High Court of KeralaDivision BenchPartly allowed; No costs.
Commissioner of Income Tax, Kochi v. Harrisons Malayalam Limited
Case / Petition Number:ITA Nos. 252/2015; 254/2015; 255/2015; 259/2015
Case Details & Bench
- Court
- High Court of Kerala
- Hon'ble Judges
- C. K. Abdul Rehim
- R. Narayana Pisharadi
- Judgment Date
- 2019-06-14
- Court Decision / Holding
- Appeals partly allowed. The Tribunal’s finding that the deduction under Section 36(1)(va) for employees’ contributions to EPF/LWF/ESI requires remittance before the due date is set aside, and the AO’s order is restored for that issue. The licence fee issue (ii) is not pressed and not interfered with. Questions (iii)-(v) are decided against the Revenue, following Harrisons Malayalam (2018). The Tribunal’s remand on the EPF/LWF/ESI issue is reversed. No costs.
- Final Disposition
- Partly allowed; No costs.
Parties to the Case
Appellants / Petitioners
- Commissioner of Income Tax, Kochi
Respondents
- Harrisons Malayalam Ltd.
Legal Representation & Advocates
Counsels for Petitioners
- • P. K. R. Menon
Counsels for Respondents
- • Raja Kannan
Case Synopsis & Summary
This is a consolidated Kerala High Court decision dealing with four ITA appeals (ITA Nos. 252/2015, 254/2015, 255/2015, 259/2015) arising from a common Tribunal order dated 14 May 2015 (ITAs 456–459/Coch/2014) for the years 2007-08 to 2010-11, concerning Harrisons Malayalam Limited, a tea and rubber product manufacturer. The Revenue challenges several issues: (i) whether delayed payments by the assessee to Employees' Provident Fund, Labour Welfare Fund and Employees' State Insurance qualify for deduction under Section 36(1)(va); (ii) whether licence fee paid to RPG Enterprises qualifies under Section 37; (iii)-(v) the tax treatment of sale consideration for old and unyielding rubber trees, the treatment of grevellea trees, and whether the provision for gratuity can be added in computing income under Section 115JB. The Court follows Popular Vehicles and Services Private Limited v. C.I.T. (2018) to hold that deduction under 36(1)(va) requires employee contributions to be remitted by the statutory due date; hence the Tribunal’s remand directing reassessment is set aside and the AO’s order restored for the EPF/LWF/ESI issue. The other four issues are decided against the Revenue, consistent with the Division Bench decision in Harrisons Malayalam (2018). The appeals are partly allowed with no costs.
Provisions of Law Cited
Section 36(1)(va) of the Income Tax Act, 1961Section 139(1) of the Income Tax Act, 1961Section 115JB of the Income Tax Act, 1961Section 37 of the Income Tax Act, 1961Rules 7 and 7A of the Income Tax RulesSection 2(24) of the Income Tax Act, 1961
Submissions & Arguments
Contentions of Appellants / Petitioners
The Revenue submits that deduction under Section 36(1)(va) for employees' contributions to welfare funds is permissible only if remitted on or before the due date prescribed under the respective statute. Relying on Popular Vehicles and Services Private Limited v. Commissioner of Income Tax (2018) 406 ITR 150, it contends that remittance after the due date cannot be allowed as a deduction. It argues that the Tribunal’s direction to remand for reconsideration on the EPF/LWF/ESI issue was erroneous. Regarding (ii), the licence fee paid to RPG Enterprises, the issue was not pressed. For (iii)-(v), the Counsel fairly concedes these questions are covered by the Delhi/Division Bench decision in Harrisons Malayalam (2018), against the Revenue, hence these should be decided accordingly.
Contentions of Respondents
The assessee-contends that the Tribunal’s order granting deductions/interpretations on the four issues should be sustained and defended by citing contemporaneous decisions and the general principles of tax deduction as applicable. It submits that the treatment of employee contributions and other deductions should be consistent with the statutory provisions and prior judicial interpretations; it emphasizes that the factual matrix of remittance and timing is pivotal to claiming deductions under Sec. 36(1)(va).
