2019 (4) TMI 2158 - HC - Income Tax

High Court Upholds Tribunal's Decision: Employee Contribution Delays Justified; Foreign Exchange Losses Legitimate.

The HC upheld the Tribunal's decision favoring the assessee on both issues. For the first issue, it affirmed that the delay in employee contributions to ... Delay of employee's contribution to ESIC and labour welfare contribution - HELD THAT:- As undisputed position that the issue is squarely covered by the judgment of this Court in case of Ghatge Patil Transports Ltd [2014 (10) TMI 402 - BOMBAY HIGH COURT] holding that, 'In this manner, the amendment provided by Finance Act, 2003 put on par the benefit of deductions of tax, duty, cess and fee on the one hand with contributions to various Employees' Welfare Funds on the other. All this came up for consideration before the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT] - The Tribunal in the case at hand relied upon the said judgment. There is no reason to fault the order passed by the Tribunal. We are of the view that the decision of the Supreme Court in Alom Extrusions Ltd. (supra) applies to employees' contribution as well as employers' contribution. Question accordingly answered in favour of the assessee and against the revenue Allowance of Foreign Exchange Loss - scope of instruction No. 3 of 2010 of the Central Board of Direct Taxes (CBDT) dated 23.3.2010- HELD THAT:- This issue is covered by a decision of this Court in D. Chetan & Co [2016 (10) TMI 629 - BOMBAY HIGH COURT] in which the Court held that the hedging transactions entered into by the assessee were to cover against the variation in foreign exchange rate and were not in the nature of speculative activity. Issues Involved:1. Whether the Tribunal was justified in allowing the sum on account of delay of employee's contribution to ESIC and labour welfare contributionRs.2. Whether the Tribunal was justified in allowing the Foreign Exchange Loss amounting to Rs. 2,56,75,159/- despite the CBDT Instruction No. 3 of 2010Rs.Issue 1:The High Court stated that the issue of delay in employee's contribution to ESIC and labour welfare contribution was covered by a previous judgment. The Court referred to the case of CIT, (Central), Pune Vs. Ghatge Patil Transports Ltd [2015] 53 taxmann.com 141 (Bombay) where it was held that the Finance Act, 2003 equated deductions of tax, duty, cess, and fee with contributions to Employees' Welfare Funds. The Court mentioned that the decision of the Supreme Court in Alom Extrusions Ltd. applied to both employees' and employers' contributions. Consequently, the Court upheld the Tribunal's decision in favor of the assessee and against the revenue.Issue 2:Regarding the Foreign Exchange Loss, the High Court pointed out that the matter was already addressed in the case of CIT, Mumbai Vs. D. Chetan & Co [2016] 75 taxmann.com 300 (Bombay). In that case, it was determined that the hedging transactions entered into by the assessee were not speculative activities but were meant to cover against variations in foreign exchange rates. Therefore, the Court dismissed the Income Tax Appeal, affirming the Tribunal's decision on this issue.