation may be rebutted by necessary implication, especially in a case where a new law is made to cure an acknowledged evil for the benefit of the community as a whole [vide Zile Singh v. State of Haryana [2004] 8 SCC 1, p. 9]. But, for this, there should be materials to show that the Legislature intended to cure the acknowledged evil or to remove any such hardship. In other words, the real issue in each case is as to the dominant intention of the Legislature to be gathered from the tests, viz., (i) the language used; (ii) the object intended; (iii) the nature of rights affected; and (iv) the circumstances under which the statute is passed. 4.9 We are constrained to examine the instant case on the basis of above tests. The second proviso to section 43B of the Act, which stands omitted by the Finance Act, 2003 with effect from 1-4-2004, related to a condition imposed on the assessee to claim deduction of statutory contribution. The condition under the said second proviso is that to claim deduction, the assessee should make payment towards the contribution bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision to that effect is inserted either expressly or by necessary implication retrospectively [vide: CED v. M.A. Merchant [1989] 77 CTR (SC) 177 : AIR 1989 SC 1710, p. 1713 : 1989 Supp. (1) SCC 499]. The same logic is also available to a statutory liability. A provision which in terms is retrospective and has the effect of opening up liability which had become barred by lapse of time, will be subject to the rule of strict construction [vide: CIT v. Onkarmal Meghraj (HUF) [1973] CTR (SC) 400 : AIR 1973 SC 2585, p. 2589, 2590 : [1974] 3 SCC 349]. 4.13 We have also gone through the Budget Speech of the Hon'ble Minister for Finance for the year 2003-04, the Notes on Clauses of Finance Bill, 2003 dealing with section 43B and the Memorandum Explaining the Provisions in the Finance Bill, 2003 dealing with section 43B of the Act, and we find that they do not help the assessee to satisfy either of the above tests in favour of the assessee. It is, therefore, not permissible in law to take a liberal view or lenient approach to give retrospective effect to the deletion of second proviso to section 43B of the Act so as to apply the same to the assessment year 1994-95, particularly when th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es-tax for the last quarter cannot be paid within the previous year, the original provisions of section 43B would unnecessarily involve disallowance of the payment for the last quarter. The situation is not the same in the case of payment of contribution towards provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees. Therefore, we are unable to accept the submission of the learned counsel for the assessee in this regard. 4.16 The test to be applied for deciding as to whether a later amendment should be given retrospective effect, despite a legislative declaration specifying a prospective date as the date from which the amendment is to come into force, is as to whether without the aid of the subsequent amendment the unamended provision is capable of being so construed as to take within its ambit the subsequent amendment [vide: CWT v. B.R. Theatres Industrial Concerns (P.) Ltd. [2004] 188 CTR (Mad.) 63 : [2005] 272 ITR 177 (Mad.)]. 4.17 In the instant case, the unamended provision enables the assessee to pay contribution towards provident fund, superannuation fund, gratuity fund, etc. before the due date under the respective enactm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee was not entitled to deduction of the contribution to the provident fund for the assessment year 1991-92 as the payment made was not on the due date as defined in the Explanation to section 36(1)(va) of the Income-tax Act, 1961. 4.21 In Halmira Estate Tea (P) Ltd v. CIT [2003] 179 CTR (Cal.) 312 : [2004] 268 ITR 498 (Cal.) the Calcutta High Court held that the provident fund contribution not made within the due date, cannot be allowed as a deduction in view of section 43B of the Income-tax Act, 1961. 4.22 The Calcutta High Court in CIT v. Sudera Services (P) Ltd [2003] 179 CTR (Cal.) 310 : [2004] 268 ITR 505 (Cal.) again held that so long as clause (b) of section 43B of the Income-tax Act, 1961 and the Explanation exist in unmodified terms in the statute book, provident fund contributions must be made within the due date for those to qualify for deductions under the Income-tax Act. 4.23 In CIT v. Udaipur Distillary Co. Ltd [2004] 187 CTR (Raj.) 369 : [2005] 274 ITR 429 (Raj.) a Division Bench of Rajasthan High Court held that in order to avail the benefits of deduction under clause (b) of section 43B in respect of contributions to the provident fund, superannuat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the last word and that last word, once spoken, is loyally accepted." (See observations of Lord Hailsham and Lord Diplock in Broome v. Cassell). The better wisdom of the Court below must yield to the higher wisdom of the Court above. That is the strength of the hierarchical judicial system. In Cassell v. Broome [1972] AC 1027 commenting on the Court of Appeal's comment that Rookes v. Barnard [1964] AC 1129, was rendered per incuriam, Lord Diplock observed. "The Court of Appeal found themselves able to disregard the decision of this House in Rookes v. Barnard by applying to it the label per incuriam. That label is relevant only to the right of an appellate court to decline to follow one of its own previous decisions, not to its right to disregard a decision of a higher appellate court or to the right of a Judge of the High Court to disregard a decision of the Court of Appeal." 14. In the case of CIT v. G.M. Mittal Stainless Steel Ltd. [2004] 142 Taxman 349 (M.P.) it has been held that every effort must be made by the Tribunal to decide the issue by taking help from the decisions of the Supreme Court and if there is no direct authority of the Supreme Court on the point, then of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter to a Larger Bench on the ground that one of the members of the succeeding Bench took or proposed to take a view different from that taken by the earlier Bench." 15. It has also been held by the Special Bench of the Tribunal in the case of Dy. CIT v. Oman International Bank SAOG [2006] 100 ITD 285 (Mum.). Third Member decision of the Tribunal has a binding force upon the Division Benches. Meaning thereby, the Third Member decision should be followed by the Division Benches of the Tribunal and according to Third Member a solitary judgment of the any High Court on particular issue should be followed by the Tribunal and there is no necessity to refer the matter to the Larger Bench of the Tribunal for the reasons that contrary view is expressed by the other coordinate Benches. The Third Member has expressed his views following the judgments of Jurisdictional High Court in the case of CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589 (Bom.) in which their Lordship have held that Income-tax Appellate Tribunal acting anywhere in the country has to respect the law laid down by the High Court though of a different State so long as there is no contrary decision of any other High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt, unless and until, subordinate authorities have strong reasons to deviate from the view taken by the non-jurisdictional High Court. If it is not done, the hierarchical judicial system would collapse. In the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 their Lordship of the Apex Court have held that if two contrary views are taken by different High Courts, view favourable to the assessee should be adopted, but, nowhere, it has been stated that the view expressed by a solitary High Court can be ignored by the non-jurisdictional subordinate bodies without any reasons. 17. We, therefore, are of the view that a solitary judgment of any High Court, in the country on a particular point or issue, should be followed in its letter and spirit by all Benches of the Tribunal notwithstanding contrary views are expressed by some Benches of the Tribunal, unless there are strong reasons to deviate from the view expressed by the High Court. Otherwise, the hierarchical judicial system would collapse. 18. Turning to the facts of the case, we are of the view that since the view taken by the Special Bench of the Tribunal in the case of Kwality Milk Foods Ltd. was overruled by its ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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