KUBER HINGES (P) LTD. v. INCOME TAX OFFICER
[Citation -2008-LL-0327-2]

Citation 2008-LL-0327-2
Appellant Name KUBER HINGES (P) LTD.
Respondent Name INCOME TAX OFFICER
Court ITAT-Delhi
Relevant Act Income-tax
Date of Order 27/03/2008
Assessment Year 2001-02
Judgment View Judgment
Keyword Tags statutory liability • superannuation fund • statutory benefit • payment of tax • provident fund • actual payment • deemed income • time-limit
Bot Summary: 17th March, 2007 and it was held that even under the law as stood prior to the amendment of s. 43B, the assessee was entitled to claim the benefit of s. 43B if the amount of contribution was paid prior to the last date of filing of the return under s. 139(1) of the Act. 26th June, 2006 has allowed the claim of the assessee with regard to employer s and employees contribution both, accordingly, the learned Authorised Representative contended that no distinction can be made now, even if the disallowance has been made with respect to the employees contribution under s. 2(24)(x) r/w s. 36(1)(va)of the Act. Learned Authorised Representative also placed on record the decision of Karnataka High Court in case of CIT vs. Sabari Enterprises 213 CTR 269, wherein question before the High Court was with regard to allowing the deduction under s. 36(1)(va) r/w s. 2(24)(x) and s. 43B of the Act. From the record we found that in the instant case the AO has disallowed the employer s contribution and employees contributions, which were deposited beyond the due date as provided under s. 36(1)(va) of the Act, by observing that employees contributions could not be allowed under s. 43B and employees contribution was to be treated as income of the assessee within the meaning of s. 2(24)(x) of the Act. Prior to the above clause was inserted to s. 36 giving statutory deductions of payment of tax under the provisions of the Act, s. 43B(b) was inserted by Finance Act, 1983 which came into force w.e.f. 1st April, 1984. Again the provision of s. 43B(b) clearly provides that notwithstanding anything contained in other provisions of the Act including s. 36(1) cl. Undisputedly, in the instant case also, both the employer s and employees contributions were not paid before statutory dates defined under PF Act, but the actual payment was before the last date of filing the return under s. 139(1) of IT Act.


This is appeal filed by assessee against order of CIT(A)-VIII, New Delhi, dt. 28th Feb., 2007 for asst. yr. 2001-02, in matter of order passed under s. 143(3) of IT Act, 1961, wherein following grounds of appeals have been taken: "1. That learned CIT(A) has erred both on facts as well as in law in upholding disallowance of Rs. 5,75,263 as deemed income under s. 2(24)(x) r/w s. 36(1)(va) of IT Act, 1961 being employer s/employees contributions made towards provident fund and ESI for alleged belated payments. While doing so, learned CIT(A) has failed to appreciate decision (sic-deletion) of second proviso to s. 43B of Act, thereby placing misconceived interpretation on provisions of said section of Act. That submissions, as made, along with individual view during appellate proceedings and amendment to s. 43B of Act stood arbitrarily disregarded by learned CIT(A), while confirming disallowance. That learned CIT(A) has further erred in viewing delay in making such contributions without reference to provisions of s. 43B of Act read with provisions of particular statutes governing admissibility of expenditure under those statutes. It is thus accordingly prayed that disallowance as made of expenditure of Rs. 5,75,263 be held without any basis or justification and be ordered to be cancelled." Rival contentions have been heard and record perused. In this appeal, assessee is aggrieved for disallowance of PF and ESI contributions by treating same as deemed income under s. 2(24)(x) r/w s. 36(1)(va) of IT Act, 1961. Contention of learned Authorised Representative was that after deletion of second proviso to s. 43B by Finance Act, 2003, no disallowance can be made if such contribution is paid even before last date of filing return. He placed reliance on order of Hon ble Supreme Court in case of CIT vs. Vinay Cement Ltd. (2007) 213 CTR (SC) 268, wherein SLP filed by Revenue against order of Gauhati High Court was dismissed by Hon ble Supreme Court vide order dt. 17th March, 2007 and it was held that even under law as stood prior to amendment of s. 43B, assessee was entitled to claim benefit of s. 43B if amount of contribution was paid prior to last date of filing of return under s. 139(1) of Act. learned Authorised Representative further submitted that Gauhati High Court in IT Appeal No. 83 of 2003 vide order dt. 26th June, 2006 has allowed claim of assessee with regard to employer s and employees contribution both, accordingly, learned Authorised Representative contended that no distinction can be made now, even if disallowance has been made with respect to employees contribution under s. 2(24)(x) r/w s. 36(1)(va)of Act. Learned Authorised Representative also placed on record decision of Karnataka High Court in case of CIT vs. Sabari Enterprises (2007) 213 CTR (Kar) 269, wherein question before High Court was with regard to allowing deduction under s. 36(1)(va) r/w s. 2(24)(x) and s. 43B of Act. Attention was drawn to pp. 8 to 12 of order of High Court wherein question referred to Hon ble High Court and elaborate discussion was made with regard to employer s and employees contribution towards PF, superannuation funds, gratuity funds, etc. Finally, issue was decided in favour of assessee and against Revenue, on plea that actual payment was made prior to last date of filing return under s. 139(1). On other hand, learned Departmental Representative relied on orders passed by lower authorities wherein payments made after statutory time-limit prescribed under PF and ESI Acts, were declined deduction. We have considered rival contentions. From record we found that in instant case AO has disallowed employer s contribution and employees contributions, which were deposited beyond due date as provided under s. 36(1)(va) of Act, by observing that employees contributions could not be allowed under s. 43B and employees contribution was to be treated as income of assessee within meaning of s. 2(24)(x) of Act. By impugned order, CIT(A) confirmed disallowance made by AO. We have carefully gone through decisions of Hon ble Supreme Court and Hon ble High Court as referred above and found that issue before Karnataka High Court was with