Principal Commissioner Of Income Tax Jaipur -Ii, Jaipur v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd, Vidyut Bhawan,Janpath, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 329/2018 Principal Commissioner of Income Tax Jaipur -II, Jaipur ----Appellant Versus Rajasthan Rajya Vidyut Utpadan Nigam Ltd, Vidyut Bhawan,Janpath, Jaipur ----Respondent For Appellant: Mr. Anuroop Singhi withMr. Aditya KhandelwalMr. Aditya KhandelwalFor Respondent: Mr. Prakul Khurana withMr. Rajat SharmaMr. Rajat Sharma HON'BLE MR. JUSTICE AVNEESH JHINGAN HON'BLE MR. JUSTICE ASHUTOSH KUMAR Order 26/09/2024 -AVNEESH JHINGAN, J: 1.This appeal is filed under Section 260A of the Income TaxAct, 1961 (for short ‘the Act’) against the order dated01.06.2018passed by the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur(for short ‘the Tribunal’). 2.The brief facts are that the respondent-company is engagedin distribution of electricity. The return for assessment year 2009-10 was filed and the assessment was finalized under Section143(3) of the Act. The two issues arose in the assessmentproceedings. Firstly, can deduction be allowed if employees’ shareof provident fund is deposited beyond the date stipulated in theEmployees’ Provident Funds and Miscellaneous Provisions Act,1952 (for short ‘EPF Act’) and Employees’ State Insurance Act, 1948 (for short ‘ESI Act’). Secondly, the effect of late deposit ofTDS on claiming deduction of the expenditure. 3.The appeal filed by the respondent was accepted by theCommissioner of Income Tax (Appeal) and the appeal filed by theappellant was dismissed by the Tribunal, hence this appeal. 4.The appeal was admitted on 19.05.2023 formulatingfollowing two substantial questions of law:- “(1) Whether the view taken by theITAT that employees’ contribution toProvident Fund and ESI is governed bythe provisions of Section 43B of theIncome Tax Act, 1961 and not bySection 36(1)(va) read with Section2(24)(x) of the Income Tax Act, 1961is sustainable in law in view of thedecision of the Hon’ble Supreme Courtin the case of Checkmate Services PLtd Vs. Commissioner of Income Tax-I(Civil Appeal No.2833 of 2016 decided on 12.10.2022)? (2) Whether in the facts andcircumstances of the case, the ITATwas justified in law in deleting additionof Rs.4987507/- made for depositingthe employees’ contribution toProvident Fund beyond the prescribedtime limit provided in the respectiveActs? (3) Whether in the facts andcircumstances of the case the ITAT wasjustified in law in deleting thedisallowance of Rs.3581966000/-made on account of advance againstdepreciationdeferredwithoutappreciating that the same is a headcreated as an internal arrangementand does not affect the nature ofreceipts as revenue receipts?” 6.The substantial questions No.1 and 2 are covered by thedecision of the Supreme Court in the case of CheckmateServices Pvt. Ltd. Vs. Commissioner of Income Tax-1reported as (2022) 448 ITR 518. It was held that share of theemployee in the provident fund deducted by the employer, has tobe deposited as per the due date fixed by the EPF Act and ESI Actconcerned and not as per Section 43B of the Act. There is noleeway with the assessee in depositing of amount of employeescontribution under EPF Act and ESI Act, beyond the due date asprescribed by the respective Act. It is only on the deposit incompliance with the provisions of the EPF Act and ESI Act, theretained amount is treated for deduction. The relevant portion of the judgment is quoted below:- 6.The substantial questions No.1 and 2 are covered by thedecision of the Supreme Court in the case of CheckmateServices Pvt. Ltd. Vs. Commissioner of Income Tax-1reported as (2022) 448 ITR 518. It was held that share of theemployee in the provident fund deducted by the employer, has tobe deposited as per the due date fixed by the EPF Act and ESI Actconcerned and not as per Section 43B of the Act. There is noleeway with the assessee in depositing of amount of employeescontribution under EPF Act and ESI Act, beyond the due date asprescribed by the respective Act. It is only on the deposit incompliance with the provisions of the EPF Act and ESI Act, theretained amount is treated for deduction. The relevant portion of the judgment is quoted below:- “54. In the opinion of this Court, thereasoning in the impugned judgmentthat the non-obstante clause would notin any manner dilute or override theemployer's obligation to deposit theamounts retained by it or deducted by itfrom the employee's income, unless thecondition that it is deposited on or beforethe due date, is correct and justified. Thenon-obstanteclause has to beunderstood in the context of the entireprovision of Section 43B which is toensure timely payment before thereturns are filed, of certain liabilitieswhich are to be borne by the assessee inthe form of tax, interest payment andother statutory liability. In the case ofthese liabilities, what constitutes the duedate is defined by the statute.Nevertheless, the assessees are givensome leeway in that as long as depositsare made beyond the due date, butbefore the date of filing the return, thededuction is allowed. That, however,cannot apply in the case of amounts which are held in trust, as it is in thecase of employees' contributions- whichare deducted from their income. Theyare not part of the assessee employer'sincome, nor are they heads of deductionper se in the form of statutory pay out.They are others' income, monies, onlydeemed to be income, with the object ofensuring that they are paid within thedue date specified in the particular law.They have to be deposited in terms ofsuch welfare enactments. It is upondeposit, in terms of those enactmentsand on or before the due datesmandated by such concerned law, thatthe amount which is otherwise retained,and deemed an income, is treated as adeduction. Thus, it is an essentialcondition for the deduction that suchamounts are deposited on or before thedue date. If such interpretation were tobe adopted, the non-obstante clauseunder Section 43B or anything containedin that provision would not absolve theassessee from its liability to deposit theemployee’s contribution on or before thedue date as condition for deduction.” 7.In view of the decision of the Supreme Court in the case ofCheckmate (supra)the substantial questions No.1 and 2 areanswered in favour of the appellant-Department. 8.With regard to substantial question No.3, learned counsel forthe respondent submits that the question is covered by thedecision of the High Court of Punjab and Haryana in the case of Commissioner of Income Tax, Faridabad Vs. NHPC Ltd.reported as 2018:PHHC:016385-DB wherein the Division Benchrelying upon the decision of the Supreme Court in the case ofNational Hydro Electric Power Corporation Ltd. Vs.Commissioner of Income Taxreported as (2010) 320 ITR 374. It is further argued that the Department has accepted thisdecision. 9.It was held that Advance Against Depreciation was notincome received for the relevant accounting year and cannot becarried forward through the Profit and Loss account. The questionwas answered in favour of the assessee. 8.With regard to substantial question No.3, learned counsel forthe respondent submits that the question is covered by thedecision of the High Court of Punjab and Haryana in the case of Commissioner of Income Tax, Faridabad Vs. NHPC Ltd.reported as 2018:PHHC:016385-DB wherein the Division Benchrelying upon the decision of the Supreme Court in the case ofNational Hydro Electric Power Corporation Ltd. Vs.Commissioner of Income Taxreported as (2010) 320 ITR 374. It is further argued that the Department has accepted thisdecision. 9.It was held that Advance Against Depreciation was notincome received for the relevant accounting year and cannot becarried forward through the Profit and Loss account. The questionwas answered in favour of the assessee. 10.Learned counsel for the appellant-Department is not in aposition to distinguish the decision relied upon and to refute thefact that the decision of Punjab & Haryana High Court wasaccepted by the department. The substantial question No.3 isanswered against the appellant-Department. 11.The appeal is accordingly disposed of. (ASHUTOSH KUMAR),J (AVNEESH JHINGAN),J AARZOO ARORA /Riya/138 S.