Cited Precedents (3)
| Case Name | Citation | Treatment | Explanation |
|---|---|---|---|
| Popular Vehicles and Services Private Limited v. Commissioner of Income Tax | (2018) 406 ITR 150 | Positive | Cited as controlling authority to require timely remittance of employee contributions for deduction under Sec. 36(1)(va); the Court follows this ruling in deciding the issue. |
| Commissioner of Income Tax v. Harrisons Malayalam Limited | (Judgment dated 06.12.2018 in ITA No.238/2012) | Positive | Used as controlling precedent; the Court holds four of the questions against the Revenue consistent with the Harrisons Malayalam decision, and the issues are decided accordingly. |
| South India Corporation Ltd., Cochin-31 | ITA No.65 & 66 of 1999 | Mentioned Only | Annexed as part of Appendix; referenced for citation but not directly discussed in reasoning. |
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Extracted Judgment Text
Exact text extracted from official judgment records.
# **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,COCHIN BENCH DATED 14-05-2015**
## **APPELLANT/RESPONDENT/REVENUE:**
**THE COMMISSIONER OF INCOME TAX KOCHI - 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 ON 14.06.2019 DELIVERED THE FOLLOWING:**
I.T.A.Nos.252/2015 & Conn.cases
2
## **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 TAX KOCHI - 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 COURT ON 14.06.2019 DELIVERED THE FOLLOWING:**
I.T.A.Nos.252/2015 & Conn.cases
3
## **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 TAX KOCHI - 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 COURT ON 14.06.2019 DELIVERED THE FOLLOWING:**
I.T.A.Nos.252/2015 & Conn.cases
4
## **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 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 14-05-2015**
## **APPELLANT/REVENUE:**
**THE COMMISSIONER OF INCOME TAX KOCHI - 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 COURT ON 14.06.2019 DELIVERED THE FOLLOWING:**
I.T.A.Nos.252/2015 & Conn.cases
5
## **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 the common order dated 14.05.2015 of the Income Tax Appellate Tribunal, Cochin Bench in I.T.A.Nos.456/Coch/2014 to 459/Coch/2014.
2. The respondent/assessee is a company engaged in the manufacture/production of tea, rubber etc. The issues in the appeals relate to assessment of income tax for the assessment years 2007-08 to 2010-11.
3. The substantial questions of law for consideration in these appeals are the following:
- (i) Whether the delayed payments made to Employees' Provident Fund, Labour Welfare Fund
I.T.A.Nos.252/2015 & Conn.cases
6
and Employees' State Insurance is allowable as deduction 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 Section 37 of the Act?
- (iii) Whether the consideration obtained on sale of old and unyielding rubber trees is exigible to tax in the light of Rules 7 and 7A of the Income Tax Rules?
- (iv) Whether the sale proceeds of grevellea trees
- can be treated as capital gains and brought to tax?
- (v) Whether the provision for gratuity can be added in computing the income under Section 115JB of the Act?
4. Heard learned Standing Counsel for Government of
India (Taxes) and the learned counsel for the respondent.
## **- Question No.(i) Belated Payments Made to EPF, LWF**
**and ESI**
I.T.A.Nos.252/2015 & Conn.cases
7
5. Learned Standing Counsel for Government of India (Taxes) would submit that this issue is covered by the decision of this Court in **Popular Vehicles and Services Private Limited v. Commissioner of Income Tax [(2018) 406 ITR 150]** .
