The Pr Commissioner Of Income Tax, Kota v. The Kota Central Co-Operative Bank Ltd., Rampura Bazar, Kota

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 177 / 2016 The Pr Commissioner of Income Tax, Kota. ----Appellant Versus The Kota Central Co-operative Bank Ltd., Rampura Bazar, Kota. ----Respondent _____________________________________________________ For Appellant(s) : Mrs. Parinitoo JainFor Respondent(s) : Mr. R.P. Vijay _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERIHON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 31/10/2017 1. By way of this appeal, the appellant has assailed thejudgment and order of the tribunal whereby tribunal has dismissedthe appeal of the department as well as cross objection of theassessee and confirmed the order of CIT(A). 2.This court while admitting the appeal on 18.10.2016 framedfollowing substantial question of law:- “1. Whether the tribunal was legallyjustified in deleting the disallowance ofRs.1,66,65,645/- made u/s 43B onaccount of provident fund notdeposited within due date specificallywhen in pursuance of order of theHon’ble High Court and the AssistantProvident Fund Commissioner, thePACS Managers were held to beEmployees of the Bank?” 3.The facts of the case are that the return of income for A.Y.2010-11 was furnished on 30.9.2010 by Managing Director of TheKota Central Cooperative Bank Ltd. on behalf of CooperativeSociety. Audit report dt. 29.9.2010 in form No.3CB was alsofurnished with Income Tax Return. Assessee Cooperative Societyhas declared total income at Rs.17,108/-. Income from businessor profession has been declared at Nil and income from houseproperty of Rs.17,108/-. The return was processed on 29.3.2012.A refund of Rs.312860/- was also issued. The case was selectedfor scrutiny under CASS. First notice u/s 143(2) was issued on24.8.2011 and duly served upon the assessee. On change ofincumbent officer fresh notices u/s 143(2) and 142(1) were issuedon 17.1.2013 alongwith questionnaire seeking details. 3.1In compliance Sh. Pradeep Kumar Garg, CA & A/R alongwithSh. Hament Kumar, Manager of Kota, Central Cooperative BankLtd. attended from time to time. Information, relevant accountbooks alongwith written explanations were produced. 3.2Assessee is engaged in banking business. Mainly financing tofarmers for their needs relating to fertilizer and seeds throughPACS (Primary Agriculture Cooperative Society). Assessee wasasked to produce necessary books of accounts and documents.Books of accounts & registers produced were examined on testcheck basis. 4.Counsel for the appellant has contended that AO whileconsidering the matter observed as under:- -2.PF Payable: 2.1 Assessee bank has shown PF payable ofRs.1,66,65,645/- in the Balance sheet filedwith return of income. A query was raisedfor furnishing of proof of outstanding due ofPF vide letter dt. 5.9.2012. 2.2 Assessee has filed a reply on22.10.2012, which is reproduced as under:- “Amount shown in PF paid Secretaries” isamount of PF+PFC of PAC’s Managers. PACs Managers are employee of PACS/CGSi.e. Primary Agriculture Credit Society/GramSeva Sahakari Samiti and not the employeesof Bank. Therefore, this is non-revenue naturereceipts of banks. PF deducted from PACs Manager’s salarywith PF contribution from Societies (PACS)was not deposited in to PF Department andwas deposited in the bank as a depositnature account head “PF Paid Secretaries”by the Societies. Therefore, the accumulated amount isshown in the head “PF paid Secretaries” asper the Balance Sheet of March, 2009. But according to the instructions receivedfrom Societies (PACS) and in order to thedecision of Hon’ble High Court, the amounttransferred from “PF paid Secretaries” headto “PF payable” head of the bank and thenamount was transferred to PF departmenton various dates thereafter. Therefore, the amount as above is neitherbank’s revenue nature income and norrevenue nature expense.” Therefore, this is non-revenue naturereceipts of banks. PF deducted from PACs Manager’s salarywith PF contribution from Societies (PACS)was not deposited in to PF Department andwas deposited in the bank as a depositnature account head “PF Paid Secretaries”by the Societies. Therefore, the accumulated amount isshown in the head “PF paid Secretaries” asper the Balance Sheet of March, 2009. But according to the instructions receivedfrom Societies (PACS) and in order to thedecision of Hon’ble High Court, the amounttransferred from “PF paid Secretaries” headto “PF payable” head of the bank and thenamount was transferred to PF departmenton various dates thereafter. Therefore, the amount as above is neitherbank’s revenue nature income and norrevenue nature expense.” 