TaxTMI 
TaxTMI 
2018 (12) TMI 196
X X X X Extracts X X X X
X X X X Extracts X X X X
....the addition of Rs. 17,34,336/- pertaining to the late payments of the employees contribution to Provident Fund & ESI ? 4. Whether on the facts and circumstances of the case, Ld CIT(A) has erred in law in not considering that the late deposit of employees contribution towards provident fund is not allowable as deduction under the provisions of section 2(24) (x) read with section 36(l)(va) of the Income Tax Act, 1961? 5. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. 2. Briefly stated facts of the case are that the assessee company filed return of income for the year under consideration on 29.09.2008, declaring loss of Rs. 11,88,20,632/-. The case was selected for scrutiny and notice under Section 143(2) of the Income-tax Act, 1961 (for short 'the Act') was issued and the assessment under Section 143(3) of the Act was completed on 11.11.2010 after making certain additions/disallowances. Aggrieved, the assessee filed appeal before the learned CIT(A) who partly allowed the appeal of the assessee. Aggrieved with the relief allowed, the Revenue is in appeal before the Tribunal, raising the grounds ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efore the ITAT has been dismissed in ITA No.5180/Del/2012 observing as under: "6. After considering the submissions of the Ld. DR and the findings given in the impugned order, we find that the Assessing Officer in a very summarily manner has disallowed the expenses on the ground that it is relatable to agricultural income shown by the assessee at Rs. 3,33,752/-. On the other hand the facts which has been discussed by the Learned CIT(Appeals), it is seen that the 'cane development expenses' has nothing to do with the agricultural income shown by the assessee from its agricultural land, albeit it is an expenditure incurred for the development of the farmers of the command area allotted to the assessee company by the State Government for procurement of the sugar cane produced by the farmers on their own land which are in the vicinity of 10 to 15 kilo meters of radius of the assessee factory. These include payments on account of seeds, fertilizer, transport subsidy to farmers, seed survey expenses, salary to staff engaged on the said cane development activities, irrigational equipments, computers and software with a view to educate farmers etc. These expenses have to be incurr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the Finance Act, 1984 12/09/1990 BUSINESS EXPENDITURE SECTION 35C,, SECTION 37(1) Under the provisions of s. 35C of the IT Act, 1961, a company or a co-operative society, which uses any product of agriculture, animal husbandry or dairy or poultry-farming as raw material or processes such products, was eligible for a deduction of the amount of expenditure incurred, whether directly or through an approved association or body, for the provision of agricultural inputs and extension services to cultivators, growers or producers of such products. 2. This deduction was withdrawn by the Finance Act, 1984 in respect of expenditure incurred on or after 1st March, 1984. 3. Sec. 37(1) of the IT Act, 1961, however, provides that any expenditure, not being in the nature of capital expenditure of personal expenses of the taxpayers, laid out or expended wholly and exclusively for the purposes of his business, is to be allowed as deduction in computing the income chargeable under the head "Profits and gains of business or profession". Hence, any expenditure incurred by a sugar factory on cane development programmes would be eligible for deduction in c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... material procured by the company for its sales commission, electric stores purchased and expenditure on Repairs& Maintenance. The purchase bills were received but cleared on later dates and paid on subsequent year. The liability was booked in view of giving the true and fair picture of the balance sheet. Therefore the same should not be disallowed. As the assessee company has itself admitted of having not made payment of this provisional liability, this amount of Rs. 40.81 lacs cannot be allowed and is accordingly added to the total income of the assessee company." 7. The Ld. Commissioner of Income Tax (Appeals) followed the decision of his predecessor for the Assessment Year 2004-05 and deleted the addition made. Before us the Ld. D.R. submits that the Ld. Commissioner of Income Tax (Appeals) has not applied the law to the facts of the case. She submits that there is no finding that the expenditure in question crystallized during the year. The Ld. Counsel for the assessee on the other hand points out that the decision of the Ld. Commissioner of Income Tax (Appeals) on the very same issue for the Assessment Year 2004-05 was accepted by the Revenue. He submits tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d under the relevant Act is not allowable as deduction and thus it has to be treated as income of the assessee under section 2(24)(x) of the Act. The Hon'ble Gujarat High Court in the Tax Appeal No. 637 of 2013 with other appeals has made a detailed analysis of the provisions and judicial precedents