6. In the instant cases, we are concerned with remittance of employees' contribution and not employers' contribution. In **Popular Vehicles** (supra), it has been held as follows:
_"Section 36(1)(va) speaks of the employee's contribution to a welfare fund for the benefit of the employees alone, by virtue of the specific reference to section 2(24). Section 2(24) includes as income, any contribution received by the employer from the employee for the purpose of remittance to a fund created for the welfare of the employees; including inter alia a provident fund and that under the ESI Act. When the same is remitted on the due date as prescribed in the statute or order creating such fund, then it is eligible for deduction under Section 36. ...................... The contributions which are deducted at the time of payment of salary is received by the employer-company and is treated as income under section 2(24). On remittance of this contribution, within the due date, it is allowed as a deduction under Section 36. If it is not paid to the welfare fund within the_
I.T.A.Nos.252/2015 & Conn.cases
8
_due date provided under the relevant statute, it remains as an income in the books of account of the assessee/employer-company.The said contribution having not been paid to the applicable welfare fund within the due date provided, the assessee for all time is deprived of claiming 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 and Services** (supra), we hold that, in order to claim the benefit of deduction under Section 36(1)(va) of the Act, payment of employees' contribution to Employees' Provident Fund, Labour Welfare Fund and Employees' State Insurance has to be made before the due date prescribed under the relevant statute. The substantial question of law is answered in favour of the revenue and against the assessee.
8. The Tribunal has found that payments have to be made only before the due date prescribed under Section 139(1) of the Act for filing return of income to claim the benefit under Section 36(1)(va) of the Act. The finding of the Tribunal in this regard is liable to be set aside. Moreover, the Tribunal has directed that the issue regarding deduction under Section 36(1)
I.T.A.Nos.252/2015 & Conn.cases
9
(va) of the Act has to be reconsidered by the assessing officer. In the instant case, the assessee has got no plea that the remittance of employees' contribution to Employees' Provident Fund, Labour Welfare Fund, Employees' State Insurance had been made before the due date prescribed in the respective enactments. Therefore, the direction given by the Tribunal remitting this issue for reconsideration by the assessing officer is 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 such circumstances, the order of the Tribunal on this issue does not warrant any interference.
## **Questions (iii) to (v)**
10. Learned Standing Counsel, Government of India (Taxes) has fairly conceded that these questions are covered by the decision of the Division Bench of this Court in **Commissioner of Income Tax v. Harrisons Malayalam Limited (Judgment dated 06.12.2018 in ITA No.238/2012** ), against the revenue. Hence, these substantial questions of law are answered against the revenue.
I.T.A.Nos.252/2015 & Conn.cases
10
11. Consequently, the appeals are partly allowed. The impugned order of the Income Tax Appellate Tribunal in ITA Nos.456/Coch/2014 to 459/Coch/2014 to the extent of answering the issue regarding delayed payment of employees's contribution to Employees' Provident Fund, Labour Welfare Fund and Employees' State Insurance in favour of the assessee is set aside. The direction made by the Tribunal remitting the aforesaid issue to the Assessing Officer for reconsideration is also set aside and the order of the Assessing Officer in this regard is restored. The order of the Tribunal on all the four other issues raised in these appeals stands confirmed. No costs in the appeals.
