Whether employees' contribution to PF etc is allowable if deposited before due date of filing ROI u/s S. 2(24)(x) r.w.s 36(1)(va) & 43B?

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

INCOME TAX APPEAL NO.1002 OF 2012

AND

INCOME TAX APPEAL NO.1034 OF 2012

The Commissioner of Income tax

(Central), 'C' Wing, PMT Building,

Swargate, Pune- 411 037.

(Appellant)

Versus

GhatgePatil Transports Ltd.

517, E, Old P.B. Road,

Kolhapur.

(Respondent)

Mr. Vimal Gupta, Senior Advocate for the Appellant.

Mr.Mihir Naniwadekar for the Respondent

BEFORE CORAM :

S.C. DHARMADHIKARI AND A.K. MENON, JJ.

RESERVED ON: 26TH SEPTEMBER, 2014

PRONOUNDED ON: 14TH OCTOBER, 2014.

JUDGMENT (PER A.K. MENON, J.)

1. This order disposes of the above two appeals under Section 260A of the Income Tax Act, 1961 ('the I.T. Act) which involve common questions of law, which read as under:-

(1) Whether the decision of the ITAT ignoring the provisions of section 2(24)(x) r/w. 36(1)(va) as per which employee's contribution to ESI, PF and Pension fund is deductible only if payment is made before the due date as prescribed in the respective Act, Rule, Order or Notification governing such funds is erroneous and contrary to provisions of Income Tax Act,1961 ?

(2) Whether on the facts and circumstances of the case and in law, the Tribunal was right in ignoring the clear distinction between employee's contribution to ESI, PF and pension fund and employer's contribution and the fact that the decision of the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. 319ITR 306 is applicable only to employer's contribution ?

(3) Whether on the facts and circumstances of the case and in law, the Tribunal was right in holding that payment of employees contribution to PF/ESI/pension fund is subject to provisions of section 43B of the Act ?

(4) Whether the ITAT failed to appreciate the fact that the amendment to section 43B is applicable only to employer's contribution and not to employees contribution and hence, whether second proviso to section 43B omitted w.e.f. 01-04-04 is retrospective or not, is not germane to issue of employee's contribution ?

2. At the outset, Mr.Vimal Gupta, learned Senior Counsel appearing on behalf of the Appellant submitted that the Appellant is not pressing question No.1. It is, therefore, not necessary to answer thesame.

3. The appeals as filed pertain to orders passed by the Income Tax Appellate Tribunal, Pune 'A' Bench on 29th July, 2011 in Income Tax Appeal No.340/PN/10 in respect of assessment year 2003-04 and Income Tax Appeal No.341/PN/10 in respect of assessment year 2004-05.

4. The facts being similar, we will refer to the facts pertaining to Income Tax Appeal No.1002 of 2012 in respect of A.Y.2003-04. The assessee had filed a return of income declaring a total loss ofRs.1,88,71,600/- on 27th November, 2003. A Notice came to be issued under section 148 of the Income Tax Act, 1961 ('the I.T. Act') on 30thAugust, 2004 and while completing the assessment under section143(3) r/w. Section 147 of the I.T. Act, additions were made on account of payment of employees contribution towards provident fund, ESI and pension fund in a sum of `32,03,947/-.

5. While disallowing the claim for deduction, the department contended that payment of employees' contribution had to be made within the due date viz. on or before the 15th of every succeeding month. Admittedly, these payments were not so made but were paid after the due dates. The Assessing Officer, therefore, disallowed the deduction made to the extent of `32,03,547/-.

6. The Commissioner of Income Tax (Appeals) dismissed the issue of disallowance on account of payment of employees 'contribution which was covered under section 36(1)(va) of the I.T. Act relying on the decision of this Court reported in 298 ITR 149 and held that the amendments to section 43B, on the basis of which relief could have been given to the assessee, were not retrospective. The Tribunal held that disallowance of the employees contribution made on account of provident fund, ESI and pension fund for assessment year 2003-04was on account of delay in payment of the employees contribution was not sustainable.

7. The question arising, therefore, is (a) whether the Tribunal was right in ignoring the distinction between the employees contribution and employer's contribution and whether the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax V/s.Alom Extrusions Ltd. reported in [2009] 319 ITR 306 would apply only in the cases of employee's contribution and (b) whether the Tribunal was right in holding that payment of employees contribution is subject to the provisions of section 43B of the I.T. Act entailing that amendment to section 43B would lead to the inclusion of the employers' contribution as well.

To read the full judgment, please find the attached file:

Attached file:

http://www.bombayhighcourt.nic.in/generatenewauth.php?auth=cGF0aD0uL2RhdGEvanVkZ2VtZW50cy8yMDE0LyZmbmFtZT1PU0lUWEExNjAzMTEucGRmJnNtZmxhZz1O