Cit Panchkula v. M/S Haryana Vidyut Prasaran Nigam Ltd

SANJEEV PRAKASH SHARMA, J.(Oral)

1.    Appellant  assails  the  order  dated  31.03.2009  passed  by  the Income Tax Appellate Tribunal, Chandigarh Bench 'A' (for short, 'ITAT'), whereby  two  appeals  bearing  ITA  No.  78/chd/2008  and  ITA No.100/chd/2008 for the assessment year 1999-2000 were decided following the judgment passed by this Court in case of 'CIT Vs. Punjab Financial Corporation Ltd', 295 ITR 510 (P&H), wherein this Court held as under: "(iii)  That  it  was  not  disputed  that  the  assessee  had contributed to the provident fund for its employees under the Provident Fund Act, 1925. Further, it could not be disputed  that  the  expense  was  made  wholly  and exclusively  for the purpose of business and was neither

ITA-710-2009(O&M)      2 capital in nature nor personal. Section 36(1) (iv) of the Act does not specifically debar deduction on account of contribution made under the Provident Fund Act, 1925. It only  talks  about  grant  of  deduction  in  respect  of recognized  provident  fund.  The  contribution  to  the unrecognized provident fund was deductible."

2.  While  admitting  the  appeal,  following  questions  of  law  have  been framed by this Court : " (i)   Whether on the facts and in the circumstances of the case, learned ITAT was right in law in relying upon the decision of Hon'ble Punjab & Haryana High Court in the  case  of  CIT  vs.  Punjab  Financial  Corporation  Ltd. Reported  in  295  ITR  510  (P  &  H)  and  deleting  the addition  of  Rs.30,02,13,163/-  made  on  account  of contributions  to  unrecognised  provident  fund  and unapproved pension fund, ignoring the submission of the revenue that there was no proof that the impugned claim by  the  assessee  was  as  per  the  Provident  Funds  Act, 1925?

(ii)   Whether on the facts and in the circumstances of the case, learned ITAT was right in law in ignoring the ratio of the judgment of Hon'ble Delhi High Court in the case of Sony India P. Ltd. vs. CIT reported in 285 ITR 213 (Del.)  in  which  it  was  held  that  allowance  of  an expenditure of the nature described in Section 36(1)(iv) of the  Income  Tax  Act,  1961  under  Section  37(1)  would render nugatory the conditions and limitations subject to which  the  provisions  of  Section  30  to  36  make  the deductions envisaged therein admissible?

ITA-710-2009(O&M) 3

(iii)   +hether on the facts and in the circumstances of the case, learned &TAT was ri(ht in law in upholdin( the order of 0&T$A% that liability payable by the assessee on account of electricity duty payable can be set off by way of  allotment  of  e;uity  shares  and  that  it  amounts  to dischar(in( of liability u3s <"= of the &T Act, 19#1, which re;uires  that  liability  has  to  be  >actually  paid>  by  the assessee49

¶3The ITAT vide its judgment also noticed the view taken by the Gujrat High Court in case, 'Decom Marketing Pvt. Ltd. Vs. CIT', 251 ITR 398(Guj), that the contributions made to the Provident Fund Act, 1925 would therefore, be eligible for registration and as the Trust of the assessee Corporation was duly recognized by CIT vide its letter dated 23/27.09.1999. The assessee had duly discharged its onus, the appeal therefore of the assessee is found to have been allowed rightfully and the question of law as framed by this Court (i) is answered in favour of assessee.

¶4With regard to question No.(ii) it appears that this Court framed the aforesaid question of law based on the judgment of Delhi High Court in case, 'Sony India P.Ltd Vs. CIT', 285 ITR 213 (Del), which held that such expenditure while depositing amount in Provident Fund, is not allowable.