(sd/-) **C.K.ABDUL REHIM, JUDGE**
(sd/-)
**R.NARAYANA PISHARADI, JUDGE**
jsr/12/06/2019
I.T.A.Nos.252/2015 & Conn.cases
11
## **APPENDIX OF ITA 252/2015**
## **APPELLANT'S EXHIBITS:**
**ANNEXURE "A"- COPY OF THE ASSESSMENT ORDER DATED 30/12/2010 PASSED BY THE ASSESSING OFFICER FOR AY 2007-2008. ANNEXURE "B" - COPY OF CIT(APPEALS-II, KOCHI ORDER NO. ITA-111/R-1/E/CIT-II/2010-11 DATED 30/6/2014 FOR ASSESSMENT YEAR 2007-2008 ANNEXURE "C" - COPY OF THE ITAT,COCHIN BENCH ORDER NO.ITA NO.456/COCH/2014 DATED 14.05.2015 FOR ASSESSMENT YEAR 2007-08**
**ANNEXURE ”D” - TRUE COPY OF THE JUDGMENT OF HON'BLE HIGH COURT OF KERALA IN THE CASE OF M/S.SOUTH INDIA CORPORATION LTD., COCHIN-31 (ITA NO.65 & 66 OF 1999)**
## **RESPONDENT'S EXHIBITS:**
**NIL**
I.T.A.Nos.252/2015 & Conn.cases
12
## **APPENDIX OF ITA 254/2015**
## **APPELLANT'S EXHIBITS:**
**ANNEXURE "A"- COPY OF THE ASSESSMENT ORDER DATED 27/12/2011 PASSED BY THE ASSESSING OFFICER FOR AY 2009-10.**
**ANNEXURE "B"- COPY OF CIT (APPEALS-II, KOCHI ORDER NO. ITA128/R-1/E/CIT-II/2010-11 DATED 30/6/2014 FOR ASSESSMENT YEAR 2009-10.**
**ANNEXURE "C" - COPY OF THE ITAT,COCHIN BENCH ORDER NO.ITA NO.458/COCH/2014 DATED 14.05.2015 FOR ASSESSMENT YEAR 2009-10 ANNEXURE ”D” - TRUE COPY OF THE JUDGMENT OF HON'BLE HIGH COURT OF KERALA IN THE CASE OF M/S.SOUTH INDIA CORPORATION LTD., COCHIN-31 (ITA NO.65 & 66 OF 1999)**
## **RESPONDENT'S EXHIBITS:**
## **NIL**
I.T.A.Nos.252/2015 & Conn.cases
13
## **APPENDIX OF ITA 255/2015**
## **APPELLANT'S EXHIBITS:**
**ANNEXURE "A"- COPY OF THE ASSESSMENT ORDER DATED 30/12/2010 PASSED BY THE ASSESSING OFFICER FOR AY 2008-09.**
**ANNEXURE "B"- COPY OF CIT (APPEALS-II, KOCHI ORDER NO. ITA112/R-1/E/CIT-II/2010-11 DATED 30/6/2014 FOR ASSESSMENT YEAR 2008-09**
**ANNEXURE "C" - COPY OF THE ITAT,COCHIN BENCH ORDER NO.ITA NO.457/COCH/2014 DATED 14.05.2015 FOR ASSESSMENT YEAR 2008-2009 ANNEXURE ”D” - TRUE COPY OF THE JUDGMENT OF HON'BLE HIGH COURT OF KERALA IN THE CASE OF M/S.SOUTH INDIA CORPORATION LTD., COCHIN-31 (ITA NO.65 & 66 OF 1999)**
## **RESPONDENT'S EXHIBITS:**
## **NIL**
I.T.A.Nos.252/2015 & Conn.cases
14
## **APPENDIX OF ITA 259/2015**
## **APPELLANT'S EXHIBITS:**
**ANNEXURE "A"- COPY OF THE ASSESSMENT ORDER DATED 28/03/2013 PASSED BY THE ASSESSING OFFICER FOR AY 2010-11**
**ANNEXURE "B"- COPY OF CIT (APPEALS-II), KOCHI ORDER NO. ITA17/R-1/E/CIT-II/2013-14 DATED 30/6/2014 FOR ASSESSMENT YEAR 2010-11**
**ANNEXURE "C" - COPY OF THE ITAT,COCHIN BENCH ORDER NO.ITA NO.459/COCH/2014 DATED 14.05.2015 FOR ASSESSMENT YEAR 2010-11**
**ANNEXURE ”D” - TRUE COPY OF THE JUDGMENT OF HON'BLE HIGH COURT OF KERALA IN THE CASE OF M/S.SOUTH INDIA CORPORATION LTD., COCHIN-31 (ITA NO.65 & 66 OF 1999)**
## **RESPONDENT'S EXHIBITS:**
## **NIL**
**TRUE COPY**
**PS TO JUDGE**