Db Income Tax Appeal v. M/S. State Bank Of Bikaner & Jaipur

DB ITA-189/2011DB ITA-272/2011 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR J U D G M E N T (1)DB Income Tax Appeal No.177/2011Commissioner of Income Tax Vs. M/s. State Bank of Bikaner & Jaipur (2)DB Income Tax Appeal No.272/2011Commissioner of Income Tax Vs. M/s. State Bank of Bikaner & Jaipur (3)DB Income Tax Appeal No.189/2011Commissioner of Income Tax Vs. Jaipur Vidyut Vitaran Nigam Ltd. DATE OF ORDER : 06 January, 2014 PRESENTHON'BLE MR.JUSTICE AJAY RASTOGIHON'BLE MR.JUSTICE J.K. RANKA Mr.RB Mathur with Mr.Akhilesh Simlote, for the appellantMr.PK Kasliwal] Mr.Gunjan Pathak ], for the respondents. *** BY THE COURT (PER HON.RANKA,J.): 1.These Income Tax Appeals u/Sec. 260A of the Income TaxAct, (for short, IT Act') are directed against the order of the IncomeTax Appellate Tribunal, Jaipur (for short, 'ITAT') in ITANo.359/JP/2006, ITA No.358/JP/2006 & ITA No.825/JP/2008dt.30/04/2010, 30/04/2010 & 24/08/2009 respectively for theAssessment Year 2002-03, 2001-02 and 2002-03 respectively. 2.Since the controversy involved is identical, these Income TaxAppeals are being decided by this common order. 3.The appeals were admitted on the following substantialquestion of law:- Substantial question of law in the case of State Bank ofBikaner & Jaipur (DB ITA 177/2011 & 272/2011) “Whether on the facts and in the circumstances of thecase, the ITAT was justified in deleting the additionmade on account of depositing the PF payment beyondprescribed time, despite the fact that as per Section 36(1)(va) employee's contribution should have beendeposited in time; and Section 43B permits delayedpayment as regards employer's contribution and notthe employee's contribution?” Substantial question of law in the case of JVVNL (DBITA No.189/2011). “Whether in the facts and circumstances of the case,the ITAT was justified in law in deleting addition madeby the Assessing Officer on account of delay in depositof employees' contribution to PF u/s 36(1)(va).” 4.The brief facts, as emerging on the face of record, are thatthe respondent-assessees are being assessed to income tax fromyear to year and the assessment stood completed originally underSection 143(3) of the IT Act in the case of SBBJ and notice u/s 154was issued, as the Assessing Officer felt that there is a mistakeapparent on the face of record. 5.In the case of the respondent-assessee—JVVNL assessmentwas completed u/s 143(3) of the IT Act and thereafter therespondent proceeded before the appellate authorities.was completed u/s 143(3) of the IT Act and thereafter therespondent proceeded before the appellate authorities. 6.The issue in short is that it came to the notice of the Assessing Officer that the respondent-assessees, though madepayment of Provident Fund Account (PF) and/or EPF, CPF, GPF butit was deposited beyond the prescribed time limit under those Actsand accordingly the Assessing Officer disallowed the same.However, it may be observed that in so far as the case of therespondent-assessee-SBBJ is concerned, even the Assessing Officerhas not chosen to mention under which provision of law the claimhas been disallowed on account of the above facts, however, theCommissioner of Income Tax (Appeals) (for short, the ('CIT(A)') aswell as the ITAT have clarified that the amount was disallowedunder the provisions contained under Section 43B. 6.1In so far as the case of the respondent-assessee-JVVNL isconcerned, the Assessing Officer has certainly observed that theamount is being disallowed under the provisions of Section 43B ofthe IT Act. 6.1In so far as the case of the respondent-assessee-JVVNL isconcerned, the Assessing Officer has certainly observed that theamount is being disallowed under the provisions of Section 43B ofthe IT Act. 7.It was contended by the respondent-assessee-SBBJ before theAssessing Officer that the payment was made before the due dateof filing of the return of income and accordingly as per provisions ofSection 43B of the IT Act, the claim was allowable. It was submittedthat there is no mistake apparent on the face of record andalternatively the issue, being debatable, will not come within thepurview of Section 154 of the IT Act. However, the AssessingOfficer did not agree with the contention raised by the respondent-assessee and disallowed the amount as according to him, the payments were made beyond the due date as prescribed under therelevant Act of PF etc. and once the payment was made beyond theprescribed time, then the amount had to be disallowed. 