2015 (7) TMI 1350 - AT - Income Tax

ITAT upholds deletion of additions for non-deposit of provident fund contributions

Asstt. Commr. of Income Tax 2 (1) Jabalpur Versus M.P. Electricity Board Rampur

The ITAT upheld the deletion of additions for non-deposit of provident fund contributions based on previous favorable decisions and the unique rules ... Addition u/s 2(24)(x) and 36(1)(vi) - not depositing the contribution of employees towards provident fund of the employees of the assessee - obligation to make the payment of PF to the Trust within any due date - HELD THAT:- The explanation to section 36(1)(va) defines the due date means the date by which the assessee is required as an employer to credit an employees contribution to the employees account in the relevant fund, under any Act, Rules, order, or notification issued thereunder or under any standing order, award, contract of service or otherwise. NO SPECIFIC DATE FOR DEPOSIT OF THE P.F. BY BOARD Thus in the case of the MPSEB the PF is governed by its own Rules. There is no specific date of payment but the internal arrange is such the payments are made regularly on adhoc basis and the amount remaining unpaid, if any, is treated as invested with the MPSEB and carries interest,. The amount is deemed as paid and invested with the Board and carries interest accordingly to Rule 11 as mentioned above - Decided in favour of assessee Issues: Appeal against deletion of addition for non-deposit of provident fund contributions invoking sections 2(24)(x) and 36(1)(vi) of the Act.Analysis:1. Issue of Non-deposit of Provident Fund Contributions: The appeals by the revenue challenged the deletion of additions made due to non-deposit of employees' provident fund contributions. The CIT(A) granted relief to the assessee based on a previous favorable decision by the ITAT in A.Y. 1994-95. The Assessing Officer (A.O.) contended that the amount deducted from employees' pay was not transferred to the provident fund account, resulting in the addition. The assessee argued that there was no specific date for depositing the provident fund, citing rules and regulations governing the fund. The A.O. disagreed, emphasizing that the amount was retained by the assessee, leading to the addition.2. Decision and Precedents: The CIT(A) had previously deleted similar additions, a decision upheld by the ITAT in a previous case. Following this precedent, the additions for non-deposit of provident fund contributions for multiple assessment years were deleted. The revenue cited various High Court cases in support of their stance, arguing that the A.O. rightly added the undeposited provident fund to the assessee's income. However, the AR for the assessee distinguished these cases based on the specific rules governing the assessee's provident fund, which enjoyed exemption and followed its regulations.3. Assessee's Fund Management and Legal Provisions: The assessee's provident fund was managed as per specific regulations, including provisions for deemed investment and interest accrual. The rules governing the provident fund eliminated the obligation for a specific due date for payment. The explanation to section 36(1)(va) was cited to define the due date, highlighting the unique nature of the fund's management and payment processes. The ITAT relied on the previous favorable decision in A.Y. 1994-95 and dismissed the revenue's appeal, considering the pending High Court case.In conclusion, the ITAT upheld the deletion of additions for non-deposit of provident fund contributions based on previous favorable decisions and the unique rules governing the assessee's provident fund. The case highlighted the importance of specific fund regulations and their impact on income tax assessments, ultimately leading to the dismissal of the revenue's appeal.