Taxes) Would Submit That This Issue Is Covered By The Decisionof This Court In Popular Vehicles And Services Privatelimited v. Commissioner Of Income Tax [(2018) 406 Itr150

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM & THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI FRIDAY, THE 14TH DAY OF JUNE 2019 / 24TH JYAISHTA, 1941 ITA.No.252 of 2015 AGAINST THE ORDER IN ITA 456/Coch/2014 of I.T.A.TRIBUNAL,COCHINBENCH DATED 14-05-2015 APPELLANT/RESPONDENT/REVENUE: THE COMMISSIONER OF INCOME TAXKOCHI - 682 018. BY ADV. SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES) RESPONDENTS/APPELLANT/ASSESSEE : M/S.HARRISONS MALAYALAM LTD BRISTOW ROAD, WILLINGTON ISLAND, KOCHI - 682 003. BY ADV.SRI.RAJA KANNAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11.06.2019,ALONG WITH ITA.254/2015, ITA.255/2015, ITA.259/2015, THE COURT ON14.06.2019 DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM & THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI FRIDAY, THE 14TH DAY OF JUNE 2019 / 21ST JYAISHTA, 1941 ITA.No.254 of 2015 APPELLANT/RESPONDENT/REVENUE: THE COMMISSIONER OF INCOME TAXKOCHI - 682 018. BY ADV. SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES) RESPONDENTS/APPELLANT/ASSESSEE : M/S.HARRISONS MALAYALAM LTD BRISTOW ROAD, WILLINGTON ISLAND, KOCHI - 682 003. BY ADV.SRI.RAJA KANNAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11.06.2019,ALONG WITH ITA.252/2015, ITA.255/2015, ITA.259/2015, THE COURTON 14.06.2019 DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM & THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI FRIDAY, THE 14TH DAY OF JUNE 2019 / 21ST JYAISHTA, 1941 ITA.No.255 of 2015 APPELLANT/REVENUE: THE COMMISSIONER OF INCOME TAXKOCHI - 682 018. BY ADV. SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES) RESPONDENT/ASSESSEE M/S.HARRISONS MALAYALAM LTD.WILLINGDON ISLAND, KOCHI -682 003. BY ADV.SRI.RAJA KANNAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11.06.2019,ALONG WITH ITA.252/2015, ITA.254/2015, ITA.259/2015, THE COURTON 14.06.2019 DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM & THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI FRIDAY, THE 14TH DAY OF JUNE 2019 / 21ST JYAISHTA, 1941 ITA.No.259 of 2015 AGAINST THE ORDER/JUDGMENT IN ITA 459/2014 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 14-05-2015 APPELLANT/REVENUE: THE COMMISSIONER OF INCOME TAXKOCHI - 682 018. BY ADV. SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES) RESPONDENT/ASSESSEE M/S.HARRISONS MALAYALAM LTD.WILLINGDON ISLAND, KOCHI -682 003. BY ADV.SRI.RAJA KANNAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11.06.2019,ALONG WITH ITA.252/2015, ITA.254/2015, ITA.255/2015, THE COURTON 14.06.2019 DELIVERED THE FOLLOWING: C.K.ABDUL REHIM & R.NARAYANA PISHARADI, JJ. ************************** I.T.A.Nos.252 of 2015, 254 of 2015, 255 of 2015 &259 of 2015 ---------------------------------------------- Dated this the 14[th] day of June, 2019 J U D G M E N T R.Narayana Pisharadi, J The revenue has filed these appeals challenging thecommon order dated 14.05.2015 of the Income Tax Appellate Tribunal, Cochin Bench in I.T.A.Nos.456/Coch/2014 to459/Coch/2014. 2.The respondent/assessee is a company engaged in the manufacture/production of tea, rubber etc. The issues inthe appeals relate to assessment of income tax for theassessment years 2007-08 to 2010-11. 