¶5We notice that the judgment passed by the Delhi High Court has failed to take notice of the judgment passed by this Court in case 'CIT Vs. Punjab Financial Corporation (supra)' and therefore, a different view was taken by the Delhi High Court and the same could not be binding upon this Court as it is a settled law that earlier judgment passed by this Court would have a

ITA-710-2009(O&M)      4 binding precedential value over and above any different view taken by any other High Court. The law has been settled by the Supreme Court in 'Official Liquidator Vs. Dayanand', 2008(10) SCC 1, wherein it was held as under: "66.   In State of Bihar v. Kalika Kuer and others [2003 (5) SCC 448], the Court elaborately considered the principle of per incuriam and held that the earlier judgment by a larger Bench cannot be ignored by invoking the principle of per incuriam and the only course open to the coordinate or smaller Bench is to make a request for reference to the larger Bench. In State of Punjab v. Devans Modern Breweries Ltd. [2004 (11) SCC 26], the Court reiterated that if a coordinate Bench does not agree with  the  principles  of  law  enunciated  by  another  Bench,  the matter has to be referred to a larger Bench. In Central Board of Dwaoodi Bohra Community v. State of Maharashtra [2005 (2) SCC  673],  the  Constitution  Bench  interpreted  Article  141, referred  to  various  earlier  judgments  including  Bharat Petroleum  Corpn.  Ltd.  v.  Mumbai  Shramik  Sangha  (supra), Pradip Chandra Parija and others v. Pramod Chandra Patnaik and  others  (supra)  and  held  that  "the  law  laid  down  in  a decision delivered by a Bench of larger strength is binding on any  subsequent  Bench  of  lesser  or  co-equal  strength  and  it would be inappropriate if a Division Bench of two Judges starts overruling the decisions of Division Benches of three Judges. The Court further held that such a practice would be detrimental not only to the rule of discipline and the doctrine of binding precedents but it will also lead to inconsistency in decisions on the point of law; consistency and certainty in the development of law  and  its  contemporary  status  -  both  would  be  immediate casualty" Keeping in view thereto question No. (ii) is also answered in favour of the assessee and against the appellant.

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6.  As regards to question No.3, whether the electricity duty payable by the assessee on account of treating as set off by way of allotment of equity shares and thereby discharging the liability under Section 43B of the IT Act, 1961 is concerned, we noticed that ITAT considered the appeal preferred by the revenue and  observed as under: "Brief  facts  are  that  original  return  was  filed  on  29.12.1999 which  was  processed  under  section  143(1)(a)  of  the  Act  on

18.12.2000. The assessee subsequently filed revised return on

30.3.2001. It was noticed by the learned Assessing Officer, from the  return,  that  there  is  an  un-discharged  liability  of  Rs. 27,04,46,079/- on account of electricity payable. The assessee was asked to explain as to why the same may not be added under section  43B  of  the  Act.  The  assessee  claimed  that  the Government  of  Haryana  endorsed  the  sanction  of release/allotment  of  equity  of  52.41  crores  vide  letter  dated

30.3.1999  against  electricity  duty  payable  by  the  assessee company  (copy  of  the  letter  dated  30.3.1999  is  available  on record which was duly considered by  the learned first appellate authority).  After  adjustment  a  sum  for  Rs.  16,95,53,921/- became  recoverable  from  the  State  government  which  was shown in Schedule XIII. As per this letter, a sum of Rs. 44 crores granted as equity was to be adjusted against the electricity duty payable to the Government of Haryana. Since, the liability on account  of  electricity  duty  has  been  discharged  by  way  of

ITA-710-2009(O&M) 6 allotment of shares, the case laws relied upon by the 1evenue, therefore, are not applicable to the facts of the present appeal, conse;uently in our view, there is no infirmity in the impu(ned order.9

¶7Section 43B of the IT Act, 1961 as it stood at that relevant time, reads as under: "Certain deductions to be only on actual payment 43B Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of-

