TaxTMI 
TaxTMI 
2023 (7) TMI 1621
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....ith. It was admitted position that the adjudication in these applications would apply to all the other similar applications filed by the revenue. The Ld. ARs as well as revenue made arguments, oral and written. Having heard rival submissions and upon perusal of case records, the applications are disposed-off as under. 2. In common order dated 11.04.2022, the Tribunal disposed-off bunch of appeals having similar issue of disallowance of late payment of Employees' Contribution to PF / ESI in terms of Sec.43B r.w.s. 36(1)(va) as well as Sec. 2(24)(x). The bench, relying on its lead decision in M/s Benco Thermal Technologies Private Ltd. vs. Asstt. Director of Income Tax (ITA No. 281/Chny/2021 dated 23.02.2022) decided this issue in assessee's favour. The lead order, in turn, substantially relied on the decision of jurisdictional High Court rendered in CIT vs. Industrial Security & Intelligence India (P.) Ltd. (TCA No.585 of 2015 dated 24.07.2015) in preference to contrary view taken by Hon'ble Kerala High Court in Popular Vehicles & Services P. Ltd. V/s CIT (96 Taxmann.com 13; 02.07.2018) as well as Hon'ble Gujarat High Court in CIT V/s Gujarat State Road Transport ....
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....come - it is the character of the amount that is important, i.e., not income earned. Thus, amounts retained by the employer from out of the employee's income by way of deduction etc. were treated as income in the hands of the employer. The significance of this provision is that on the one hand it brought into the fold of "income" amounts that were receipts or deductions from employees income; at the time, payment within the prescribed time - by way of contribution of the employees' share to their credit with the relevant fund is to be treated as deduction (Section 36(1)(va)). The other important feature is that this distinction between the employers' contribution (Section 36(1)(iv)) and employees' contribution required to be deposited by the employer (Section 36(1)(va)) was maintained - and continues to be maintained. On the other hand, Section 43B covers all deductions that are permissible as expenditures, or out- goings forming part of the assessees' liability. These include liabilities such as tax liability, cess duties etc. or interest liability having regard to the terms of the contract. Thus, timely payment of these alone entitle an assessee to the benefit....
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.... are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction. 55. In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not....
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...., the revenue, inter-alia, submits that the decision of the Tribunal has followed the decision in CIT vs. Industrial Security & Intelligence India (P.) Ltd. (supra) as against the fact that Hon'ble Court in subsequent decision titled as M/s. Orchid Pharma Ltd. (TCA No. 430 &421 of 2019 dated 08.7.2019) did not follow its own decision in the case of M/s. Industrial Security and Intelligence India Private Ltd. (supra) and had observed about the various decisions favoring revenue and remitted the issue back to lower authorities. It is thus clear that Hon'ble High Court did not agree with its own decision rendered earlier. The revenue further submits that the decision of Tribunal is contrary to the ratio laid down by the Hon'ble Apex court in CIT Vs Podar Cement Pvt. Ltd. (92 Taxman 541), wherein it was held that declaratory and clarificatory amendments are retrospective in operation and the principle was laid down after considering similar explanatory memorandum to the Finance Bill 1987. The CIT(A) had elaborately discussed the decisions rendered by the Kerala High Court in Popular Vehicles & Services Pvt. Ltd. Vs CIT (supra) & the decision of Hon'ble Gujarat High Cour....
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....powers u/s 254(2). The powers u/s 254(2) are akin to Order XLVII Rule 1 Code of Civil Procedure 1908. While considering the application u/s 254(2), the Appellate Tribunal is not required to re-visit its earlier order and to go into detail on merits. The powers under section 254(2) of the Act are only to rectify/correct any mistake apparent from the record. The Apex Court after reckoning the nature of the proceedings of the Appellate Tribunal had equated the powers conferred for such rectification u/s 254(2) of the Act with that of the powers of the civil court by referring to Rule 1 Order XLVII of Code of Civil Procedure 1908 and the same reads as under: Rule 1 Order XLVII of Code of Civil Procedure 1908 "Application for review of judgment" (1) Any person considering himself aggrieved (a) by a decree or order from which an appeal is allowed, but from no appeal has been preferred, (b) by a decree or order from which no appeal is allowed, or (c) by a decision on a reference from a Court of Small Causes and who, from the discovery of new and important matter or evidence which, after the exercise of due diligence was not within his knowledge....