3.The substantial questions of law for consideration inthese appeals are the following: (i) Whether the delayed payments made to Employees' Provident Fund, Labour Welfare Fund and Employees' State Insurance is allowable asdeduction under Section 36(1)(va) of the Income Tax Act, 1961 (for brevity “the Act”)? (ii) Whether licence fee paid to RPG Enterprises Limited is allowable as a deduction under Section37 of the Act?37 of the Act? Tribunal, Cochin Bench in I.T.A.Nos.456/Coch/2014 to459/Coch/2014. 2.The respondent/assessee is a company engaged in the manufacture/production of tea, rubber etc. The issues inthe appeals relate to assessment of income tax for theassessment years 2007-08 to 2010-11. 3.The substantial questions of law for consideration inthese appeals are the following: (i) Whether the delayed payments made to Employees' Provident Fund, Labour Welfare Fund and Employees' State Insurance is allowable asdeduction under Section 36(1)(va) of the Income Tax Act, 1961 (for brevity “the Act”)? (ii) Whether licence fee paid to RPG Enterprises Limited is allowable as a deduction under Section37 of the Act?37 of the Act? (iii) Whether the consideration obtained on sale of old and unyielding rubber trees is exigible to taxin the light of Rules 7 and 7A of the Income TaxRules?in the light of Rules 7 and 7A of the Income TaxRules? (iv) Whether the sale proceeds of grevellea trees can be treated as capital gains and brought totax?tax? (v) Whether the provision for gratuity can be added in computing the income under Section115JB of the Act?115JB of the Act? 4.Heard learned Standing Counsel for Government ofIndia (Taxes) and the learned counsel for the respondent. Heard learned Standing Counsel for Government of Question No.(i) Belated Payments Made to EPF, LWF and ESI 5. Learned Standing Counsel for Government of India (Taxes) would submit that this issue is covered by the decisionof this Court in Popular Vehicles and Services PrivateLimited v. Commissioner of Income Tax [(2018) 406 ITR150]. 6. In the instant cases, we are concerned with remittanceof employees' contribution and not employers' contribution. InPopular Vehicles (supra), it has been held as follows: "Section 36(1)(va) speaks of theemployee's contribution to a welfare fund for thebenefit of the employees alone, by virtue of thespecific reference to section 2(24). Section2(24) includes as income, any contributionreceived by the employer from the employee forthe purpose of remittance to a fund created forthe welfare of the employees; including inter aliaa provident fund and that under the ESI Act.When the same is remitted on the due date asprescribed in the statute or order creating suchfund, then it is eligible for deduction underSection 36. ...................... The contributionswhich are deducted at the time of payment ofsalary is received by the employer-company andis treated as income under section 2(24). Onremittance of this contribution, within the duedate, it is allowed as a deduction under Section36. If it is not paid to the welfare fund within the due date provided under the relevant statute, itremains as an income in the books of account oftheassessee/employer-company.Thesaidcontribution having not been paid to theapplicable welfare fund within the due dateprovided, the assessee for all time is deprived ofclaiming such a remittance, made subsequently,as deduction from the income."remains as an income in the books of account oftheassessee/employer-company.Thesaidcontribution having not been paid to theapplicable welfare fund within the due dateprovided, the assessee for all time is deprived ofclaiming such a remittance, made subsequently,as deduction from the income." 