2.3 A show cause letter was issued on22.10.2012 for furnishing the explanation,which is reproduced as under:- “1.1 The Hon’ble High Court in D.B. CivilSpecial Appeal (Writ) No.196/2008 dt.20.2.2008 has observed that “...at the timeof determination of dues, it will be open tothe appellant bank to invite attention of theauthority concerned to the PrimaryAgriculture Credit Co-operative Societies(Manager’s Selection Appointment andservice condition) Rules, 2003. Needless to say that while determining providet funddues, the authority will consider theapplicability of these rules to the factsituation and pass on appropriate order.” 1.2 Consequent to the Hon’ble High Courtdecision, Asst. PF Commissioner has passedan order dt. 31.3.2009, wherein he hasgiven findings, which is as under:- “…….Therefore, the establishment is directedto deposit the PF dues in respect of PackManagers within 15 days of this order, failingwhich action for assessment of PF dues willbe taken separately, as the EPF & MP Act,1952 is empathetically applicable upon thePacks Managers and they are employees ofKota Central Cooperative Bank, Kota. The petitioner establishment can not escapefrom the liabilities of depositing the PF duesin respect of Packs Managers.” 1.3 Therefore, the assessee bank is liable todeposit the dues of PF as per above ordersof Hon’ble High Court as well PFCommissioner. Further, as per Income TaxAct, provisions of Section 43B is squarelyapplicable in this case Section 43B statesthat:- (b) Any sum payable by the assessee as anemployer by way of contribution to anyprovident fund or superannuation fund orgratuity fund or any other fund for thewelfare of employees. 1.4Hence, as per Balance Sheet as on31.3.2010 assessee has shown dues of PFPayable amounting to Rs.1,66,65,645/-. Youare therefore requested to furnishexplanation on this account as to why thesum of PF payable should not be added inyour total income u/s 43B of the Income TaxAct, 1961.” 5.After taking into consideration the evidence on record andmaterial which was reflected in the balance sheet and issuingnotice, the amount which was shown outstanding towards PFaccount wascalculated at Rs.1,66,65,645/-. 6.However, CIT(A) while considering the issue observed as under:- Ground No.2 The Assessing Officer made addition ofRs.1,66,65,645/- observing as under:- “2. PF Payable:- 2.1 Assessee bank has shown PF Payable ofRs.1,66,65,645/- in the Balance sheet filedwith return of income. A query was raisedfor furnishing of proof of outstanding dues ofPF vide letter dated 5.09.2012. 2.2 Assessee has filed a reply on22.10.2012, which is reproduced as under: “Amount shown in “PF paid Secretaries” isamount of PF+PFC of PACs Managers. PACs Managers are employee of PACS/CGSi.e. Primary Agriculture Credit Society/GramSeva Sahakari Samiti and not the employeesof bank. Therefore, this is non-revenue naturereceipts of banks. 6.However, CIT(A) while considering the issue observed as under:- Ground No.2 The Assessing Officer made addition ofRs.1,66,65,645/- observing as under:- “2. PF Payable:- 2.1 Assessee bank has shown PF Payable ofRs.1,66,65,645/- in the Balance sheet filedwith return of income. A query was raisedfor furnishing of proof of outstanding dues ofPF vide letter dated 5.09.2012. 2.2 Assessee has filed a reply on22.10.2012, which is reproduced as under: “Amount shown in “PF paid Secretaries” isamount of PF+PFC of PACs Managers. PACs Managers are employee of PACS/CGSi.e. Primary Agriculture Credit Society/GramSeva Sahakari Samiti and not the employeesof bank. Therefore, this is non-revenue naturereceipts of banks. PF deducted from PAC’s Manager’s salarywith PF contribution from Societies (PACS)was not deposited in to PF Department andwas deposited in to PF Department and wasdeposited in the bank as a deposit natureaccount head “PF Paid Secretaries” by theSocieties. Therefore, the accumulated amount isshown in the head “PF paid secretaries” asper the Balance Sheet of march, 2009. But according to the instructions receivedfrom societies (PACS) and in order to thedecision of Hon’ble High Court, the amounttransferred from “PF paid Secretaries” headto “PF Payable” head of the bank and thenamount was transferred to PF departmenton various dates thereafter. Therefore, the amount as above is neitherbank’s revenue nature income and norrevenue nature expense.” 