Pr. Commissioner Of Income Tax, Jaipur Ii, Jaipur v. M/S Rajasthan Renewable Energy Corp. Ltd., E

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 256/2018 Pr. Commissioner Of Income Tax, Jaipur Ii, Jaipur. ----Appellant Versus M/s Rajasthan Renewable Energy Corp. Ltd., E-166, Akshay UrjaBhawan, Yudhister Marg, C-Scheme, Jaipur. ----Respondent For Appellant(s) : Mr. Amit Malani on behalf of Mr. R.B. Mathur (Senior Advocate) For Respondent(s): Mr. Anant Kasliwal, Senior Advocate assisted by Mr. Vaibhav Kasliwal andassisted by Mr. Vaibhav Kasliwal and Ms. Kritika Singh HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI HON'BLE MR. JUSTICE SUDESH BANSAL 24/02/2022 Order This appeal is filed by the revenue to challenge the judgmentof the Income Tax Appellate Tribunal. Two issues are raised beforeus. One is of claim of the assessee for deduction under Section37(1) of the Income Tax Act, 1961 and the other is of claimingdeduction of employees contribution to PF and ESI which wasmade beyond the prescribed period of limitation provided underthe Act. Following two questions may be noted:- "i)Whether in the facts and circumstances of thecase and in law the ITAT was justified in deleting theaddition of Rs.20,00,000/- made on account ofcontribution made to State Renewal Fund ignoring thefact that contribution towards fund is not connectedwith the business but it is diversion of Income and notallowable u/s. 37 (1) of the IT Act. ii)Whether in the facts and circumstances of thecase and in law the ITAT was justified in deleting the addition of Rs. 425000/- made for depositing theemployees' contribution to PF & ESI beyond theprescribed time limit provided in the respective Acts." So far as question No.1 is concerned, similar issue wasdealt with by a Division Bench in a judgment dated 13.03.2018in D.B. Income Tax Appeal No.10/2018 and connected appealsinvolving this very issue. Following observations may be noted:- "4.So far as question No.1 is concerned, thesame is now covered by the decision of this Court inPrincipal Commissioner of Income-Tax V/s RajasthanState Seed Corporation Ltd.[2016] 386 ITR 267 (Raj)wherein it has been held as under:- “Insofar as the expenditure incurredon State Renewal Fund is concerned, saidexpenditure also goes to show that therenewal fund was set up by the StateGovernment and was created with theobject of providing a safety net for theworkers likely to be effected by restrictingin the State Public Enterprise and that afinding of fact has been recorded that thecontribution made to the State Renewalfund is solely for the purposes of thewelfare and benefit of the employees. Inour view, it is for the assessee to decidewhether any expenditure should beincurred in the course of business andexpenditure of this nature being forbusiness expediency is certainly allowablededuction under Section 37(1) of the Act.In our view any normal expenditure for thewelfare and benefit of employees isallowable expenditure under Section37(1),the Tribunal has come to a finding of factthat it was a legal obligation of therespondent-assessee towards contributionof the said amount to the State RenewalFund and there being a legal obligation aswell in our view the Tribunal has come to acorrect conclusion." 5. In view of above, question No.1 is answered infavour of the assessee and against the department." So far as question No.2 is concerned, following observations may be noted:- ""6. The effect of deletion of second proviso to s. 43Bof the Act was considered by Hon'ble Supreme Courtin Commissioner of Income Tax v. Alom ExtrusionsLtd. : (2009) 319 ITR 306 (SC) and it was observedat p.314 of the report as under:- 5. In view of above, question No.1 is answered infavour of the assessee and against the department." So far as question No.2 is concerned, following observations may be noted:- ""6. The effect of deletion of second proviso to s. 43Bof the Act was considered by Hon'ble Supreme Courtin Commissioner of Income Tax v. Alom ExtrusionsLtd. : (2009) 319 ITR 306 (SC) and it was observedat p.314 of the report as under:- ".......s.43B (main section), which stoodinserted by the Finance Act, 1983, w.e.f. 1stApril, 1984, expressly commences with a nonobstante clause, the underlying object beingto disallow deductions claimed merely bymaking a book entry based on the mercantilesystem of accounting. At the same time, s.43B (main section) made it mandatory forthe Department to grant deduction incomputing the income under s. 28 in theyear in which tax, duty, cess, etc., is actuallypaid. However, Parliament took cognizance ofthe fact that the accounting year of acompany did not always tally with the duedates under the Provident Fund Act,Municipal Corporation Act (octroi) and othertax laws. Therefore, by way of the firstproviso, an incentive/relaxation was soughtto be given in respect of tax, duty, cess orfee by explicitly stating that if such tax, duty,cess or fee is paid before the date of filing ofthe return under the Income-tax Act (duedate), the assessee(s) then would be entitledtodeduction.However,thisrelaxation/incentive was restricted only totax, duty, cess and fee. It did not apply tocontributions to labour welfare funds. Thereason appears to be that the employer(s)should not sit on the collected contributionsand deprive the workmen of the rightfulbenefits under social welfare legislations bydelaying payment of contributions to thewelfare funds. However, as stated above, thesecond proviso resulted in implementationproblems, which have been mentionedhereinabove, and which resulted in theenactment of the Finance Act, 2003, deletingthe second proviso and brining aboutuniformity in the first proviso by equatingtax, duty, cess, and fee with contributions towelfare funds." 7. Further the Hon'ble Supreme Court in CIT v. VinayCement Ltd. : (2007) 213 CTR (SC) 268 whiledismissing the Special Leave Petition preferred by theRevenue against the judgment of the Guwahati HighCourt observed as under:- "In the present case we are concerned withthe law as it stood prior to the amendment ofs. 43B. In the circumstances the assesseewas entitled to claim the benefit in s. 43B forthat period particularly in view of the factthat he has contributed to provident fundbefore filing of the return." 8. Following the observations of Hon'ble Supreme Courtin Vinay Cement (supra), the Delhi High Court inCommissioner of Income-Tax v. AIMIL Ltd and Ors.:(2010) 321 ITR 508 (Del) held at p.518 as under:- "We may only add that if the employees'contribution is not deposited by the due dateprescribed under the relevant Acts and isdeposited late, the employer not only paysinterest on delayed payment but can incurpenalties also, for which specific provisions aremade in the Provident Fund Act as well as theESI Act. Therefore, the Act permits theemployer to make the deposit with somedelays, subject to the aforesaid consequences.In so far as the Income-tax Act is concerned,the assessee can get the benefit if the actualpayment is made before the return is filed, asper the principle laid down by the SupremeCourt in Vinay Cement" In the result this appeal is dismissed. (SUDESH BANSAL),J (AKIL KURESHI),CJ KAMLESH KUMAR/16