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....of amendment made subsequently in the case of CIT vs Sudhir M. Mehta (265 ITR 548) held that the decision of Tribunal rendered three months prior to amending law receiving the presidential assent would not amount to mistake apparent from record. 8.4 The Ld. AR also referred to the decision of Hon'ble Madras High Court in Express Newspaper Ltd. (320 ITR 12), wherein Hon'ble Court, after considering various decisions including the judgment of the Apex Court in the case of Saurashtra Kutch Stock Exchange Ltd (305 ITR 227) held as under: - 9. The scope and amplitude of section 254(2) and the analogous provision on section 154 of the Act have been considered by catena of decisions of the Apex Court and other High Courts. The uniform opinion of the Courts of superior jurisdiction is that a patent, manifest and self-evident error which does not require elaborate discussion of evidence or argument to establish it, can be said to be an error apparent on the face of the record and can be corrected under section 254(2). An error cannot be said to be apparent on the face of the record if one has to travel beyond the record to see whether the judgment is correct or not. An e....
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....o the party, which prejudice is attributable to the Tribunal's mistake, error or omission and which error is a manifest error, then the Tribunal would be justified in rectifying its mistake. Rectification can be made only when a glaring mistake of fact or law committed by the officer passing the order becomes apparent from the record. The rectification is not possible if the question is debatable. A point which was not examined on facts or in law cannot he dealt with as a mistake apparent from the record. No error can be said to be apparent on the face of the record if it is not manifest or self evident and requires an examination or argument to establish it. Where without any elaborate argument one could point to the error and say here is a substantial point of law which stares one in the face, and there could reasonably be no two opinions entertained about it, is a clear case of error apparent on the face of the record. Vide ... 10. From the various judgments of the Supreme Court above referred to and other High Courts it is clear that the Tribunal's order under section 254(2) is not to review its earlier order but only to amend it with a view to rectify any mist....
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....ribunal has no power or authority. Whether Rs.3,000 was leviable as penalty or not is not a mistake apparent from the record. 8.6 The Ld. AR also referred to the decision of Hon'ble Andhra Pradesh High Court in the case of Prefab Gratings Ltd. vs. ACIT (366 ITR 550) and also the decision of Calcutta High Court in CIT vs. Peerless General Finance & Investment Co. Ltd. (59 Taxmann.com 370) to support various propositions. The decision of Hon'ble Madras High Court in CIT vs Baer Shoes (India) P. Ltd. (331 ITR 435) was also referred wherein Hon'ble Court quashed the attempted re- assessment based on the subsequent Supreme Court decision and according to the Madras High Court, the interpretation of law by the Supreme Court would not give scope for the presumption of escapement of income inasmuch as the rectification proceedings u/s 254(2) of the Act being much narrower than the re-opening proceedings u/s 147 of the Act, the present attempt of the Revenue seeking review of the earlier order(s) passed in the guise of mistake apparent from record is not sustainable in law. 8.7 The Ld. AR submitted that the decision of Hon'ble Supreme Court in ACIT vs. Saurashtra Kutch....
