2023 (6) TMI 1427 - AT - Income Tax

ITAT recalls order allowing superannuation fund deduction after Supreme Court judgment in Checkmate Services under section 254(2)

ITAT Mumbai recalled its earlier order allowing assessee's appeal regarding disallowance of employees' contribution to superannuation fund under section ... Rectification of order on subsequent Supreme Court decision - Disallowance of employees contribution to superannuation fund under section 36(1)(va) r/w section 2(24) - Tribunal, allowed ground raised in assessee’s appeal, pertaining to the disallowance of employees‟ contribution to superannuation fund by following the decision of Ghatge Patil Transport Ltd. [2014 (10) TMI 402 - BOMBAY HIGH COURT] but D.R. further submitted that the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. [2022 (10) TMI 617 - SUPREME COURT] up held the disallowance made u/s 36(1)(va) - HELD THAT:- We find that the Hon'ble Supreme Court in ACIT v/s Saurashtra Kutch Stock Exchange [2008 (9) TMI 11 - SUPREME COURT] held that non–consideration of the decision of the Hon'ble Jurisdictional High Court or the Hon'ble Supreme Court can be said to be a “mistake apparent from record” which can be rectified under section 254(2) of the Act. We further find that the Hon'ble Supreme Court in Saurashtra Kutch Stock Exchange [2008 (9) TMI 11 - SUPREME COURT] also held that the judicial decision acts retrospectively and it is not the function of the Court to pronounce a “new rule”, but to maintain and expound the “old one”. The facts before the Hon’ble Supreme Court in Saurashtra Kutch Stock Exchange (supra) were that the decision of the Hon'ble Jurisdictional High Court was available, however, the attention of the Tribunal was not invited to the said decision at the time of the disposal of the appeal. Thus, in these circumstances, the aforesaid findings were rendered by the Hon'ble Supreme Court and the decision of the Tribunal under section 254(2) of the Act, in recalling its earlier order, was affirmed. Where the Larger Bench of the Hon'ble Supreme Court overrules its earlier decision on which the Tribunal relied on, the said decision of the Tribunal can be rectified under section 254(2) of the Act since the decision of the Hon'ble Supreme Court operates retrospectively. Thus, we find merit in the present M.A. filed by the Revenue seeking recall of the Tribunal’s order limited to the extent of ground No. 22, raised in assessee’s appeal, on the basis of the subsequent decision of the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. (supra). Accordingly, the order dated 05/08/2022, passed by the Co–ordinate Bench of the Tribunal in assessee’s appeal for the assessment year 2006-07 is hereby recalled limited to the extent of adjudication of ground no.22. Issues:- Recall of Tribunal's order under section 254(1) of the Income Tax Act, 1961 based on subsequent Supreme Court decision regarding disallowance of employees' contribution to superannuation fund.- Consideration of judicial decisions for rectification under section 254(2) of the Act.- Application of retrospective effect of judicial decisions on earlier orders.- Impact of subsequent Supreme Court decision on Tribunal's order.- Dismissal of ground no.22 raised in assessee's appeal for the assessment year 2006-07.Analysis:The judgment revolves around a Miscellaneous Application (M.A.) filed by the Revenue seeking the recall of an order passed under section 254(1) of the Income Tax Act, 1961. The M.A. was filed concerning the adjudication of ground no. 22 in the assessee's appeal, specifically related to the disallowance of employees' contribution to a superannuation fund. The Revenue based its request for recall on a subsequent decision by the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. v/s CIT, [2022] 448 ITR 518 (SC), which upheld the disallowance of delayed payments towards employee contributions to Provident Fund (P.F) / Employees State Insurance Corporation (E.S.I.C). The Revenue argued that the Tribunal's decision should be reconsidered in light of this Supreme Court judgment.The Tribunal considered the submissions and found that the issue in question was whether the employees' contribution to the superannuation fund could be disallowed under section 36(1)(va) of the Act. The Tribunal had initially allowed the assessee's appeal based on a decision of the Jurisdictional High Court. However, the subsequent Supreme Court decision altered the interpretation of the law regarding such contributions. The Tribunal referred to the principle that a judicial decision acts retrospectively, and it is not the function of the Court to create new law but to maintain and expound the existing one.Relying on previous judicial pronouncements, including the decision in ACIT v/s Saurashtra Kutch Stock Exchange, the Tribunal concluded that the subsequent Supreme Court decision could serve as a basis for recalling the Tribunal's order under section 254(2) of the Act. The Tribunal acknowledged that the subsequent decision of the Hon'ble Supreme Court, being binding under Article 141 of the Constitution of India, could rectify the Tribunal's order. Consequently, the Tribunal allowed the Revenue's M.A. and recalled its earlier order limited to the adjudication of ground no. 22 in the assessee's appeal for the assessment year 2006-07.In the final analysis, the Tribunal dismissed ground no. 22 raised in the assessee's appeal for the said assessment year, following the principles laid down in the subsequent Supreme Court decision. The judgment highlights the significance of subsequent judicial decisions in interpreting and applying the law retrospectively, emphasizing the need for consistency and adherence to established legal principles.