M/S. Shriram Chits Private Limited v. Deputycommissioner Of Income Tax) Decided On 30. 1 1.2022Against The Assessee And In Favour O[ The Revenue

IN THE HIGH COURT FOR THE STATE OF TELANGANAAT HYDERABAD WEDNESDAY ,THE FIRST DAY OF FEBRUARYTWO THOUSAND AND TWENTY THREE PRESENTTHE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYANANDTHE HONOURABLE SRI JUSTICE N.TUKARAMJI INCOME TAX TRIBUNALNO: 326 OF 2006 Appeal Under Section 260A of the lncome Tax Act, 1961 aggrieved bythe order dated 31-o1-2ooz in l.T.A. No. 1918 , Hyd/ 1996 (AssessmentYears 199{-9f,to 1994 -95} on the file of the Court of the tncome Tax AppeltateTribunal, Hyderabad Bench "8" , Hyderabad prcferred against the order of theCommissioner of lncome Tax ( Appeals ) , Hyderabad in ITA No. 1681 324195-96 and l.T.A. No. 539 DC(A.V) , 90.97 dated 16{8-1996 prefered against theorder of the Deputy Commissioner of lncome Tax , (Appeals V), Hyderabaddated 2843-1995 in PAN / GIR No. S-7 Between M/s Shriram Chits Private Ltd, Rep. by its Executive Director Mr. R. Duruvasan 3-5-909, Himayathnagar, Hyderabad- 500 029 ...APPELLANTAND The Deputy Commissioner of lncome Tax, (Assts), Special Range-S, Hyderabad ...RESPONDENT Counsel for the Appellant: SRl. K. GOVINDA RAO REP.SRI K. MAHESHWAR RAO Counsel for the Respondent SRI J.V. PRASAD, S.C. FOR INCOME TAX DEPT.The Court made the following: JUDGMENT THE HON'BLE THE CHIEF JUSTICE UJJAL BIflIYANANDTHE HON'BLE SRI WSTICE N. TUI(ARAMJI I.T.T.A.No.326 of 2o,o,6 JUDGMENT:(Per the Hon'ble the Chief Justice Ujjal Bhuyan) Heard Mr. K.Govinda Rao, learned counsel for theappellant and Mr. J.V.Prasad, learned Standing Counselfor lncome Tax Department for the respondent 2. This appeal has been preferred by the assessee as theappellant under Section 260A of the Incotne Tax Act, 1961,against the order dated 31.O l.2OO2 passed by the IncomeTax Appellate Tribunal, Hyderabad Bench 'B', Hyderabad,1nI.T.A.No.1918/Hydl 1996 for the assessment yeart993-94. 3. Learned counsel for the parties submit that issue raised in this appeal is squarely covered by a recentdecision of this Court in I.T.T.A.No.296 of 2006 and batch (M/s. Shriram Chits Private Limited v. DeputyCommissioner of Income Tax) decided on 30. 1 1.2022against the assessee and in favour o[ the revenue. 4. Relevant portion of the [aforesaid ][order ][dated] 30.1 L.2022 reads as [follows:] 3. These appeals under [Section 260A ][of ][the ][Income]Tax Act, 1961 [(briefly ]['the Act'hereinafter) ][arise ][out ][of]the orders dated 3L.O1.2022, [26.07.2OO4 ][and]3O.O7.2OO4 [passed ]by [the ][Income ][Ta:< ][Appellate]Tribunal, Hyderabad Bench ['B', ][Hyderabad ][(briefly ][qthe]Tribunal' hereinafter) in [I.T.A.No. ][L9l'6/Hydl ] [for]the assessment [year ][199 ][t'92; ][l.T.A.Nos.5O6/Hyd/L999,]327 l$ydl2}Or, [47 ]L & LOag lHyd/2OO2 for theassessment [yea-rs ][1995-96, L997-98, ] [& ][1999-]2OOO; and I.T.A.No.1175/Hydl2OO3 [for the ][assessment]year 2OO0-01. 4. Though at the time of [filing ][appeal, substantial]questions of law were not [framed, appellant ][has]proposed the following two [questions ][as ][substantial]questions of law. " 1. Whether on the facts and in thecircumstances of the [case, ][the ][Income ][Tax]Appellate Tribunal [was ][correct ][in ][law ][in]rejecting the appellant's [claim for ][exemption ][of]the chit fund income on [the ][principal ][of]mutuality, on the [ground ]that [appellant ][is ][a]business concern [?] 2. Whether on' the facts and in [the]circumstances of the [case, ][the ][Income ][Tax]Appellate Tribunal [lvas ]correct [in ][law ][in]ignoring the fact that [when ][the ][appellant]subscribed to a chit, it [does so ][in its ][character]as a subscriber ? \,r. 5. The two questions raise only one issue i.e.,whether appellant's claim to exemption of the chit fundincome on the principle of mutuality was justifred. Wemay mention that Tribunal had rejected the claim of theappellant for exemption of its income from chit fundbusiness on the principle of mutuality holding thatappellant is a business concern. 2. Whether on' the facts and in [the]circumstances of the [case, ][the ][Income ][Tax]Appellate Tribunal [lvas ]correct [in ][law ][in]ignoring the fact that [when ][the ][appellant]subscribed to a chit, it [does so ][in its ][character]as a subscriber ? \,r. 5. The two questions raise only one issue i.e.,whether appellant's claim to exemption of the chit fundincome on the principle of mutuality was justifred. Wemay mention that Tribunal had rejected the claim of theappellant for exemption of its income from chit fundbusiness on the principle of mutuality holding thatappellant is a business concern. 6. This question has already been decided by thisCourt in Commissioner of Income-Tax v. KovurTextiles ((1982) 136 ITR 61 Ap) holding rhat principle ofmutuality cannot be extended to income earned by achit fund company. 