TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 295
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....he IT Act dated 10th July, 2020. 02. Because the CIT(A) has erred on facts and in law in upholding the disallowance of Rs. 29,16,547/- being employees contribution to ESIC and EPF under section 43B read with 36(1)(va), paid after the due date but before the filing of the income tax return, which disallowance is contrary to facts, bad in law be deleted. 03. Because the CIT(A) has failed to appreciate that the contribution towards ESIC & EPF are all expenditure incurred for the purposes of business and are to be allowed, irrespective of the time frame, provided deposited before the filing of the tax return, the disallowance be deleted. 04. Because on a proper consideration of the facts and reading of the provisions of section 36(1)(va) as interpreted by the Apex Court, time and again, it would be found that the contribution to EPF & ESIC are allowable whenever paid but before the filing of the income tax return." ITA No. 243/LKW/2022 "1. Because the CIT (A) has erred on facts and in law in upholding the disallowance of Rs. 23,88,603/- being employees contribution to ESIC and EPF under section 43B read with 36(1)(va), paid after the due dat....
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....ssessee company filed a return of income on 30.10.2018 which was processed under section 143(1)(a) vide order dated 2.10.2019 at a total income of Rs. 76,82,700/- by making the following adjustments:- i. Inconsistency in provision of payment of gratuity under section 40A(7) of the I.T. Act of Rs. 49,17,636/- and ii. sums received from employees as contribution to provident fund / ESI but not credited to the employees account before the due date under section 36(1)(va) of Rs. 29,16,547/-. 6. Thereafter, on 29.08.2019, the case was picked up for limited scrutiny and the matter was scrutinized on the issue of, 'disallowance under section 40A(7)'. The ld. AO concluded the assessment with the finding that, 'no addition on the issue was made' vide his order dated 10.07.2022. However, the ld. AO did not make any discussion regarding the addition made on account of violation of section 36(1)(va) of Rs. 29,16,547/-. In the computation sheet annexed with the assessment order, the income of the assessee continued to be assessed as per the intimation dated 2.10.2019 i.e. at Rs. 76,82,700/-. In effect, despite not making any disallowance on account of gratuity in the body o....
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.... or disposed of. Accordingly, an appeal was filed to the ld. CIT(A) asking him to delete the said additions. 8. The ld. CIT(A) considered the addition of Rs. 29,16,547/- to the returned income of the assessee under section 143(1)(a)(iv) on account of late deposit of employee contribution to provident fund and ESI while processing the return of income. He reproduced the provisions of section 143(1) and highlighted the fact that expenditure could be disallowed, which was indicated in the audit report but not taken into account in computing the total income in the return. He moved on to analyse the various amendments made to section 143(1) over a period of time and pointed out that in the memorandum to Finance Bill, 2016, it had been explained that Clause (a) of sub section (1) of section 143 provided that, a return filed was to be processed and total income or loss was to be computed, after making the adjustments on account of any arithmetical error in the return or on account of an incorrect claim, if such claim was apparent from any information in the return and in order to remove the mismatch between the return and the information available with the Department, it was proposed ....
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....te payments of EPF/ESI after 1.04.2016. Thereafter, the ld. CIT(A) proceeded to discuss the disallowance on its merits. He observed that the ld. AR had considered the provisions of section 43B also with respect to employees contribution for EPF/ESI, which was otherwise applicable to the employers' contribution, and after referring to CBDT Circular No.22/2015, that clarified that the said Circular relating to section 43B of the Income Tax Act did not apply to claim of deduction relating to employees' contribution to welfare funds which were governed by section 36(1)(va) of the Income Tax Act. He also quoted from the judgment of the Hon'ble Kerela High Court in the case of CIT vs. Merchem (Ltd.) 2015 61 taxman.com 119/235 taxman 291 (Ker) which clearly pointed out that section 36(1)(va) and section 43B(6) operate in different fields and the benefit of deduction under section 43B(6), as provided under the proviso thereto, only existed with regard to the employers' contribution to the welfare funds. The ld. CIT(A) also placed reliance on the decisions of the ITAT Mumbai in the case of IMP Power Limited vs. ITO (2007) 107 TTJ (Mum) 522, 535-37, the decision of the Hon'ble Gujarat High C....
