2021 (11) TMI 927 - AT - Income Tax

Delayed Employees contribution to the employees provident fund and the employees state insurance fund - Delay deposit (by the assessee-employer) as beyond the due dates - returned income having been made by the AO u/ss. 143(1) and 154 - HELD THAT - Sec. 43B(b) does not include the employee contribution, and even regarding so is to no avail, rendering the Explanations under reference, even as suggested by their express language, explanatory. An examination of the Notes on Clauses to, and the Memorandum explaining the Provisions of, Finance Bill, 2021, however, resolves the matter beyond the pale of any doubt. While confirming the Explanations under reference to be explanatory of the law, even as signified by the clear, unambiguous language employed therein, are yet stated to be prospective inasmuch as they are applicable assessment year 2021-22 onwards. Lastly, no decision by Hon'ble jurisdictional High Court in the matter has been either cited before me, or found, which, where so, would, irrespective of the view expressed therein, hold for the relevant years, being prior to the year of applicability of the Explanations under reference. No adjustment, in view of the conflicting judicial opinion could, accordingly, be made to the returned income u/s. 143(1)/154, which sections admit only issues on which there could be conceivably no two views, rampant, irrespective of merits thereof, in the instant case, which aspect, as explained therein, has been given cognizance to in making the provision applicable not retrospectively. The assessee, accordingly, succeeds in his challenge to the impugned adjustments, which are held as bad in law and directed for deletion. This is of course subject to any different view taken by the Hon ble jurisdictional High Court for any year prior to AY 2021-22. Assessee appeal allowed.

Summary

Issues Involved:
1. Disallowance of employees' contribution to provident and insurance funds due to late deposit.
2. Applicability of amendments to sections 36(1)(va) and 43B by Finance Act, 2021.
3. Scope of adjustments under sections 143(1) and 154.

Detailed Analysis:

1. Disallowance of Employees' Contribution to Provident and Insurance Funds Due to Late Deposit:
The primary issue in these appeals concerns the disallowance of employees' contributions to the provident fund and state insurance fund, which were deposited by the employer beyond the due dates stipulated under the relevant statutes. The assessee argued that the contributions were deposited before the due date for filing the return of income under section 139(1) and included interest for the delayed deposit. The Revenue, however, disallowed the deductions under section 36(1)(va), which defines the "due date" for deposit, and not under section 43B, which pertains to the employer's contribution and allows for deductions if paid by the due date for filing the return of income.

2. Applicability of Amendments to Sections 36(1)(va) and 43B by Finance Act, 2021:
The amendments to sections 36(1)(va) and 43B, introduced by the Finance Act, 2021, were central to the controversy. The Revenue argued that these amendments, which clarify that section 43B does not apply to employees' contributions, were declaratory and retrospective. However, the Tribunal noted that these amendments were stated to be effective from 01/04/2021, suggesting a prospective application. The Tribunal emphasized that the clear legislative intent, as expressed in the amendments and their explanatory notes, was to apply these provisions prospectively from AY 2021-22 onwards.

3. Scope of Adjustments Under Sections 143(1) and 154:
The Tribunal observed that adjustments under sections 143(1) and 154 are limited to non-contentious issues. Given the conflicting judicial opinions on the matter, the Tribunal held that the adjustments made by the Revenue under these sections were not permissible. The Tribunal referenced various case laws to support the view that contentious issues, such as the applicability of section 43B to employees' contributions, should not be addressed under sections 143(1) and 154.

Conclusion:
The Tribunal concluded that the adjustments made by the Revenue under sections 143(1) and 154 were not valid, given the contentious nature of the issue and the prospective application of the amendments to sections 36(1)(va) and 43B. Consequently, the appeals were allowed, and the disallowances were directed to be deleted. The Tribunal also noted that this conclusion is subject to any contrary decision by the jurisdictional High Court for years prior to AY 2021-22.