7. Appellant has proposed two more questions assubstantial questions of law in I.T.T.A.No.3l6 of 20O6,which are as under: 1. Whether on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in not consideringthe appellant's submissions that theretrospective amendment to Section 438 of theIncome Tax Act, 1961 by Finance Act, 2003was clarificatory, and hence retrospective ? 2. Whether the Tribunal on the facts andin the circumstances of the case, erred ir.rholding that the payments ro ESI & pFCorporations made after the due dates underthe respective statutes but before the due datefor filing of the return of income u,asinadmissible as an expenditure ? 8. Though two questions have been proposed, theissue is basically one and the same. The [question ][is]whether payments made on account of employees'contribution to ESI and PF Corporations after the [due]date under the respective statutes but [before ][the ][due]date of frling of return of income [was ]inadmissible [as an]expenditure. 9. This issue is also no longer res integra in [view ]ofthe decision rendered by the Supreme Court inCheckmate Senrices P. Limited v. Commissioner ofIncome Tax-l (2022 SCC Online SC 1423). In the saiddecision, Supreme Court has held as follows [:] The distinction between an employer'scontribution which is its primary liability underlaw - in terms of Section 36(l)(iv|, and itsliability to deposit amounts received by it ordeducted by it (Section 36(1)(va)) is, thuscrucial. The former forms part of the employers'income, and the latter retains its character asan income (albeit deemed|, b-v virtue of Section2(2al$l - unless the conditions spelt byexplanation to Section 36(l)(va) are satisfiedi.e., depositing such amount received ordeducted from the employee on or before thedue date. [n other words, there is a markeddistinction between the nature and character ofthe two amounts - the employer's liability is tobe paid out of its income whereas the second isdeemed an income, by'de{inition, since it is thededuction from the employees'income and heldin trust b)' the emplo-ver. This markeddistinction has to be borne rvhile interpreting the obligation of every assessee under Section438. the obligation of every assessee under Section438. In the opinion of this Court, thereasoning in the impugned judgment that thenon-obstanle clause would not in any mannerdilute or override the employer's obligation todeposit the amounts retained by it or deductedby it from the employee's income, unless thecondition that it is deposited on or before thedue date, is correct and justified. The non-obstante clause has to be understood in thecontext of the entire provision of Section 43Bwhich is to ensure timely payment before thereturns are filed, of certain liabilities which areto be borne by the assessee in the form of tax,interest payment and other statutory liability.In the case of these liabilities, what cohstitutesthe due date is defined by the statute.Nevertheless, the assessees are given someleeway in that as long as deposits are madebeyond the due date, but before the date offiling the return, the deduction is allor.r,ed.That, however, cannot apply in the case ofamounts which are held in trust, as it is in thecase of emplo5rees' contributions- which arededucted from their income. They are not partof the assessee employer's income, nor are theyheads of deduction per se in the form ofstatutory pay out. They are others' income,monies, only deemed to be income, with theobject of ensuring that they are paid within thedue date specilied in the particular law. Theyhave to be deposited in terms of such welfareenactments. It is upon deposit, in terms ofthose enactments and on or before the due I dates mandated by such concerned law, thatthe amount which is otherwise retained, anddeemed 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. 10. In view of above, all the [questions ][proposed ][are]answered against the appellant/assessee [and ][in ][favour]of the revenue/respondent. 5. Following the above, the present appeal is [also]dismissed. Miscellaneous applications [pending, ][if &ri], ][shall] stand closed. However, there shall [be ][no ][order ][as ][to ][costs.] Sd/.B.S.CHIRANJEEVIJOINT REGIStrRARI ,/TRUE COPY" 0/SECTION OFFICER To 1. The lncome Tax Appellate Tribunal, Hyderabad Bench "B" , Hyderabad 2. The Commissioner of lncome Tax ( Appeals ) , Hyderabad 3. The Deputy Commissioner of lncome Tax , (Appeals V), Hyderabad 4. One CC to SRl. K. Maheswara Rao, Advocate [OPUCI 5. One CC to Sri J.V. PRASAD, SC FOR lncome Tax. Dept. (OPUC) 6. Two CD Copies f,yr / t HIGH COURT DATED t0110212023 JUDGMENT ITTA.No.326 of 2006 DISMTSSTNG THE ITTz\WITHOUT COSTS i[9.p] .\ tr.[g ][$IAT'1..](*1 5 [illp,R ][?t1:1]r,)*;' .-l t [.r]