Commissioner Of Income Tax Rajkot-Iii v. Orchev Pharma Pvt.ltd.....opponent(S

O/TAXAP/447/2006 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 447 of 2006 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI Sd/- and HONOURABLE MR.JUSTICE K.J.THAKERSd/-=========================================================== ================================================================COMMISSIONER OF INCOME TAX RAJKOT-III....Appellant(s) Versus ORCHEV PHARMA PVT.LTD.....Opponent(s) ================================================================ Appearance: MR PRANAV G DESAI, ADVOCATE for the Appellant(s) No. 1MR SN SOPARKAR, Ld. SENIOR COUNSEL with MRS SWATI SOPARKAR, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERIandHONOURABLE MR.JUSTICE K.J.THAKER Date : 14/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.By way of this Appeal, the appellant has challenged the judgment and order of the Income Tax Appellate Tribunal, Rajkot Bench in ITA No.318/Rjt/05 for the Assessment Year : 1998-1999. 2.While admitting the matter on 12.09.2006, the following substantial question of law was framed :- “Whether on facts and circumstances of the case the Income Tax Appellate Tribunal was right in directing the Assessing Officer to allow the claim of the respondent for deduction u/s. 43B of the Income Tax Act, 1961 relating to all the payments?” 3.The facts in brief are that during the assessment proceedings, the respondent had made the payment towards the provident fund of employees belatedly. The Assessing Officer adopting the provisions of Section 43B read with Section 36(1)(v) of the Income Tax Act, 1961 disallowed the said deduction. On appeal, the Commissioner (Appeals) upheld the said addition. On further appeal, the AppellateTribunalhasdeletedthe disallowance. 4.However, learned Senior Counsel for the O/TAXAP/447/2006 JUDGMENT respondent Mr. S.N. Soparkar states that in view of the decision of this Court in the case of General Contracts Co. v. Commissioner of Income Tax reported in 287 Income Tax Reports 416, the question of law raised in this Appeal will have to be answered in favour of the assessee. 5.In the above background of facts and considering the submissions canvassed, it is necessary to go through the relevant paragraphs of the Income Tax Appellate Tribunal which read as under :- “4. The issue in controversy is squarely covered by the order of different benches of ITAT and by the co-ordinate bench in the case of ACT Shipping Limited v. Addl. CIT, Rajkot(ITANo.847/Rjt/2002 Dt.16.6.2005) wherein it was held that Finance Act, 2003 has brought an amendment in section 43B, so as to make payments made by employer towards contribution of PF, ESI, Gratuity and other welfare funds allowable, if the same are made before filing the return of income. Even though the amendment has been brought in force with effect from assessment year 2004-05, but the same are curative in nature. So the sameistobeconstrued retrospectively. As the amendment has been made to remove the hardship caused due to total disallowance of the amount paid for welfare of the employees, if the same had been paid O/TAXAP/447/2006 JUDGMENT after the due date. Since the amendment in proviso clause has been inserted to remove the hardship caused due to total disallowance of inserted to remove the hardship caused due to total disallowance of the amount paid for welfare of the O/TAXAP/447/2006 JUDGMENT after the due date. Since the amendment in proviso clause has been inserted to remove the hardship caused due to total disallowance of inserted to remove the hardship caused due to total disallowance of the amount paid for welfare of the employees, if the same had been paid after the due date. Since the amendment in proviso clause has been inserted to remove the hardship cause due to total disallowance, the amendment becomes curative so as to be construed retrospectively in view of the decision of the Supreme Court in Allied Motors Pvt. Ltd. (224 KTR 677) and Poddar Cement P. Ltd. (226 KTR 625). Similar view has been taken by ITAT, Bangalor Bench Vibhuti Mines (P) Ltd., ITA No.1006/Bang/2002videorder dt.22.3.2005 and reported at Taxman May, 2005 page 452. It was observed by the Bench that in view of the amended provisions of section 43B, payments made by employer towards contribution of PF, ESI, etc. are allowable if the same are paid before due date of filing of return of income. 4.1 As per the details filed by the assessee with regard to the actual payment of PF, we found that all payments are made before the end of the relevant financial year i.e. 31.3.1998 as well as last date of filing of return. We, therefore, reverse the finding of the lower authorities and direct the Assessing Officer to allow assessee's claim of deduction 43B. 5. With regard to assessee's claim for deduction under section 80IA in respect of interest on delayed O/TAXAP/447/2006 JUDGMENT payments, the issue is squarely covered in favour of revenue by the order of Special Bench in the case of Nirma Industries Limited (95 ITD 1999-2000), wherein it was held that interest on delayed payment of sale proceeds cannot be said to be income derived from industrial undertaking for the purpose of deduction under section 80I. Similarly, the assessee's claim for deduction under section 80IA in respect of sale of import license is covered by the order of the Supreme Court in the case of Sterling Foods (237 ITR 579), in favour of the revenue, wherein it was held by the Hon'ble Supreme Court that income from sale of import license cannot be said to be income derived from industrial undertaking. 6. In view of the above, we uphold that the action of the lower authorities and dismiss the ground No.3 of the assessee's appeal. In the result, the appeal assessee is allowed in part for statistical purpose.” 6.While disposing of this matter, the decision in the case of General Contracts Co. (supra) and the reasoning given by the Tribunal will have to be considered and the finding of facts by the ITAT require to be upheld, more particularly in view of the Tribunal's findings at Paragraph 5 which has been reproduced hereinabove. O/TAXAP/447/2006 JUDGMENT 7.Therefore, qua the question which has been posed for our consideration, in the facts and circumstances of the case, the ITAT was right in directing the Assessing Officer to allow the claim of the respondent for deduction under Section 43(b) of the Income Tax Act, relating to the payment in question. The provisions of Section 43(b) was also considered by the Tribunal and therefore, we do not think that the decision of the Bangalore Bench in the case of Vibhuti Mines relied on by the Tribunal which attained finality requires to be disturbed. In that view of the matter and more particularly, in view of the decisions cited by learned Senior Counsel Mr. S.N. Soparkar, the grounds urged before us required to be answered against the Revenue and in favour of the assessee. 7.Therefore, qua the question which has been posed for our consideration, in the facts and circumstances of the case, the ITAT was right in directing the Assessing Officer to allow the claim of the respondent for deduction under Section 43(b) of the Income Tax Act, relating to the payment in question. The provisions of Section 43(b) was also considered by the Tribunal and therefore, we do not think that the decision of the Bangalore Bench in the case of Vibhuti Mines relied on by the Tribunal which attained finality requires to be disturbed. In that view of the matter and more particularly, in view of the decisions cited by learned Senior Counsel Mr. S.N. Soparkar, the grounds urged before us required to be answered against the Revenue and in favour of the assessee. Sd/-(K.S. JHAVERI, J.) CAROLINE Sd/-(K.J. THAKER, J)