JUDGMENT
O.K. Narayanan, A.M.
1. This appeal is filed by the Revenue. The relevant assessment year is 2001-02. The appeal is directed against the order of the CIT(A) VII at Mumbai dated 02/08/04 and arises out of the assessment completed Under Section 143(3) of the Income Tax Act, 1961.
2. The first ground raised by the Revenue is that the CIT(A) has erred in disallowing the payments Under Section 43B on account of employers contribution to Provident Fund amounting to Rs. 1,60,277/- and employees contribution to Provident Fund amounting to Rs. 1,52,410/-, made after due dates specified in the PF Act.
3. Even though the payments towards PF have been made by the assessee company after the due dates prescribed under the respective enactment, the payments were in fact made before the due date of filing of return for the impugned assessment year 2001-02.
4. Where the payments towards Provident Fund, ESI etc have been made by the assessee on or before the due date of filing of the return for the concerned assessment year, ITAT, Chennai Special Bench in the case of Kwality Milk Foods v. ACIT 100-ITD 199 (SB)(Chn) has held that deduction has to be allowed in such cases, as prayed for by the assessee. The above decision has been taken by the Special Bench on the basis of its findings that thus relevant amendments brought in under various clauses of Section 43B are retrospective in nature.
5. But, the Madras High Court in the case of Synergy Finance Exchange Ltd. 286 ITR 366 has held that those amendments are not retrospective and therefore, such bleated payments of PF, ESI etc cannot be allowed as deduction, even if they have been paid before the due date of filing of the return of the income.
6. But, the Guwahati High Court in the case of CIT v. Assam Tribune 253 ITR 93 has held that where the contribution towards PF, ESI etc have been made before the due date of filing of return of income, such amounts should be deducted in computing the income. The Guwahati High Court has followed the said judgment in a subsequent case in CIT v. Bharat Bamboo and Timber Suppliers 219 ITR 212 The Gujarat High Court has also taken a similar view in the case of CIT v. Olympic Glass Industries 279 ITR 331 holding that the statutory liability towards Sales tax, ESI, PF discharged after close of the previous year, but before the due of the filing of the return cannot be disallowed.
7. As far as the state of Maharashtra is concerned, there is no direct decision of the Jurisdictional High Court on the issue. As different views of different High Courts are available on the subject, the view favourable to the assessee has to be followed, as held by the Hon’ble Supreme Court in the case of Union of India and Ors. v. Onkar S. Kanwar and Ors. 258 ITR 192.
8. In view of the above, we find the CIT(A) is justified in directing the Assessing Authority to give deduction for the PF payments. The first ground raised by the Revenue fails.
9. The next ground raised by the Revenue is that the CIT(A) has erred in holding payments made to Pathak and Assoc. Rs. 19,67,804/-, Harsha Singh Rs. 3,50,000/-, IDESA Rs. 7,00,000/-, Chokshi Technologies Rs. 5,50,000/-, Health Matters Rs. 2,52,000/-, Madhavi Irani Rs. 2,20,000/- as revenue in nature.
10. The above payments were made by the assessee company for services like Logo Designing, Legal & Professional Consultancy, HR Consultancy, Software Consultancy, Management Consultancy, Content Writers etc. The case of the Revenue is that all the above expenses were made by the assessee in setting up its new service business and therefore capital in nature. The CIT(A) has held that all the above expenses are in the nature of running service business of the assessee and not for setting up business as such.
11. We considered the matter in detail. Even though the Revenue has raised the ground that the CIT(A) has treated the amount of Rs. 5,50,000/- paid to Chokshi Technologies for setting up the website as revenue in nature, the fact is that the CIT(A) has treated the same as capital in nature. Therefore, to this extent the ground of the Revenue is infructuous. Regarding other items of the expenses/payments agitated by the Revenue, they all are for the services rendered by different professional in running the website in a functional manner. These expenses have not been incurred for setting up the income earning apparatus of the assessee company but for running and maintaining the income earning apparatus. Therefore, all the expenses are to be treated as Revenue in nature and the CIT(A) is justified in doing so. The second ground also fails.
12. In result, the appeal filed by the Revenue is dismissed.
Order pronounced on 13th September, 2007.