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....by taking a strange stand of its inability to file cross-objection as per Section 253(4) of the Act in view of the early disposal of the appeal(s) in terms of the law existed at the said point in time. 8.11 The legal propositions were thus summarized by Ld. AR as under: - (a) The provisions of Section 254(2) of the Act is narrow and limited in scope. (b) The review of the order being not permitted under the statute cannot be sought for in the guise of rectification of mistake apparent from record. (c) The power of rectification u/s 254(2) is akin/ essentially similar to Rule 1 Order XLVII of Code of Civil Procedure, 1908 thereby negating the present attempt of the Petitioner / Revenue in seeking review based on the subsequent judgment of the Apex Court on the ground of mistake of law. (d) There is no mistake committed in the original order(s) which are based on the law as it stood at the point of decision rendered therein by this Hon'ble Bench. (e) The doctrine of prospective over-ruling would negate the present attempt of Petitioner / Revenue in seeking review in the guise of mistake of law in the original order(s) in consequence....
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....such debate. 8.14 The Ld. AR sought distinction in the facts of case law rendered by Hon'ble High Court of Madras in the case of Southern Industrial Corporation Ltd v CIT (258 ITR 481). 9. Shri T. Banusekar (appearing in MA Nos.194 to 198 & 201/Chny/22) referred to the decision of Hon'ble High Court of Madras in the case of Southern Industrial Corporation Ltd v CIT (supra) wherein it was held as under: - "When a statutory provision is interpreted by the Apex Court in a manner different from the interpretation made in the earlier decisions by a smaller Bench, the order which does not conform to the law laid down by the larger Bench in the later decision which decision would constitute the law of the land and is to be regarded as the law as it always was, unless declared by the court itself to be prospective in operation, would clearly suffer from a mistake which would be apparent from the record. The rectification under section 154(1) on the ground that the order sought to be rectified is not in conformity with the law declared by the Apex Court is required to be upheld." The Ld. AR submitted that the claim was allowed by Tribunal by following the decision ....
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.... would amount to holding that the orders of the Tribunal taking a view favoring the assessee would be incorrect orders which is impermissible u/s 254(2). 10. Shri N.V. Balaji, appearing in MA/131/Chny/22, submitted that the decision of Tribunal follows binding judicial precedent in CIT vs Industrial Security & Intelligence India (P.) Ltd (supra). On the date of passing impugned order, the said issue was covered by this decision and there was no decision of Hon'ble Apex Court that propounds contrary view in comparison with the decision of the Hon'ble Jurisdictional High Court. The Ld. AR submitted that till the rendering of said decision by Hon'ble Apex Court, the issue was debatable one and contrary views emerged from different High Courts. The Hon'ble Tribunal as on the date of passing the order rightly concurred with the decision of the binding jurisdictional High Court in the case of CIT vs Industrial Security & Intelligence India (P.) Ltd (supra). The Ld. AR submitted that subsequent decision of Hon'ble Supreme Court could not be relied upon to conclude that the order of the Tribunal passed by relying on the Jurisdictional High Court was mistake apparent ....
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....nd ambit of the powers under section 254(2). In exercise of the powers under section 254(2), the ITAT may amend any order passed by it to rectify any mistake apparent on record only. The Tribunal cannot revisit its earlier order and go into detail on merits. The powers under section 254(2) are only to correct and/or rectify the mistake apparent from the record. 14. The other arguments are, more or less, on similar lines and therefore, not specifically referred to by us for the sake of brevity. 15. Arguments on behalf of Revenue 15.1 The Ld. Sr. DR submitted that the decision rendered by Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. (supra) has triggered the present application. In para 53 & 54 of the judgment, the Hon'ble Court has held that there is a marked distinction between the nature and character of the two amounts - the employer's liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees' income and held in trust by the employer. This marked distinction has to be borne in mind while interpreting the obligation of every assessee under Section 43B. 15.2 The ....
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....h decision would constitute the law of the land and is to be regarded as the law as it always was, unless declared by the Court itself to be prospective in operation, would clearly suffer from a mistake which would be apparent from the record. The rectification under section 154(1) on the ground that the order sought to be rectified is not in conformity with the law declared by the Apex Court is required to be upheld. 15.6 Similarly, Hon'ble High Court of Andhra Pradesh in the case of Praga Tools Ltd. (252 ITR 813) held that: - "10. In the light of the above judgement of the Apex Court, the documents in question that are supplied under various collaboration agreements would constitute 'plant' for the purpose of depreciation. In the light of the said finding, the assessee is entitled for depreciation. Therefore, the rectification made by the AAC disallowing the depreciation originally granted, is not in accordance with law laid down by the Apex Court. Though at the time when the order was passed may be in accordance with the decision of the jurisdictional High Court, but in view of the subsequent decision of the Apex Court, the assessee is entitled for deprec....