7.1 In the matter of respondent-assessee-JVVNL as well, it wassubmitted that there is an amendment under Section 43B of the ITAct which came into effect from 01/04/2004 and there was asubmission of the respondent-assessee that it is retrospective innature and therefore, is applicable in the facts of the present case.The Assessing Officer was not satisfied with the explanation offeredby the respondent-assessee and disallowed the claim by observingthat the law has to be strictly followed and at least the assesseeought to have paid the amount according to the due date under therelevant provisions of PF Act or GPF etc. and since there wasviolation of even those Acts, therefore, the benefit/deduction cannotbe granted/allowed. Accordingly, the amounts were disallowed. 8.Dissatisfied with the said disallowance, as aforesaid, thematter was carried in appeal before the CIT(A). Before the CIT(A),same explanation was offered and it was further submitted that thepayment under the PF Act could not be disallowed under Section43B of the IT Act even as per the provision as it stood prior to theamendment w.e.f. 01/04/2004. Reliance was placed by therespondents-assessees on the judgment of the Hon'ble Apex Courtin the case of CIT Vs. Vinay Cement Ltd.: (2007) 213 CTR 268 (SC) and after considering the said judgment, the CIT(A) agreedwith the contention offered by the respondents-assessees anddeleted the disallowance as made by the Assessing Officer. 9.Dissatisfied with the deletion of the disallowance underSection 43B of the IT Act, the matter was carried in appeal beforethe ITAT by the revenue. It was submitted on behalf of therevenue that the Assessing Officer had correctly disallowed theamount as per the provisions of Section 43B of the IT Act and strictcompliance is required to be made in the given facts, then certainlywhen the amount was paid beyond the due date, then there was nooccasion for the CIT(A) to come to a different conclusion. On behalfof the respondents-assessees, reliance was placed not only on thejudgment of the Hon'ble Apex Court (Vinay Cement) but also adirect authority of Karnataka High Court, rendered in the case ofCIT Vs. Sabari Enterprises: (2007) 213 CTR 269 (Kar.). Accordingly,after considering the submissions, the ITAT dismissed the appealspreferred by the revenue. It is these orders of the ITAT which havebeen assailed before us. 10.Shri RB Mathur, ld. counsel for the revenue drew attention ofthis Court towards provisions of Section 36(1)(va) coupled withSection 43B of the IT Act and submitted that there was nojustification for allowing the claim by the ITAT as well as CIT(A) asunder Section 36(1)(va) of the IT Act, the amount was to beallowed only if the amount was paid on or before the due date and 10.Shri RB Mathur, ld. counsel for the revenue drew attention ofthis Court towards provisions of Section 36(1)(va) coupled withSection 43B of the IT Act and submitted that there was nojustification for allowing the claim by the ITAT as well as CIT(A) asunder Section 36(1)(va) of the IT Act, the amount was to beallowed only if the amount was paid on or before the due date and therefore, he contended that Section 43B of the IT Act would comeat a later stage and the first point, which is required to be lookedinto, is that under Section 36(1)(va) of the IT Act, if the amount hasbeen paid on or before the due date under the relevant Act, thencertainly the deduction could have been allowed. He furthersubmitted that as per explanation, as given under Section 36(1)(va)of the IT Act, the 'due date' means the date by which the assesseeis required, as an employer to credit the employees contribution tothe concerned department within due date prescribed under thatAct and once it has been found as a finding of fact that the amountwas not deposited on or before the due date, even the verydeduction under Section 36 was not permissible and secondly, hesubmitted that under Section 43B also, the amount could have beenallowed if the same would have been paid on or before the duedate as contemplated under the relevant PF or GPF or CPF Act. Hefurther submitted that the intention of the legislature was very clearthat the amount was allowable only in cases where the amount waspaid before the due date and it was for the welfare of theemployees as earlier several instances came where though theamount was not paid but was claimed and therefore, this provisionwas brought in. Accordingly, he submitted that both the authoritieshave come to a wrong conclusion which is not permissible under theAct. 