7. In the light of the aforesaid dictum laid down by the Division Bench of this Court in Popular Vehicles andServices (supra), we hold that, in order to claim the benefit ofdeduction under Section 36(1)(va) of the Act, payment ofemployees' contribution to Employees' Provident Fund, LabourWelfare Fund and Employees' State Insurance has to be madebefore the due date prescribed under the relevant statute. Thesubstantial question of law is answered in favour of the revenueand against the assessee. 7. In the light of the aforesaid dictum laid down by the Division Bench of this Court in Popular Vehicles andServices (supra), we hold that, in order to claim the benefit ofdeduction under Section 36(1)(va) of the Act, payment ofemployees' contribution to Employees' Provident Fund, LabourWelfare Fund and Employees' State Insurance has to be madebefore the due date prescribed under the relevant statute. Thesubstantial question of law is answered in favour of the revenueand against the assessee. 8.The Tribunal has found that payments have to bemade only before the due date prescribed under Section 139(1)of the Act for filing return of income to claim the benefit underSection 36(1)(va) of the Act. The finding of the Tribunal in thisregard is liable to be set aside. Moreover, the Tribunal hasdirected that the issue regarding deduction under Section 36(1) (va) of the Act has to be reconsidered by the assessing officer. In the instant case, the assessee has got no plea that theremittance of employees' contribution to Employees' ProvidentFund, Labour Welfare Fund, Employees' State Insurance hadbeen made before the due date prescribed in the respectiveenactments. Therefore, the direction given by the Tribunalremitting this issue for reconsideration by the assessing officeris also liable to be set aside. -Question No.(ii) Licence Fee Paid to RPG Enterprises 9. Learned Standing Counsel, Government of India (Taxes)has submitted that this issue is not pressed. In suchcircumstances, the order of the Tribunal on this issue does notwarrant any interference. Questions (iii) to (v) 10. Learned Standing Counsel, Government of India(Taxes) has fairly conceded that these questions are covered bythe decision of the Division Bench of this Court inCommissioner of Income Tax v. Harrisons MalayalamLimited (Judgment dated 06.12.2018 in ITANo.238/2012), against the revenue. Hence, these substantialquestions of law are answered against the revenue. 