Referred Sections:
Section 36(1)(va) rws 2(24)(x) of the I.T. Act, 1961
Section 36(1)(va)
Section 43B(b)
Referred Cases / Judgments:
Delhi vs., M/s. Bharat Hotels Ltd., 410 ITR 417 (Del.)
Commissioner of Income Tax, Cochin v. Mercham Ltd., [2015] 61 taxmann.com 119 (Kerala)
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES "B" : DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND
SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER
ITA.No.238/Del./2017
Assessment Year 2013-2014
The ACIT, M/s. Digicall Teleservices
Central Circle 25, Room vs P. Ltd., D-7 Dhawandeep
No.322, III Floor, ARA Apartments, 6 Jantar
Centre, Jhandewalan Mantar Road, New Delhi.
Extn., New Delhi. PIN 110 001 PAN AABCP9794Q
(Appellant) (Respondent)
For Revenue : Ms. Ashima Neb, Sr. D.R.
For Assessee : -None-
Date of Hearing : 05.12.2019
Date of Pronouncement : 05.12.2019
ORDER
PER BHAVNESH SAINI, J.M.
This appeal by Revenue has been directed against
the Order of the Ld. CIT(A)-29, New Delhi, Dated
25.10.2016, for the A.Y. 2013-2014, on the following
grounds :
1. That on the facts and in the circumstances of the
case, the Ld. CIT(A) has erred in law and on facts in
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deleting the disallowance of employee's contribution
to the provident fund (PF) of Rs.1,43,17,261/- and
the employee's contribution to the ESI of
Rs.68,20,240/- in view of the provisions of section
36(1)(va) rws 2(24)(x) of the I.T. Act, 1961 without
appreciating the fact that the assessee has made
[payments of these amounts to the respective funds
after the due dates as specified by rules of relevant
funds.
2. That on the facts and in the circumstances of the
case, the Ld. CIT (A) had erred in law and on facts in
deleting the above said disallowances without
appreciating the findings of the Kerala High Court in
the case of Commissioner of Income Tax, Cochin v.
Mercham Ltd., [2015] 61 taxmann.com 119 (Kerala)
where the Hon'ble high Court has held that the
section 36(1)(va) and section 43B(b) operate in
different fields i.e. the former takes care of
employee's contribution and the latter of employer's
contribution and so far as the employee's
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ITA.No.238/Del./2017 M/s. Digicall
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contribution received is concerned, it should have
been paid on or before the due date prescribed under
the relevant statutes as per section 36(l)(va) to be
eligible for deduction.
3. That on the facts and in the circumstances of the
case, the Ld. CIT (A) erred in law and on facts in
deleting the above said disallowances without
appreciating that if the intention of a particular
provision statute can be gathered from language
used by the legislation, then one is bound to abide by
the language used therein in order to ascertain the
intention. There was a clear logic behind section 36(1
)(va) and explanation thereof since the legislature
intended that the amount received towards
contribution of the employee was money belonging to
the employee and the assessee was not entitled to
utilize the said fund and enrich himself."