11.Per-contra, Shri P.K. Kasliwal and Mr. Gunjan Pathak, ld. counsel for the respondents-assessees submitted that the ITAT,after considering all the facts, has come to the correct conclusion inanalyzing the provisions contained under the Act. 12.It was further contented by them that though proviso wasapplicable from 01/04/2004 but it was clarified that it has to betreated as retrospective in nature. Nevertheless, they submitted thateven the Hon'ble Apex Court in the case of Vinay Cement Ltd.(supra) has come to the conclusion that even the plain language ofSection 43B of the Act makes it clear that even without the provisothe claim was allowable under the provisions of Section 43B of theAct and accordingly submitted that the ITAT has come to thecorrect conclusion and the appeal deserves to be dismissed. 13.We have heard ld. counsel for the parties. It would be fruitfulto quote Sections 2(24)(x), 36(1)(va) and 43B of the IT Act whichis required to be considered in the present appeals:- “Section2(24)'Income' includes- (x)any sum received by the assessee from hisemployees as contribution to any PF or Superannuationfund or any fund set up under the provisions of theEmployees State Insurance Act, 1948(34 of 1948), orany other fund for the welfare of such employees.” “Section 36(1)(va)”any sum received by the assesseefrom any of his employees to which the provisions ofsub-clause (x) of clause (24) of section 2 apply, if suchsum is credited by the assessee to the employee'saccount in the relevant fund or funds on or before the due date. Explanation-For the purposes of this clause, “due date”means the date by which the assessee is required as anemployer to credit an employee's contribution to theemployee's account in the relevant fund under any Act,rule, order or notification issued thereunder or underany standing order, award, contract of service orotherwise.” Section.43B-”Notwithstanding anything contained inany other provision of this Act, a deduction otherwiseallowable under this in respect of- (a).........., or (b)any sum payable by the assessee as an employer by due date. Explanation-For the purposes of this clause, “due date”means the date by which the assessee is required as anemployer to credit an employee's contribution to theemployee's account in the relevant fund under any Act,rule, order or notification issued thereunder or underany standing order, award, contract of service orotherwise.” Section.43B-”Notwithstanding anything contained inany other provision of this Act, a deduction otherwiseallowable under this in respect of- (a).........., or (b)any sum payable by the assessee as an employer by way of contribution to any provident fund orsuperannuation fund or gratuity found or any otherfund for the welfare of employees, (c)............ (d)............ (e)........... (f)........... shall be allowed (irrespective of the previous year inwhich the liability to pay such sum was incurred by theassessee according to the method of accountingregularly employed by him) only in computing theincome referred to in section 28 of that previous yearin which such sum is actually paid by him. Provided that nothing contained in this section shallapply in relation to any sum which is actually paid bythe assessee on or before the due date applicable in hiscase 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 incurredas aforesaid and the evidence of such payment isfurnished by the assessee along with such return. Explanation(1)-For the removal of doubts, it ishereby declared that where a deduction in respect ofany sum referred to in clause (a) or clause (b) of thissection is allowed in computing the income referred toin section 28 of the previous year (being a previousyear relevant to the assessment year commencing onthe 1[st] day of April, 1983 or any earlier assessmentyear) in which the liability to pay such sum wasincurred by the assessee, the assessee shall not beentitled to any deduction under this section in respectof such sum in computing the income of the previousyear in which the sum is actually paid by him.” 14.On perusal of the above, it transpires that Section 36(1)(va)was inserted by Finance Act, 1987 w.e.f. 01/04/1988 andexplanation to this clause, if read collectively, explains to mean thatthe date by which the assessee is required as an employer to creditthe contribution to the employees account in the relevant fundunder any Act/Rule or order or notification issued thereunder orunder any standing order, award, contract of service or otherwise,prior to the above, clause was inserted to Section 36 for statutorydeductions of payment of tax under the provisions