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....d matter. 10. The assessee is aggrieved at this order passed by the Ld. CIT(A), dismissing the appeal of the assessee and has accordingly come before us. Shri Rakesh Garg, Adv (hereinafter referred as to "AR") submitted that following the judgment of the Hon'ble Supreme Court in the case of Checkmate Services Pvt Ltd vs CIT-1 (2023) 6 SCC 451, that the contribution towards ESI/EPI was to be paid before the due dates as indicated under the respective Acts, he was not pressing ground nos. 2, 3 & 4 in the original memorandum of appeal. However, he prayed to raise an additional ground that the said disallowance could not be made under the provisions of Section 143(1)(a) of the Act as the issue was highly debatable, at the time when the processing was done. For this proposition, the Ld. AR placed reliance on the recent judgment of the Hon'ble Chhattisgarh High Court in the case of Raj Kumar Bothra vs DCIT, Circle-2(1), Raipur in Tax Case No. 56 of 2025. The Ld. AR took us through the said judgment and pointed out that after considering the judgment of the Hon'ble Supreme Court in the case of Kvaverner John Brown Engg. (India) Pvt Ltd vs ACIT in CA No. 3073 of 2008 and the judgment in....
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.... may allowed it. 11. On the other hand, Shri Deepak Yadav, Ld. Sr. DR, appearing and argued on behalf of the Revenue, submitted that the issue of deposit of employees share of contribution towards labour welfare fund had been settled by the judgment of the Hon'ble Supreme Court in the case of Checkmate Services Pvt Ltd vs CIT (supra). It was submitted that the Hon'ble Supreme Court in its judgment had only explained the law as it always existed. Therefore, the decision rendered by the Lordships in the matter of Raj Kumar Bothra vs DCIT (supra) was not a correct interpretation of the law, when they held retrospective effect of the Hon'ble Supreme Court decision was not an issue involved in that case. It had been pointed out by the Ld. DR in that case, that the Hon'ble Supreme Court judgment would have a retrospective effect as has been held in the Hon'ble Supreme Court decision rendered in the State of Bihar and Ors vs Ramesh Prasad Verma (Dead) and in the case of P.V. George and Ors vs State of Kerala and Ors, but this had been overlooked. Therefore, it was not correct to hold that the matter could not be processed u/s 143(1)(a) of the Act because the Hon'ble Supreme Court had l....
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....rner John Brown Engg. (India) Pvt Ltd vs ACIT (supra), the only issue before the Hon'ble Court was whether u/s 143(1)(a) of the Act could be resorted to, for making the disallowance, when there were conflicting judgment on the interpretation of Section 80O of the Act. In that case, the Hon'ble Supreme Court had not settled the issue as has been done in respect of EPF/ESI by the Hon'ble Supreme Court in the case of Checkmate Services Pvt Ltd (supra). It is also observed that the judgment in the case of Rajesh Jhaveri Stock Broker Pvt Ltd was delivered in the year 2008 and was rendered in the context of provisions of Section 143(1)(a) of the Act as it stood them. The Ld. CIT(A) has pointed out in his order, that the provisions of Section 143(1)(a) of the Act have undergone a change due to amendment made by the Finance Act, 2016. Therefore, the said judgment in the case of Rajesh Jhaveri Stock Broker Pvt Ltd (supra), having considered the provisions of Section 143(1)(a) of the Act as they stood earlier, would not hold good for adjustment made to the income of the assessee u/s 143(1)(a) of the Act after 01.04.2016. It is further, observed that contrary to the decision of the Hon'ble Ch....
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....y been overruled and the court would have to decide the cases according to the law laid down by the latest decision of the Hon'ble supreme Court and not by the decision which has been expressly overruled. The above reasoning stems from the principle that when a court decides a matter, it is not as if it is making any new law but it is as it is only restating what the law has always been. The Reliance in this respect can be placed on the decision of the Hon Supreme Court in the case of Ramdas Bhikaji Chaudhari vs Sadanand (1980)1 SCC 550 and on the recent decision of the Hon'ble Supreme Court in the case of Manoj Parihar v State of Jammu and Kashmir, (SLP(c ) no 11039 of 2022 dated 27-06-202;P.V.George vs State of Kerala (2007)3 SCC 557; Asst CIT vs Saurashtra Kutch stock exchange Ltd( 2008) 173 Taxman 322/305 ITR 227(SC)/14 SCC 171, wherein the Hon Supreme Court has held that the judges do not make law, they only discover and find the correct law . Even where an earlier decision of the court operates for quite some time, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood. In view of the ab....