respect to claim of deduction under s. 36(1)(va) r/w s. 2(24) which pertains with respect to claim of deduction under s. 36(1)(va) r/w s. 2(24) which pertains to employees contribution which was not paid by assessee before statutory dates provided under PF Act, but before due date for furnishing return of income under s. 139(1) of Act. disallowance made by invoking provisions of s. 43B pertains to deduction claimed with reference to employer s contribution. After discussing in detail history of provisions of s. 2(24)(x) and ss. 36(1)(va) and 43B of Act, and amendment brought therein by various Finance Acts, High Court observed as under: "After hearing learned counsel for parties, we have carefully examined above statutory provisions of Act including definition of s. 2(24)(x) and ss. 36(1)(va) and 43B(b), which reads thus: 2(24)(x) income includes any sum received by assessee from his employees as contributions to n y provident fund or superannuation fund or any fund set up under provisions of Employees State Insurance Act, 1948 or any other fund for welfare of such employees . 36(1) deduction provided for in following clauses shall be allowed respect of matters dealt with therein in computing income referred to in s. 28 (va) any sum received by assessee from any of his employees to which provisions sub-cl. (x) of (24) of s. 2 apply, if such sum is credited by assessee to employee s account in relevant fund or funds on or before due date. Explanation: For purposes of this clause, due date means date by which assessee is required as employer to credit employee s contribution to employee s account in relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. This clause is inserted by Finance Act w.e.f. 1st April, 1988. Explanation to this clause is read very carefully. "Due date" has been explained stating that "means date by which assessee is required as employer to credit contribution to employee s account in relevant fund under any Act, rules or order or notification issued thereunder or under any standing order, award contract or service or otherwise". Prior to above clause was inserted to s. 36 giving statutory deductions of payment of tax under provisions of Act, s. 43B(b) was inserted by Finance Act, 1983 which came into force w.e.f. 1st April, 1984. Therefore, again provision of s. 43B(b) clearly provides that notwithstanding anything contained in other provisions of Act including s. 36(1) cl. (va) of Act, even prior to insertion of that clause assessee is entitled to get statutory benefit of deduction of payment of tax from Revenue. If that provision is read along with first proviso of said section which was inserted by Finance Act, 1987 which came into effect from 1st April, 1988, letters numbered as cl. (a) or cl. (c) or cl. (d) or cl. (e) or cl. (f) are omitted from above proviso and therefore deduction towards employer s contribution paid can be claimed by assessee. Explanation to cl. (va) of s. 36 of IT Act further makes it very clear that amount actually paid by assessee on or before due date applicable in this case at time of submitting returns of income under s. 139 of Act to Revenue in respect of previous year can be claimed by assessee for deduction out of their gross income. abovesaid statutory provisions of IT Act abundantly make it clear that, contention urged on behalf of Revenue that deduction from out of gross income for payment of t x at time of submission of returns under s. 139 is permissible only if statutory liability of payments of PF or other contributions funds referred to in cl. (b) are paid within due date under respective statutory enactment by assessee as contended by learned counsel for Revenue is not tenable in law and therefore same cannot be accepted by us. learned counsel, Sri Parthasarathy and Departmental Representative, Kishna appearing for respondents, also drew our attention to deletion of second proviso to s. 43B of IT Act by Finance Act, 2003 which provision has come into force w.e.f. 1st April, 2004. reliance placed upon decision of apex Court in Allied Motors (P) Ltd. vs. CIT and also on decision in General Finance Co. vs. CIT, in respect of applicability of s. 43B(b) and also General Finance Co. vs. CIT, in respect of applicability of s. 43B(b) and also omission of cl. (a) or (c) or (d) or (f) referred to above occurred in first proviso to s. 43B, support case of assessee and also relevant paras extracted from Allied Motor s case and para 59 referred to supra in this judgment from Finance Bill with all fours support case of assessee/respondents. Therefore, we have no answer substantial question of law No. 1 framed by this Court in these appeals at instance of Revenue against them viz. in negative. Accordingly, we answer substantial question No. 1 framed in these appeals in negative." It is crystal clear from detailed discussion made by Hon ble Karnataka High Court that both employer s and employees contributions were considered for allowing as deduction if paid before last date of filing return under s. 139(1). Undisputedly, in instant case also, both employer s and employees contributions were not paid before statutory dates defined under PF Act, but actual payment was before last date of filing return under s. 139(1) of IT Act. verdict of Hon ble Karnataka High Court is squarely applicable to facts and circumstances of instant case. Recently, Hon ble Delhi High Court in case of CIT vs. Dharmendra Sharma (2007) 213 CTR (Del) 609, vide order dt. 28th Jan., 2008 held that Tribunal was right in deleting disallowance of payments towards PF and ESI as same were paid before due date of filing of return. While so holding Hon ble Delhi High Court relied on verdict of Hon ble Supreme Court in case of CIT vs. Vinay Cement Ltd. (supra), wherein SLP filed by Department was dismissed by observing that even prior to amendment of s. 43B by Finance Act, 2003, no disallowance can be made if such payment is made before last date of filing t h e return of income. However, no contrary decision of any High Court was brought to our notice by learned Departmental Representative. We, therefore, respectfully follow decision of Hon ble Karnataka High Court, and reverse orders of lower authorities declining deduction of payments actually made before last date of filing return under s. 139(1) of IT Act Accordingly, we allow appeal in favour of assessee. In result, appeal of assessee is allowed. *** KUBER HINGES (P) LTD. v. INCOME TAX OFFICER
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