of the Act.Section 43B(b) was inserted by the Finance Act, 1983 which cameinto force w.e.f.01/04/1984. There again, provisions of Section 43B(b) clearly postulates that it is notwithstanding anything contained in other provision of the Act including Section 36(1)(va) and evenprior to insertion of the clause, assessee is entitled to get statutorybenefit of deduction of payment of amount from the revenue. Itmay be observed that the Hon'ble Apex Court, in the case of AlliedMotors (P) Ltd. vs. CIT: (1997) 224 ITR 677 (SC), considered thescheme of Section 43B and the scope of the said provision andobserved thus as under:- in other provision of the Act including Section 36(1)(va) and evenprior to insertion of the clause, assessee is entitled to get statutorybenefit of deduction of payment of amount from the revenue. Itmay be observed that the Hon'ble Apex Court, in the case of AlliedMotors (P) Ltd. vs. CIT: (1997) 224 ITR 677 (SC), considered thescheme of Section 43B and the scope of the said provision andobserved thus as under:- “Several cases have come to notice where taxpayers donot discharge their statutory liability such as in respectof excise duty, employer's contribution to PF, ESIScheme, etc. for long periods of time, extendingsometimes to several years. For the purpose of theirincome-tax assessments, they claim the liability asdeduction on the ground that they maintain accounts onmercantile or accrual tests basis. On the other hand,they dispute the liability and do not discharge the same.For some reason or the other, undisputed liabilities alsoare not paid. To curb this practice, it is proposed toprovide that deduction for any sum payable by theassessee by way of tax or duty under any law for thetime being in force (irrespective of whatever such tax orduty is disputed or not) or any sum payable by theassessee as an employer by way of contribution to anyPF, or superannuation fund or gratuity fund or any otherfund for the welfare of employees shall be allowed onlyin computing the income of that previous year in whichsuch sum is actually paid by him.” “Sec.43B was, therefore, clearly aimed at curbing the activities of those taxpayers, who did not dischargetheir statutory liability of payment of excise duty,employer's contribution to PF, etc., for long periods oftime but claimed deductions in that regard from theirincome on the ground that the liability to pay theseamounts had been incurred by them in the relevantprevious year. It was to stop this mischief that S. 43Bwas inserted. It was clearly not realised that thelanguage in which S.43B was worded, would causehardship to those taxpayers who had paid sales-taxwithin the statutory period prescribed for this payment,although the payment so made by them did not fall inthe relevant previous year. This was because the sales-tax collected pertained to the last quarter of therelevant accounting year. It could be paid only in thenext quarter which fell in the next accounting year.Therefore, even when the sales-tax had in fact beenpaid by the assessee within the statutory periodprescribed for its payment and prior to the filing of theIT return, these assessees were unwillingly preventedfrom claiming a legitimate deduction in respect of thetax paid by them. This was not intended by s.43B.Hence, the first proviso was inserted in s.43B. Theamendment which was made by the Finance Act of 1987in s.43B by inserting, inter alia, the first proviso, wasremedial in nature, designed to eliminate unintendedconsequences which may cause undue hardship to theassessee and which made the provision unworkable orunjust in a specific situation.” 15.The Hon'ble Apex Court, in the case of Vinay Cement Ltd.(supra), after approving the judgment rendered by Gauhati High 12 Court in the case of CIT Vs. George Williamson (Assam) Ltd.:(2006) 284 ITR 619 (Gau), came to the conclusion that suchomission under Section 43B(b), without any saving clause of theGeneral Clauses Act, means that the above provisions namely;Clause (a) or (c) or (d) or (e) or (f) were not in existence or neverexisted and after considering the judgments rendered by theHon'ble Apex Court in the case of Kolhapur Canesugar Works Ltd.vs. Union of India, reported in (2000) 2 SCC 536 and RayalaCorporation (P) Ltd. vs. Director of Enforcement, reported in (1969)2 SCC 412, held the claim of the assessee as allowable. The Hon'bleApex Court, as aforesaid, approving the judgment of Gauhati HighCourt, has held as under:- 12 Court in the case of CIT Vs. George Williamson (Assam) Ltd.:(2006) 284 ITR 619 (Gau), came to the conclusion