Commissioner Of Income Tax v. M/S Lakhani Footwear Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No. 149 of 2010 Date of decision 19.5.2010 Commissioner of Income Tax ... Appellant Versus M/s Lakhani Footwear Ltd.... Respondent CORAM:HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE JITENDRA CHAUHAN Present:Ms. Urvashi Dhugga ,Advocate for the appellant 1.To be referred to the Reporter or not ? 2.Whether the judgement should be reported in the Digest ? M.M.KUMAR, J. The Revenue has approached this Court challenging orderdated 27.3.2009 passed by the Income Tax Appellate Tribunal, DelhiBench, New Delhi (for brevity 'the Tribunal') in ITA No.345/DeL/2008 forthe assessment year 1999-2000. The assessment in this case was completedunder Section 143(3) of the Income Tax Act,1961 (for brevity 'the Act') on12.10.2006 at an income of Rs. 91,60,010/-. The Assessing Officer hadmade addition of Rs. 11,61,641/- on account of late deposit of employees'contribution to the provident fund of Rs. 11,61,641/- and Rs. 10,09,158/-on account of late deposit of employer's contribution to EPF and FPFbesides other addition. On appeal against the assessment order dated 12.10.2006, theCommissioner of Income Tax (A) vide his order dated 26.11.2007 partiallyallowed the relief to the assessee- respondent. The CIT(A) held that since ITA No. 149 of 2010 all the payments were made within the grace period the relief ofRs.21,99,799/- deserves to be granted. He placed reliance on the judgementsof the Tribunal rendered in ITA No. 2995/Del/2006 in the case of LakhaniRubber Udyog (P) Ltd. for the assessment year 2001-02 and ITANo.2443/Del/06 in the case of Laksons Shoes Co.(P) Ltd. for the assessmentyear 2002-03. On further appeal by the Revenue, the Tribunal upheld theorder of the CIT(A) by observing that payments have been made within thegrace period, the additions made by the Assessing Officer have been rightlydeleted by the CIT(A). The Tribunal further held that the decision of theCIT(A) was rightly based on the earlier decisions of the Tribunal. Feeling aggrieved, the Revenue has approached this Court byclaiming that the following questions of law would arise which are based onthe judgment of the Bombay High Court rendered in the case of CIT v.Pamwi Tissues Ltd. (2009) 313 ITR 137. “ 1.Whether on the facts and in the circumstances of the case,the Ld. ITAT was rightly in law in confirming the order of theld. CIT(A) in deleting the addition of Rs. 11,61,641/- made bythe Assessing Officer on account of late deposit of employees'contribution to PF disregarding the fact that the payments weremade beyond the due dates and were, therefore, not allowableu/s 36(1)(va) and were to be treated as Income U/s 2(24)(x) ofthe Income Tax Act, 1961, in contravention of the decision inthe case of CIT v. Pamwi Tissues Ltd. 215 CTR 150 (Bom.)2.Whether, on the facts and in the4 circumstances of the case,the Ld. ITAT was right in law in confirming the order of the Ld. CIT(A) in deleting the addition of Rs. 10,09,158/- made by the Assessing Officer on account of late deposit of employer'scontribution to PF, EPF and FPF as without appreciating thefact that payments were not made by the assessee within theprescribed 'due date' by which the assessee was required tomake payments, in contravention of the decision in the case ofCIT v. Pamwi Tissues Ltd. 215 CTR 150 (Bom.) ? Ld. CIT(A) in deleting the addition of Rs. 10,09,158/- made by the Assessing Officer on account of late deposit of employer'scontribution to PF, EPF and FPF as without appreciating thefact that payments were not made by the assessee within theprescribed 'due date' by which the assessee was required tomake payments, in contravention of the decision in the case ofCIT v. Pamwi Tissues Ltd. 215 CTR 150 (Bom.) ? The aforesaid judgement of the Bombay High Court fell forconsideration of Hon'ble the Supreme Court in the case of Commissioner ofIncome Tax v. Alom Extrusions Ltd.(2009) 319 ITR 306 and the viewtaken by the Bombay High Court was reversed. Hon'ble the Supreme Courthas held that the omission of the 2[nd] proviso to Section 43 B of the Act byFinance Act 2003 operated retrospectively from 1.4.1988. The HonbleSupreme Court further held that before amendment of the 2[nd] proviso toSection 43 B of the Act, the assessee were entitled to deduction only if thecontribution stood credited on or before the due date given in the ProvidentFund Act which created further difficulties. On a representation made to theFinance Ministry, one more amendment was made by Finance Act No. 2003which was to apply retrospectively w.e.f. 1.4.1988. The rationale of Hon'blethe Supreme Court is that when a proviso in a section is inserted to remedyunintended consequences and to make the section workable, the provisowhich supplies an obvious omission therein is required to be readretrospectively in operation, particularly to give effect to the section as awhole. In order to achieve that object strict and literal construction shouldbe avoided. As a sequel to the aforesaid discussion, the appeal fails and the questions of law are answered against the Revenue. (M.M.Kumar) Judge 19.5.2010 (Jitendra Chauhan)Judge okg