2. Briefly the facts of the case are that during the
assessment proceedings, it is noticed from the return of
income that the assessee has not discharged its liabilities as
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ITA.No.238/Del./2017 M/s. Digicall
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specified in section 2(24)(x) of the Act regarding payment of
provident fund and ESI contribution within the specified
dates. It is noticed that there is delay in deposit of provident
fund in almost all the months during the year. The due date
of payment in the case of contribution to provident fund is
20th of each succeeding month which includes grace period
of five days as per CBFC's Circular No. E-128(1)60-11 I
dated 19.03.1964 as modified by circular number E-11/128
(14-13 amendment)/73 dated 24.10.1973 which allows 05
days grace period to the employers for payment of PF
contribution, administrative charges and DLI charges. The
employees' contribution to the provident fund and ES1C is
an allowable deduction under section 36(1)(va) of the Act
only if the payment is made on or before the due date
prescribed in the statute. As per the circular referred to
above, the amount has to be deposited in fund by 20lh of the
succeeding month, but, the assessee has failed to deposit
the provident fund within the stipulated period in most of
the cases. The A.O. has noted all the details in the
assessment order and came to the finding that the amount
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claimed by the assessee is not allowable as deduction under
section 36(1)(va) of the Act. The A.O, accordingly, made
addition of Rs.1,43,17,269/-. The A.O. further noted that as
per details furnished there is a delay in deposit of employees
contribution to ESIC, details of the same are noted in the
assessment order that all the payments are belated as
against the Rules. The A.O. noted that the due date for
depositing employees contribution towards ESIC is 16th of
succeeding month. Even if grace period of 05 days is given,
the same is to be deposited by 21st of succeeding month,
which the assessee has failed to comply in most of the cases
as reproduced in the assessment order. The A.O,
accordingly, disallowed Rs.68,20,240/- under section
2(24)(x) read with section 36(1)(va) of the I.T. Act, 1961. The
addition was accordingly made. The Ld. CIT(A) deleted both
the additions because of following his appellate order for
preceding A.Ys. 2002-2003 to 2005-2006 and 2007-2008
and 2008-2009.
3. We have heard the Ld. D.R. who has submitted
that the issue is covered in favour of the Revenue by
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Judgment of Hon'ble Delhi High Court in the case of CIT,
Delhi vs., M/s. Bharat Hotels Ltd., 410 ITR 417 (Del.) in
which in paras 8 and 9 the Hon'ble Delhi High Court has
held as under :
8. "Having regard to the specific provisions of the
Employees Provident Funds Act and ESI Act as well
as the concerned notifications which granted a grace
period of 5 days (which appears to have been late
withdrawn recently on 08.01.2016), we are of the
opinion that the ITATs decision in this case was not
correct. The assessee undoubtedly was entitled to
claim the benefit and properly treat such amounts as
having been duly deposited, which were in fact
deposited within the period prescribed (i.e. 15 + 5
days in the case of EPF and 21 days + any other
grace period in terms of the extent notification). As far
as the amounts constituting deductions from
employees salaries towards their contributions,
which were made beyond such stipulated period,
obviously the assessee was not entitled to claim the
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deduction from its returns.
9. In view of this discussion, the Revenues appeal is
partly allowed. The AO is directed to examine the
contributions made with reference to the dates when
they were actually made and grant relief to such of
them which qualified for such relief in terms of the
prevailing provisions and notifications. We also
clarify that the assessee would be entitled to
deduction in terms of Section 36(1)(va) of the Act."
4. However, none appeared on behalf of the assessee,
despite notifying the date of hearing through registered post.
5. Considering the facts of the case in the light of
decisions of Hon'ble Delhi High Court in the case of CIT,
Delhi vs., M/s. Bharat Hotels Ltd., (supra), we set aside the
Order of the Ld. CIT(A) and restore the matter in issue to the
file of Ld. CIT(A) with a direction to re-decide the issue in
the light of decisions of Hon'ble Delhi High Court in the case
of CIT, Delhi vs., M/s. Bharat Hotels Ltd., (supra). The Ld.
CIT(A) need not to follow his order for preceding assessment
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years in the case of the assessee because of the above
decision. The Ld. CIT(A) shall give reasonable, sufficient
opportunity of being heard to the assessee as well as A.O.
6. In the result, appeal of the Department allowed
for statistical purposes.
Order pronounced in the open Court.
Sd/- Sd/-
(B.R.R. KUMAR) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Delhi, Dated 05th December, 2019
VBP/-
Copy to
1. The appellant
2. The respondent
3. CIT(A) concerned
4. CIT concerned
5. D.R. ITAT "B" Bench
6. Guard File
// BY Order //
Asst. Registrar : ITAT Delhi Benches :
Delhi.
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