2019 (6) TMI 1685 - AT - Income Tax

Tribunal Partially Allows Appeal, Orders Review of Section 80JJAA Deduction, Upholds Provident Fund Disallowance Beyond Due Dates.

The Deputy Commissioner of Income Tax, Circle 5 (1) (2), Bangalore Versus Page Industries Ltd.

The Tribunal dismissed the revenue's appeal regarding the disallowance of employees' contributions to Provident Funds and ESI, adhering to the ... Delayed payment of employees contribution to Provident Funds and ESI beyond due dates prescribed under PF Act and ESI Act - HELD THAT:- Assessee which is a company engaged in the business of manufacture and distribution of Jockey brand inner garments claimed deduction which was employees contribution to ESI & PF, which was paid beyond the due date as per the relevant governing contribution to PF & ESI, but was nevertheless paid on or before the due date for filing of return of income u/s. 139(1) - There is no dispute that if the employees contribution to PF & ESI is paid on or before due date u/s. 139(1) of the Act, then there can be no disallowance u/s. 43B of the Act and it was so held in the case of CIT v. Sabari Industries [2007 (7) TMI 169 - KARNATAKA HIGH COURT] DR, however, placed reliance on a contrary decision rendered in the case of CIT v. Gujarat State Road Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT] The decision of the Hon’ble High Court of Karnataka which is the jurisdictional High Court is to be followed by the Tribunal. Consequently, we find no merit in the relevant ground No.1 of appeal of the revenue. Excess Deduction u/s. 80JJAA - AO referred to the provisions of the section 80JJAA and observed that the deduction is available on the additional wages paid to the new regular workmen employed in the previous year for the three assessment years including the assessment year relevant to the previous year in which such employment is provided and found that the deduction claimed in respect of the additional wages paid for the earlier previous years, if allowed, would amount to allowing weighted deduction which is not suggestive in the provisions - HELD THAT:- We find that in AY 2007-08 identical issue came up for consideration before the Tribunal [2015 (7) TMI 1117 - ITAT BANGALORE] and the Tribunal in its order [2015 (7) TMI 1117 - ITAT BANGALORE] allowed similar claim of the Assessee. The tribunal of the aforesaid order held that once a new workmen is employed in a previous year and works for 300 days in that year the additional wages paid to him is to be allowed as deduction at 30% of the additional wages paid to him in that year should be allowed as deduction for three Assessment years and that he need not be in employment for the subsequent period for claiming deduction u/s.80JJAA - It was held that once the deduction is allowed in the first year then, 30% of such additional wages is allowable as deduction in each of the subsequent two years. In Assessee’s own case [2016 (12) TMI 1887 - ITAT BANGALORE] the Tribunal remanded identical issue to the AO for fresh consideration. Similar order was passed in AY 2010-11 [2016 (7) TMI 1012 - ITAT BANGALORE]. Since in the later orders on identical issue, the Tribunal has remanded to the AO for fresh consideration of the issue, we deem it fit to restore this issue to the AO for fresh consideration in accordance with law. Consequently, Gr.No.2 is treated as allowed for statistical purpose. Issues:1. Disallowance of employees' contribution to Provident Funds and ESI.2. Allowance of deduction under section 80JJAA for wages paid in earlier previous years.Issue 1: Disallowance of employees' contribution to Provident Funds and ESI:The appeal by the revenue challenged the deletion of disallowance/addition made on account of delayed payment of employees' contribution to Provident Funds and ESI beyond prescribed due dates. The company claimed deduction for these contributions, paid after the due dates but before the income tax return filing due date. The High Court of Karnataka precedent stated that if contributions are paid before the income tax return filing due date, no disallowance under section 43B of the Income-Tax Act, 1961 occurs. Despite a contrary decision from the Gujarat High Court, the Tribunal followed the jurisdictional High Court's ruling, dismissing the revenue's appeal.Issue 2: Allowance of deduction under section 80JJAA for wages paid in earlier previous years:The second ground of appeal related to the deduction claimed under section 80JJAA for additional wages paid to new workmen. The company claimed a deduction for wages paid in the previous years 2012-2013 and 2013-2014, in addition to the relevant year 2013-2014. The Assessing Officer disallowed the deduction for the earlier years, citing it as a form of weighted deduction not supported by the provisions. The company argued that the deduction was rightfully claimed under section 80JJAA for the three assessment years, including the first previous year. The CIT(A) allowed the appeal, referencing the Tribunal's decision in the company's favor for previous assessment years. However, the Tribunal, based on previous rulings, remanded the issue back to the Assessing Officer for fresh consideration, treating the ground as allowed for statistical purposes.In conclusion, the Tribunal partially allowed the revenue's appeal for statistical purposes, maintaining the disallowance of employees' contribution to Provident Funds and ESI beyond due dates but remanding the deduction issue under section 80JJAA for fresh consideration.