that suchomission under Section 43B(b), without any saving clause of theGeneral Clauses Act, means that the above provisions namely;Clause (a) or (c) or (d) or (e) or (f) were not in existence or neverexisted and after considering the judgments rendered by theHon'ble Apex Court in the case of Kolhapur Canesugar Works Ltd.vs. Union of India, reported in (2000) 2 SCC 536 and RayalaCorporation (P) Ltd. vs. Director of Enforcement, reported in (1969)2 SCC 412, held the claim of the assessee as allowable. The Hon'bleApex Court, as aforesaid, approving the judgment of Gauhati HighCourt, has held as under:- “In the present case we are concerned with the law asit stood prior to the amendment of s.43B. In thecircumstances the assessee was entitled to claim thebenefit in s.43B for that period particularly in view ofthe fact that he has contributed to provident fundbefore filing of the return.” circumstances the assessee was entitled to claim thebenefit in s.43B for that period particularly in view ofthe fact that he has contributed to provident fundbefore filing of the return.” 16.The Hon'ble Apex Court, in the case of Commissioner ofIncome Tax Vs. M/s. Alom Extrusions Limited: (2009) 319 ITR 306(SC), while considering the scope of the amendment made w.e.f.01/04/2004, observed that the same is curative in nature, hence itis retrospective in nature and would operate w.e.f. 01/04/1988(when the first proviso came to be inserted) and after discussingthis, held as under:- “Before concluding, we extract hereinbelow the relevantobservations of this Court in the case of Commissionerof Income Tax, Bangalore vs. J.H. Gotla, reported in[1985] 156 I.T.R. 323, which reads as under: “We should find out the intention from the languageused by the Legislature and if strict literal constructionleads to an absurd result, i.e., a result not intended tobe subserved by the object of the legislation found inthe manner indicated before, then if anotherconstruction is possible apart from strict literalconstruction, then that construction should be preferredto the strict literal construction. Though equity andtaxation are often strangers, attempts should be madethat these do not remain always so and if aconstruction results in equity rather than injustice, thensuch construction should be preferred to the literalconstruction.” For the afore-stated reasons, we hold that Finance Act,2003, to the extent indicated above, is curative innature, hence, it is retrospective and it would operatewith effect from 1[st] April, 1988 (when the first provisocame to be inserted). For the above reasons, we findno merit in this batch of civil appeals filed by theDepartment which are hereby dismissed with no orderas to costs.” 17.Similarly, the Gauhati High Court, in the case of CIT Vs. AssamTribune: (2002) 253 ITR 93 (Gau), came to the similar conclusionthat the contribution towards the PF etc. having been depositedbefore filing of the return by the assessee, deduction could not be 14 disallowed under Section 43B of the Act. 18.The Delhi High Court, in the case of CIT Vs. DharmendraSharma: (2007) 213 CTR 609 (Del.); Madras High Court, in the caseof CIT Vs. Nexus Computer (P) Ltd., reported in (2008) 219 CTR(Mad.) 54; Delhi High Court, in the case of CIT Vs. P.M. ElectronicsLtd., reported in (2008) 220 CTR (Del) 635; Karnataka High Court,in the case of CIT Vs. Kurlon Ltd., reported in (2011) 203 Taxman29 (Kar.); Himachal Pradesh High Court, in the case of CIT Vs.Nipso Polyfabriks Ltd., reported in (2013) 213 Taxman 376(Himachal Pradesh) also came to the aforesaid view. 19.Uttrakhand High Court, in the case of CIT Vs. M/s. KichhaSugar Company Ltd., reported in (2013) 356 ITR 351 (Uttaranchal),after considering the aforesaid provisions, held as under:- 14 disallowed under Section 43B of the Act. 18.The Delhi High Court, in the case of CIT Vs. DharmendraSharma: (2007) 213 CTR 609 (Del.); Madras High Court, in the caseof CIT Vs. Nexus Computer (P) Ltd., reported in (2008) 219 CTR(Mad.) 54; Delhi High Court, in the case of CIT Vs. P.M. ElectronicsLtd., reported in (2008) 220 CTR (Del) 635; Karnataka High Court,in the case of CIT Vs. Kurlon Ltd., reported in (2011) 203 Taxman29 (Kar.); Himachal Pradesh High Court, in the case of CIT Vs.Nipso Polyfabriks Ltd., reported in (2013) 213 Taxman 376(Himachal Pradesh) also came to the aforesaid view. 19.Uttrakhand High Court, in the case of CIT Vs. M/s. KichhaSugar Company Ltd., reported in (2013) 356 ITR 351 (Uttaranchal),after considering the aforesaid provisions, held as under:- “Therefore, the due date referred to in