and decided the issue as under: "7.01 Short question which is posed for consideration of this Court is with respect to the disallowance of the amount being employee's contribution to PF Account/ESI Contribution which admittedly which the concerned assessee did not deposit with the PF Department / DSI Department within due date under the PF Act and/or ESI Act. 7.02. To answer the above controversy, the relevant provisions of Income Tax Act, 1961 are required to be referred to. 7.03. "Income" has been defined under section 2(24) of the Act. Under section 2(24)(x), any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the Employees' State Insurance Act, 1948, or any other fund for welfare of such employees, constitute income. Section 2(24)(x) reads as under "Section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Act prior to the amendment of Section 43B of the Act vide Finance Act, 2003 reads as under: "Provided that nothing contained in this section shall apply in relation to any sum referred to in clause (a) or clause (c) or clause (d) or clause (e) or clause (f), which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by th assessee along with such return: Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of subsection (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date." By the Finance Act, 2003, Second Proviso to section 43B of the Act came to be deleted and even the first proviso to section 43B of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees (employer's contribution) provided such sum - employer's contribution is actually paid by the assessee on or before the due date applicable in his case for furnishing return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred and the evidence of such payment is furnished by the assessee along with such return. It also further provided that no deduction shall, in respect of any sum referred to in clause (B) i.e. with respect to the employer's contribution, be allowed unless such sum is actually been paid in cash or by issue of cheque or draft or by any other mode on or before the due date as defined in explanation below clause (va) of sub-section (1) of section 36 and where such sum has been made otherwise that in cash, the sum has been realised within 15 days from the due date. By the Finance Act 2003, Second Proviso of section 43B of the Act has been deleted and First Proviso to section 43B has also been amended which is reproduced hereinabove. Therefore, with respect to employer's co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e under the relevant Act, is deleted, it cannot be said that section 36(l)(va) is also amended and/or explanation to section 36(l)(va) has been deleted and/or amended. It is also required to be noted at this stage that as per the definition of "income" as per section 2(24)(x), any sum received by the assessee from his employees as contribution to any Provident Fund or Superannuation Fund or any fund set up under the provisions of ESI Act or any other fund for the welfare of the such employees is to be treated as income and on fulfilling the condition as mentioned under section 36(1) (va), the assessee shall be entitled to deduction with respect to such employees' contribution. Section 2(24)(x) refers to any sum received by the assessee from his employees as contribution and does not refer to employer's contribution. Under the circumstances and so long as and with respect to any sum received by the assessee from any of his employees to which provisions of sub-clause (x) of sub-section 24 of section 2 applies, assessee shall not be entitled to deduction of such sum in computing the income referred to in section 28 unless and until such sum is credited by the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../2004 or whether it operates retrospectively w.e.f. 1/4/1988. Under the circumstances, the learned tribunal has committed an error in relying upon the decision of the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra) while passing the impugned judgement and order and deleting disallowance of the respective sums being employees' contribution to PF Account / ESI Account, which were made by the AO while considering the proviso to section section 36(1) (va) of the Income Tax Act. 7.08. Now, so far as the reliance placed upon the decision of the Division Bench of this Court in the case of Alembic Glass Industries Ltd. (supra) is concerned, on facts and considering the provisions of section section 36(l)(va) of the Act as is stands, the said decision would not be applicable to the facts of the case on hand and the controversy in question. 7.09. Now, so far as the reliance placed upon the decision of the Karnataka High Court in the case of Sabari Enterprises (supra) is concerned, on facts and controversy raised in the present appeals, the said decision would not be any assistance to the assessee. In the case before the Karnataka High Court, the di....