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..... Ltd. dated 21.12.2022 wherein it was held that: - "While processing return of income u/ s 143(1)(a)(ii) of the Act, an incorrect claim, if such incorrect claim is apparent 'from any information in the return of income is to be disallowed and such adjustment is to be made on the total income or loss to the assessee". Further, even prior to amendment by Finance Act, 2021, the provisions of Sec.143(1)(a)(iv) allowed such adjustments as it amounts to only disallowance of expenditure u/s.36(1)(va). The contributions recovered from the employees is a deemed income as on the date of recovery itself u/s. 2(24) of the IT Act. At the time of remittance, the assessee' s claim is only an expenditure and as such the un-amended provision of Sec.143(1)(a)(iv) clearly allow the same. The Ld. Sr. DR also referred to the decision of Chennai Tribunal in Electrical India (ITA No. 789/Chny/2022) and group of cases which were held in Revenue's favour by holding that such an adjustment could be made in an intimation issued u/s 143(1). Our findings and Adjudication 16. Having considered rival submissions and upon perusal of case records, we proceed to deal with the present ....
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....en by coordinate bench of Hon'ble Court in CIT v. Industrial Security & Intelligence India (P.) Ltd. [TCA No. 585 of 2015, dated 24.07.2015] which upheld the view of the Tribunal taking favorable view relying upon the decision of Hon'ble Supreme Court in the case of CIT V. Alom Extrusions Ltd. (supra). However, in later decision titled as Unifac Management Services (India) P. Ltd. V/s DCIT (100 Taxmann.com 244; 23.10.2018), the single judge bench of Hon'ble Court has held that the scope of Section 43B and Section 36(1)(va) are different and thus, there is no question of reading both provisions together to consider as to whether assessee-employer is entitled to deduction in respect of sum belatedly paid towards employee contribution and therefore, for considering such question, application of section 36(1)(va) read with section 2(24)(x) alone is proper course. It was further held that though an amendment has been introduced to Section 43B, whereby actual date of payment is enough for considering deduction, if such date falls before date for filing return but in absence of any amendment made to section 36(1)(va), both contributions, viz., 'employees' and 'empl....
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....nted only when the conditions which govern them are strictly complied with. It was further held that the decision in Alom Extrusions Ltd. (319 ITR 306) did not consider the fact of the introduction of Section 2(24)(x) or in fact the other provisions of the Act. It was finally held that there is clear distinction between employer's contribution which is its primary liability under law [in terms of Section 36(1)(iv)] and its liability to deposit amounts received by it or deducted by it from its employees' [in terms of Sec. 36(1)(va)]. The former forms part of the employers' income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) and therefore, subjected to conditions spelt out by Explanation to Section 36(1)(va) i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two contributions - the employer's liability is to be paid out of its income whereas the second is deemed to be an income, by definition, since it is the deduction from the employees' income and held in trust by the employer. This ....
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....said reason, the clarification brought in by Finance Act, 2021 would lose much of relevance since from the inception of the provisions itself, it is to be presumed that law was always like that. The argument that the decision in Checkmate Services P. Ltd. (supra) did not consider the effect of amendment is dismissed. Another argument that the decision would apply prospectively also stand dismissed. The plea of principle of prospective ruling or the argument that this decision would operate prospectively is also dismissed. We concur with the plea of revenue that there is mistake apparent on record in terms of Sec. 254(2) considering the latest ruling of Hon'ble Apex Court. 22. In the judgment of Hon'ble Apex Court in the case of CIT Vs. Reliance Telecom Limited (2022) 440 ITR 1 (SC), as extensively relied on behalf of the assessee, the Hon'ble court observed that the powers u/s. 254(2) of the Act are akin to those under Order XLVII, Rule 1 of the Code of Civil Procedure, 1908. The Ld. AR relies on the same to submit that as per "Explanation" to Order XLVII, Rule 1 of the Code of Civil Procedure (5 of 1908), a subsequent decision of a superior court cannot form a groun....