(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or

(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or

(c) any sum referred to in clause(ii) of sub-section(1) of section 36, or

(d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State financial Corporation or a State industrial investment corporation, in accordance with the terms and ITA-710-200 P p is a s w a a E t c 9(O&M)

conditions of the agreem borrowing, or

(da) xxxx

(e) any sum payable by loan or advances from a sc bank other than a primary primary co-operative agri bank in accordance with agreement governing such

(f) any sum payable by t lieu of any leave at the cre

(g) xxx

(h) xxx Provided that nothing contain provisions of clause(h) shall app s actually paid by the assesse applicable in his case for furnish sub-section (1) of section 139 in which the liability to pay such and the evidence of such payme along with such return. Explanation 1-For the removal that where a deduction in resp clause(a) or clause(b) of this sec ment governing such loan or the assessee as interest on any cheduled bank or a co-operative y agricultural credit society or a icultural and rural development the terms and conditions of the h loan or advances, or the assessee as an employer in edit of his employee, or ed in this Section except the ply in relation to any sum which ee on or before the due date hing the return of income under n respect of the previous year in sum was incurred as aforesaid ent is furnished by the assessee l of doubts, it is hereby declared pect of any sum referred to in ction is allowed in computing the

r y e a t e n e h e r n d e d n e ITA-710-200 i p t w t S p E m a s r E t c t a t w t s p E t 9(O&M)

ncome referred to in Section 28 previous year relevant to the as the 1st day of April, 1983, or an which the liability to pay such su the assessee shall not be entitle Section in respect of such sum i previous year in which the sum is Explanation 2-For the purpose material times, "any sum payab assessee incurred liability in the sum might not have been paya relevant law. Explanation 3-For the removal that where a deduction in resp clause(c) or clause (d) of this s the income referred to in section a previous year relevant to the a the 1st day of April, 1988, or a which the liability to pay such su the assessee shall not be entitle section in respect of such sum i previous year in which the sum is Explanation 3A-For the remova that where a deduction in resp 8 of the previous year (being a ssessment year commencing on ny earlier assessment year) in um was incurred by the assessee, ed to any deduction under this in computing the income of the s actually paid by him. es of clause(a), as in force at all ble" means a sum for which the previous year even though such able within that year under the l of doubts it is hereby declared pect of any sum referred to in section is allowed in computing n 28 of the previous year (being assessment year commencing on any earlier assessment year) in um was incurred by the assessee, ed to any deduction under this in computing the income of the s actually paid by him. l of doubts, it is hereby declared pect of any sum referred to in

a n n

s e l e h e d n g g n n

s e d n ITA-710-200 c r y o l a i y E E t c r y o l a i y E d u h w 9(O&M)

clause(e) of this section is allo referred to in section 28 of the p year relevant to the assessment y of April, 1996, or any earlier liability to pay such sum was assessee shall not be entitled to a n respect of such sum in compu year in which the sum is actually Explanation 3AA xxxxxx Explanation 3B-For the remova that where a deduction in resp clause (f) of this section is allo referred to in section 28, of the p year relevant to the assessment y of April, 2001, or any earlier a liability to pay such sum was assessee shall not be entitled to a n respect of such sum in compu year in which the sum is actually Explanation 3C-For the rem declared that a deduction of an under clause (d) of this section, has been actually paid and any in which has been converted into a owed in computing the income previous year (being a previous year commencing on the 1st day assessment year) in which the incurred by the assessee, the any deduction under this section uting the income of the previous y paid to him. l of doubts, it is hereby declared pect of any sum referred to in owed in computing the income, previous year (being a previous year commencing on the 1st day assessment year) in which the incurred by the assessee, the any deduction under this Section uting the income of the previous y paid by him. moval of doubts, it is hereby ny sum, being interest payable shall be allowed if such interest nterest referred to in that clause loan or borrowing or debenture

e s y e e n s d n

s y e e n s y e t e e ITA-710-200 o t E E d u h w o t E 9(O&M)

or any other instrument by which to a future date shall not be deem Explanation 3CA-xxxxx Explanation 3D-For the rem declared that a deduction of an under clause(e) of this section, s has been actually paid and any in which has been converted into a or any other instrument by which to a future date shall not be deem Explanation 4- For the purpose