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s amended and/or even explanation below clause (va) of sub-section (1) of section 36 is also deleted. It can be said that there was a reference to explanation below clause (va) of sub-section (1) of section 36 in second proviso of section 43B (which has been deleted by Finance Act, 2003), only for the purpose of defining due date as per explanation below clause (va) of sub-section (1) of section 36. Therefore, by deleting Second Proviso to section 43B by Finance Act, 2003, it cannot be said that Section 36(1) (va) is amended and/or explanation below clause (va) of subsection (1) of section 36 is deleted, which is with respect to employees' contribution. Under the circumstances, we are not in agreement with the view expressed by the Himachal Pradesh High Court; Karnataka High Court; Rajasthan High Court and Punjab and Haryana High Court in the cases refereed to hereinabove. 7.12. Now, so far as the reliance placed upon the decision of the Hon'ble Supreme Court in the case of Sarabhai Sons Ltd. (supra), by the learned counsel appearing on behalf of the assessee and his submission that if two views are possible and different High Courts have taken a particula....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ever, we note that the Hon'ble Jurisdictional Delhi High Court in the case of CIT Vs AIMIL (supra) held that the assessee can get benefit of section 36(1)(va), if the actual payment towards the PF/CSI contributions is made before the return is filed. The relevant finding of the Hon'ble High Court is reproduced as under: "11. Before we delve into this discussion, we may take note of some more provisions of the Act. Sec. 2(24) of the Act enumerates different components of income. It, inter alia, stipulates that income includes any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees'. It is clear from the above that as soon as employees' contribution towards PF or ESI is received by the assessee by way of deduction or otherwise from the salary/wages of the employees, it will be treated as 'income' at the hands of the assessee. It clearly follows therefrom that if the assessee does not deposit this contribution with PF/ESI authorities, it will be taxed as income at the han....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the case of CIT vs. Vinay Cement Ltd. (supra) which was a special leave petition filed by the Department against the High Court order of 26th June, 2006 in IT Appeal No. 2 of 2005 and IT Appeal No. 56 of 2003 and IT Appeal No. 80 of 2003 of the High Court of Guwahati, Assam and it is order dt. 7th March, 2007. A copy of the said order is placed on record. The observations of their Lordships on the issue are as under : 'In the present case we are concerned with the law as it stood prior to the amendment of s. 43B. In the circumstances the assessee was entitled to claim the benefit in s. 43B for that period particularly in view of the fact that he has contributed to PF before filing of the return. The special leave petition is dismissed'." 13. It is clear from the above that in Vinay Cement (supra), the SLP preferred by the Revenue against the judgment of the Guwahati High Court was dismissed making the aforequoted observations. The reasons are given and, thus, it amounts to affirmation of the view taken by the High Court of Guwahati. 14. When we keep that proposition in mind and also take into consideration various judgments where Vinay....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Williamson (Assam) Ltd. (2006) 284 ITR 619 (Gau) dealt with the very same issue. In the said judgment the Division Bench of the Gauhati High Court noted a contrary view taken by the Kerala High Court in the case of CIT vs. South India Corporation Ltd. (1999) 157 CTR (Ker) 422 : (2000) 242 ITR 114 (Ker). After noting the said judgment the fact that the amendments had been made to the provisions of s. 43B of the Act by virtue of Finance Act, 2003 w.e.f 1st April, 2004 it agreed with the submission of the learned counsel for the assessee that by virtue of the omission of the second proviso and the omission of cls. (a), (c), (d), (e) and (f) without any saving clause would mean that the provisions were never in existence. For this purpose, in the said case the assessee had placed reliance on the judgment of a Constitution Bench of the Supreme Court in the case of Kolhapur Canesugar Works Ltd vs. Union of India (2000) 2 SCC 536 and Rayala Corporation (P) Ltd vs. Director of Enforcement (1969) 2 SCC 412 and General Finance Co. & Anr. vs. Asstt. CIT (2002) 176 CTR (SC) 569 : (2002) 257 ITR 338 (SC). The said submissions found favour with the Division Bench of the Guahati High Court and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Art. 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the Court, Tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the apex Court of the country. But, this does not amount to saying that the order of the Court, Tribunal or authority below has stood merged in the order of the Supreme Court rejecting SLP or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the parties.' 11. Upon noting the observations of the Supreme Court in Kunhayammed & Ors. (supra) the Division Bench of the Madras High Court in the case of Nexus Computer (P) Ltd. (supra) came to the conclusion that the view taken by the Supreme Court in Vinay Cement (supra) would bind the High Court as it was non declared by the Supreme Court under Art. 141 of the Constitution. ....