11. Consequently, the appeals are partly allowed. Theimpugned order of the Income Tax Appellate Tribunal in ITANos.456/Coch/2014 to 459/Coch/2014 to the extent ofanswering the issue regarding delayed payment of employees'scontribution to Employees' Provident Fund, Labour Welfare Fundand Employees' State Insurance in favour of the assessee is setaside. The direction made by the Tribunal remitting theaforesaid issue to the Assessing Officer for reconsideration isalso set aside and the order of the Assessing Officer in thisregard is restored. The order of the Tribunal on all the fourother issues raised in these appeals stands confirmed. No costsin the appeals. (sd/-) C.K.ABDUL REHIM, JUDGE jsr/12/06/2019 (sd/-) R.NARAYANA PISHARADI, JUDGE APPENDIX OF ITA 252/2015 APPELLANT'S EXHIBITS: ANNEXURE "A"- COPY OF THE ASSESSMENT ORDER DATED30/12/2010 PASSED BY THE ASSESSING OFFICERFOR AY 2007-2008.30/12/2010 PASSED BY THE ASSESSING OFFICERFOR AY 2007-2008. ANNEXURE "B" - COPY OF CIT(APPEALS-II, KOCHI ORDER NO.ITA-111/R-1/E/CIT-II/2010-11 DATED 30/6/2014FOR ASSESSMENT YEAR 2007-2008ITA-111/R-1/E/CIT-II/2010-11 DATED 30/6/2014FOR ASSESSMENT YEAR 2007-2008 ANNEXURE "C" - COPY OF THE ITAT,COCHIN BENCH ORDER NO.ITANO.456/COCH/2014DATED14.05.2015FORASSESSMENT YEAR 2007-08NO.456/COCH/2014DATED14.05.2015FORASSESSMENT YEAR 2007-08 ANNEXURE ”D” - TRUE COPY OF THE JUDGMENT OF HON'BLE HIGHCOURT OF KERALA IN THE CASE OF M/S.SOUTHINDIA CORPORATION LTD., COCHIN-31 (ITA NO.65& 66 OF 1999)COURT OF KERALA IN THE CASE OF M/S.SOUTHINDIA CORPORATION LTD., COCHIN-31 (ITA NO.65& 66 OF 1999) RESPONDENT'S EXHIBITS: NIL APPENDIX OF ITA 254/2015 APPELLANT'S EXHIBITS: ANNEXURE "B" - COPY OF CIT(APPEALS-II, KOCHI ORDER NO.ITA-111/R-1/E/CIT-II/2010-11 DATED 30/6/2014FOR ASSESSMENT YEAR 2007-2008ITA-111/R-1/E/CIT-II/2010-11 DATED 30/6/2014FOR ASSESSMENT YEAR 2007-2008 ANNEXURE "C" - COPY OF THE ITAT,COCHIN BENCH ORDER NO.ITANO.456/COCH/2014DATED14.05.2015FORASSESSMENT YEAR 2007-08NO.456/COCH/2014DATED14.05.2015FORASSESSMENT YEAR 2007-08 ANNEXURE ”D” - TRUE COPY OF THE JUDGMENT OF HON'BLE HIGHCOURT OF KERALA IN THE CASE OF M/S.SOUTHINDIA CORPORATION LTD., COCHIN-31 (ITA NO.65& 66 OF 1999)COURT OF KERALA IN THE CASE OF M/S.SOUTHINDIA CORPORATION LTD., COCHIN-31 (ITA NO.65& 66 OF 1999) RESPONDENT'S EXHIBITS: NIL APPENDIX OF ITA 254/2015 APPELLANT'S EXHIBITS: ANNEXURE "A"- COPY OF THE ASSESSMENT ORDER DATED 27/12/2011PASSED BY THE ASSESSING OFFICER FOR AY 2009-10.ANNEXURE "B"- COPY OF CIT (APPEALS-II, KOCHI ORDER NO. ITA-128/R-1/E/CIT-II/2010-11 DATED 30/6/2014 FORASSESSMENT YEAR 2009-10.ANNEXURE "C" - COPY OF THE ITAT,COCHIN BENCH ORDER NO.ITANO.458/COCH/2014 DATED 14.05.2015 FOR ASSESSMENTYEAR 2009-10ANNEXURE ”D” - TRUE COPY OF THE JUDGMENT OF HON'BLE HIGH COURTOF KERALA IN THE CASE OF M/S.SOUTH INDIACORPORATION LTD., COCHIN-31 (ITA NO.65 & 66 OF1999) RESPONDENT'S EXHIBITS: NIL APPENDIX OF ITA 255/2015 APPELLANT'S EXHIBITS: ANNEXURE "A"- COPY OF THE ASSESSMENT ORDER DATED 30/12/2010PASSED BY THE ASSESSING OFFICER FOR AY 2008-09.ANNEXURE "B"- COPY OF CIT (APPEALS-II, KOCHI ORDER NO. ITA-112/R-1/E/CIT-II/2010-11 DATED 30/6/2014 FORASSESSMENT YEAR 2008-09ANNEXURE "C" - COPY OF THE ITAT,COCHIN BENCH ORDER NO.ITANO.457/COCH/2014 DATED 14.05.2015 FOR ASSESSMENTYEAR 2008-2009ANNEXURE ”D” - TRUE COPY OF THE JUDGMENT OF HON'BLE HIGH COURTOF KERALA IN THE CASE OF M/S.SOUTH INDIACORPORATION LTD., COCHIN-31 (ITA NO.65 & 66 OF1999) RESPONDENT'S EXHIBITS: NIL APPENDIX OF ITA 259/2015 APPELLANT'S EXHIBITS: ANNEXURE "C" - COPY OF THE ITAT,COCHIN BENCH ORDER NO.ITANO.459/COCH/2014 DATED 14.05.2015 FOR ASSESSMENTYEAR 2010-11 ANNEXURE ”D” - TRUE COPY OF THE JUDGMENT OF HON'BLE HIGH COURTOF KERALA IN THE CASE OF M/S.SOUTH INDIACORPORATION LTD., COCHIN-31 (ITA NO.65 & 66 OF1999) RESPONDENT'S EXHIBITS: NIL TRUE COPY PS TO JUDGE