(a) "public financial instit assigned to it in section 4A of 1956);

(aa) "scheduled bank" sh to it in the Explanation to of section 11;

(b) "State financial corp corporation established un an institution notified un Financial Corporation Act

(c) "State industrial inve Government company wit of the Companies Act, 19 h the liability to pay is deferred med to have been actually paid. moval of doubts, it is hereby ny sum, being interest payable shall be allowed if such interest nterest referred to in that clause a loan or advance or debenture h the liability to pay is deferred med to have been actually paid. e of this section,- tutions" shall have the meaning A of the Companies Act, 1956 (1 hall have the meaning assigned o clause (iii) of Sub Section (5) poration" means a financial nder Section 3 or Section 3A or nder Section 46 of the State t, 1951 (63 of 1951); estment corporation" means a thin the meaning of section 617 956 (1 of 1956), engaged in the

d y e t e e d g d ) l r e a e ITA-710-2009(O&M)

business of providing lo projects and eligible for d sub-section (1) of section 3

(d) "co-operative bank", society" and "primary rural development bank respectively assigned to th section (4) of section 80 P;

(e) xxxx

(f) "non-banking financi meaning assigned to it in Reserve Bank of India Act,

(g) "systemically impor banking financial comp financial company which public deposits and havin five hundred crore rupees sheet and is registered w under the provisions of th 1934 (2 of 1934) Following clause(g) shall clause (g) of Explanati Fianance Act, 2023, w.e.f.

(g) xxxxx ng-term finance for industrial deduction under clause (viii) of 36; , "primary agricultural credit co-operative agricultural and k" shall have the meanings hem in the Explanation to sub- ; ial company" shall have the clause (f) of section 45-I of the , 1934 (2 of 1934); rtant non-deposit taking non-pany" means a non-banking h is not accepting or holding ng total assets of not less than as per the last audited balance with the reserved Bank of India he Reserved Bank of India Act, l be substituted for the existing ion 4 to section 43B by the f. 1-4-2024:

l f t d s - e e - g g n e a

g e ITA-710-200 E The wo while the exp allowable.

¶8Thus, a discharged to from the allot to the said ex part of the fun said to have b in terms of Se is hereby dism

9.

A

December 05, rashmi

¶1Whethe

¶2Whethe 9(O&M)

Explanation 5-xxxx" ord 'actually paid' has been, ther planation lays down circumstan as per the revised return filed wards the Government relating tment of equity of Rs. 52.41 cro xtent, the same was adjusted i.e. nds allotted by the Government been acquired from other source ection 43 (d) of the IT Act, 1961 missed. All pending applications also stan

(SANJ 2024 r speaking/reasoned?

Y r reportable?

Y refore, used only in the proviso, nces where the deduction is not d by the assessee, the liability to Electricity duty was payable ores by Government of Haryana Rs.44 Crores. The shares being of Haryana, the same cannot be es and was therefore, allowable 1, accordingly the present appeal nd disposed of accordingly. JEEV PRAKASH SHARMA) JUDGE

(SANJAY VASHISTH) JUDGE

, t y e a g e e l

ITA-710-2009(O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA-710-2009(O&M) Date of Decision: 05.12.2024 CIT Panchkula . . . . Appellant Vs. M/s Haryana Vidyut Prasaran Nigam Ltd. . . . Respondent **** CORAM: HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA HON'BLE MR. JUSTICE SANJAY VASHISTH **** Present: Mr. Saurabh Kapoor, Sr. Standing Counsel and Ms. Pridhi Sandhu, Jr. Standing Counsel Ms. Muskaan Gupta, Advocate for the appellant. None for the respondent. ***