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....ra), has observed that the power to rectify an order u/s 254(2) is extremely limited and it does not extend to correcting the errors of law or re-appreciating the factual findings. Those properly fall within the appellate review of an order of Court of first instance. What legitimately falls for consideration are errors (mistakes) apparent from record. There is absolutely no quarrel on this proposition. In the present case, there is no dispute on factual findings. Further, considering Article 141 of the constitution, we would have no hesitation in applying the binding law laid down by Hon'ble Apex Court. If the error is not corrected, there would certainly remain a mistake apparent from record since the adjudication of Tribunal would not be in line with the binding law laid down by Hon'ble Court in Checkmate Services P. Ltd. (supra). In the decision of Hon'ble Bombay in CIT vs Sudhir M. Mehta (supra), the decision of Tribunal was rendered much before the amending law receiving the Presidential assent. In the circumstances, Hon'ble Court confirmed rejection of miscellaneous application filed by the Department. Therefore, this case law is also not applicable to the fa....
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....ount of any mistake committed by the Tribunal. This fundamental principle has nothing to do with the inherent power of the Tribunal. If prejudice is resulted to the party, which prejudice is attributable to the Tribunal's mistake, error or omission and which error is a manifest error, then the Tribunal would be justified in rectifying its mistake. Rectification can be made only when a glaring mistake of fact or law committed by the officer passing the order becomes apparent from the record. The rectification is not possible if the question is debatable. A point which was not examined on facts or in law cannot be dealt with as a mistake apparent from the record. No error can be said to be apparent on the face of the record if it is not manifest or self evident and requires an examination or argument to establish it. Where without any elaborate argument one could point to the error and say here is a substantial point of law which stares one in the face, and there could reasonably be no two opinions entertained about it, is a clear case of error apparent on the face of the record. 26. Though Ld. AR has referred this case law, however, the underlined observations, in fact, suppo....
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.... rectification of the order passed by the Tribunal. It could at the most be a change in opinion based upon the facts in the subsequent case. The subsequent wisdom may render the earlier decision incorrect, but not so as to render the subsequent decision as a mistake apparent from the record calling for rectification u/s 254 of the Act. This decision is thus in the context of subsequent decision of the Tribunal. In the decision of Hon'ble Calcutta High Court in Jiyajeerao Cotton Mills Ltd. v ITO & Ors. (supra), it was held that the principle of retrospective legislation is applicable to the decisions of the Supreme Court declaring the law or interpreting a provision in a statute. The law is laid down or a provision in a statute is interpreted by the Supreme Court only when there is a debate or doubt on the interpretation of any provision of a statute requiring interpretation by the Supreme Court or when there is a conflict of judicial opinion on a provision of a statute between the different High Courts which is required to be resolved and settled by the Supreme Court. The law laid down by the Supreme Court cannot be said to have retrospective operation in the sense that althoug....
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.... a point is covered by the decision of the Hon'ble Supreme Court or that of the Hon'ble Jurisdictional High Court rendered prior to or even subsequent to the order proposed to be rectified, then it could be said to be a mistake apparent from record u/s. 254(2) of the Act and could be corrected by the Tribunal. In Saurashtra Kutch Stock Exchange Ltd. (supra), Hon'ble Court clearly held that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a 'new rule' but to maintain and expound the 'old one'. In other words, the Judges do not make law; they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make a new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite some time, the decision rendered later on would have retrospective effect, clarifying the legal position which was earlier not correctly understood. The ratio of both these decisions clearly supports the ....