2.3 A show cause letter was issued on22.10.2012 for furnishing explanation, whichis reproduced as under:- “1.1 The Hon’ble High Court in DB CivilSpecial Appeal (Writ) No. 196/2008 dated20.02.2008 has observed that “...at the timeof determination of dues, it will be open tothe appellant bank to invite attention of theauthority concerned to the primaryagriculture Credit Co-operative Societies(manager’s Selection Appointment andservice condition) Rules, 2003. Needless tosay that while determining provident funddues, the authority will consider theapplicability of these Rules to the factsituation and pass an appropriate order.” 6.1Thereafter, the CIT(A) gave the following finding:- I have gone through Assessing Officer’sfindings and Assessee’s submissions. The facts which emerge are as under:- (I) That there were Primary Agriculturecredit society/Gram Seva Sahakari Samiti (ii) There Manager (PAC Managers) &employees were paid salary by thesesocieties/Samities (iii) The PF deducted from their employeeswas deposited with Kota Central Co-operative bank Ltd., (A) (iv) The assessee showed this amount as“PF Payable” (v) Salary of these persons was not claimedby assessee. (vi) Section 43B provides that no deductionwould be allowed if PF is not deposited to“Provident Fund” a/c. (vii) The question of disallowance arises onlywhen assessee has claimed it as anexpenditure. (viii) The assessee has claimed salary ofRs.2,95,78,400/- only & it can not bepresumed that sum of Rs.1,66,65,645/-could be deducted as PF from the aboveamount of Rs. 2,95,78,400/-. It is therefore held that as the assessee hasnot claimed the amount as expenditure, thequestion of disallowance does not arise. 7.The tribunal while considering the matter has observed asunder:- (iv) The assessee showed this amount as“PF Payable” (v) Salary of these persons was not claimedby assessee. (vi) Section 43B provides that no deductionwould be allowed if PF is not deposited to“Provident Fund” a/c. (vii) The question of disallowance arises onlywhen assessee has claimed it as anexpenditure. (viii) The assessee has claimed salary ofRs.2,95,78,400/- only & it can not bepresumed that sum of Rs.1,66,65,645/-could be deducted as PF from the aboveamount of Rs. 2,95,78,400/-. It is therefore held that as the assessee hasnot claimed the amount as expenditure, thequestion of disallowance does not arise. 7.The tribunal while considering the matter has observed asunder:- “2.5 Apropos revenue’s appeal, ld. CIT(A)by a detailed order has held that the bankhas not claimed any amount of salary asexpenditure since the concerned employeesare not employed by it. The PF in questionis also not claimed by the bank. There aremany Primary Agriculture Credit Societiesand Gram Seva Sahkari Samitis which comeunder the jurisdiction of assessee districtcentral bank. The PF of staff deducted bythese Primary Agriculture Credit Societiesand Gram Seva Sahkari Samitis wasdeposited with assessee. By accountingnomenclature these amounts were enteredas payable in its book. This entry wasmistaken by the ld. AO as if it was the PFamount remaining payable by the assesseeand disallowed the same withoutappreciating that they were not covered atall u/s 43B.” 8.Counsel for the respondent contended that the amountreceived from different societies was shown in the balance sheetas outstanding amount to be payable to the employees differentsocieties towards PF. The issue arose on 31.3.2009 when theamount was not deposited. However, the same will not fall underthe Income Tax Act and Section 43B provides that no deductionwould be allowed if PF is not deposited to provident fund account. 9.Even CIT(A) while considering the issue has deleted theaddition which has been confirmed by the tribunal. 10.In our considered opinion, the Aseessing Officer whiledeciding the matter has exceeded his jurisdiction. 11.In view of the above, the issue is answered in favourassessee and against the department. 12.The appeal stands dismissed. (VIJAY KUMAR VYAS)J. (K.S. JHAVERI)J. Brijesh 38.