section 36(1)(va) of the Act must be read in conjunction with section43B(b) of the Act and a reading of the same wouldmake it amply clear that the due date as mentioned inSection 36(1)(va), is the due date as mentioned insection 43B(b) i.e. payment/contribution made to theProvident Fund Authority any time before filing thereturn for the year in which the liability to pay accruedalongwith evidence to establish payment thereof. TheAssessing Officer proceeded on the basis that “duedate”, as mentioned in section 36(1)(va) of the Act, isthe due date fixed by the Provident Fund Authority,whereas in the matter of culling out the meaning of theword “due date”, as mentioned in the said section, the Assessing Officer was required to take note of Section43B(b) of the Act and by not taking note of heprovisions contained therein committed gross error,which having been rectified by the Appellate Authorityand confirmed by the Tribunal, there is no scope ofinterference” 20.On perusal of Sec.36(1)(va) and Sec.43(B)(b) and analyzingthe judgments rendered, in our view as well, it is clear that thelegislature brought in the statute Section 43(B)(b) to curb theactivities of such tax payers who did not discharge their statutoryliability of payment of dues, as aforesaid; and rightly so as on theone hand claim was being made under Section 36 for allowing thededuction of GPF, CPF, ESI etc. as per the system followed by theassessees in claiming the deduction i.e. accrual basis and the samewas being allowed, as the liability did exist but the said amountthough claimed as a deduction was not being deposited even afterlapse of several years. Therefore, to put a check on the saidclaims/deductions having been made, the said provision wasbrought in to curb the said activities and which was approved by theHon'ble Apex Court in the case of Allied Motors (P) Ltd. (supra).21.A conjoint reading of the proviso to Section 43-B which wasinserted by the Finance Act, 1987 made effective from 01/04/1988,the words numbered as clause (a), ©, (d), (e) and (f), are omittedfrom the above proviso and, further more second proviso wasremoved by Finance Act, 2003 therefore, the deduction towards the employer's contribution, if paid, prior to due date of filing of returncan be claimed by the assessee. In our view, the explanationappended to Section 36(1)(va) of the Act further envisage that theamount actually paid by the assessee on or before the due dateadmissible at the time of submitting return of the income underSection 139 of the Act in respect of the previous year can beclaimed by the assessee for deduction out of their gross totalincome. It is also clear that Sec.43B starts with a notwithstandingclause & would thus override Sec.36(1) (va) and if read in isolationSec. 43B would become obsolete. Accordingly, contention ofcounsel for the revenue is not tenable for the reason aforesaid thatdeductions out of the gross income for payment of tax at the timeof submission of return under Section 139 is permissible only if thestatutory liability of payment of PF or other contribution referred toin Clause (b) are paid within the due date under the respectiveenactments by the assessees and not under the due date of filingof return. 22.We have already observed that till this provision was broughtin as the due amounts on one pretext or the other were not beingdeposited by the assessees though substantial benefits had beenobtained by them in the shape of the amount having been claimedas a deduction but the said amounts were not deposited. It ispertinent to note that the respective Act such as PF etc. alsoprovides that the amounts can be paid later on subject to payment 17 of interest and other consequences and to get benefit under theIncome Tax Act, an assessee ought to have actually deposited theentire amount as also to adduce evidence regarding such deposit onor before the return of income under sub-section (1) of Section 139of the IT Act. 23.Thus, we are of the view that where the PF and/or EPF, CPF,GPF etc., if paid after the due date under respective Act but beforefiling of the return of income under Section 139(1), cannot bedisallowed under Section 43B or under Section 36(1)(va) of the ITAct. 24.Accordingly, the substantial question of law is answeredagainst the appellant-revenue and in favour of the assessee. 25.Consequently, these appeals, being devoid of merit, are hereby dismissed. No order as to costs. [J.K. RANKA],J ,J. Raghu/p.17/ Certificate:All corrections made in the judgment/order have beenincorporated in the judgment/order being e-mailed./Raghu, PA.