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2022 (3) TMI 1070 - AT - Income TaxDisallowance of ESI PF contribution being employees' share of contribution under section 36(1)(va) - case of the assessee that employees' share of ESI has been paid before the due date for filing of return u/s. 139(1) - HELD THAT - In this case there is no dispute that the assessee made payment of the Employees share of PF/ESI on or before the due date for filing return of income for AY 2017-18 u/s. 139(1) of the Act. The next aspect to be considered is whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also. On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act, deserves to be deleted. Assessee received a sum from the Government of Karnataka - Karnataka Government, with a view to promote efficiency of public enterprises in Karnataka and to encourage pay dividends regularly to the Government, announced an award called Chief Minister's Annual Ratna Award - HELD THAT - From perusal of the proceedings of the Government of Karnataka dated 29.12.2016, it is clear that the award was given for the criteria of earning sustained profits. For 3 Financial Years, dividends should be paid to the Government and significant CSIR activities should have been undertaken each year. The requirements of section 10(17A) of the Act are that award should have been instituted in public interest by Central Government or State Government. The criteria for exemption under section 10(17A) of the Act is therefore public interest which is absent in the present case and therefore we confirm the order of the CIT(A). Credit for TDS was denied because of the mismatch in Form 26AS - HELD THAT - It appears that the assessee has a physical TDS certificate as per Form 16A. The CBDT in its instruction No. 5/2013 dated 08.07.2013 has taken a view that when physical certificates are produced, credit should be given in the absence of details in the Form. Mismatch in Form 26AS should not be a ground for denying credit on TDS. We therefore remand the issue to the AO for taking cognizance of Form 16A and give credit for TDS in accordance with law.
Issues Involved:
1. Disallowance of Employees' Contribution to PF/ESI under Section 36(1)(va) of the Income Tax Act, 1961. 2. Applicability of the amendment to Section 36(1)(va) and Section 43B by the Finance Act, 2021. 3. Taxability of the award received from the Government of Karnataka under Section 10(17A). 4. Credit for TDS denied due to mismatch in Form 26AS. Detailed Analysis: 1. Disallowance of Employees' Contribution to PF/ESI under Section 36(1)(va) of the Income Tax Act, 1961: The assessee contested the disallowance of ESI & PF contributions, arguing that the payments were made before the due date for filing the return under Section 139(1) of the Act. The CIT(A) upheld the disallowance, citing the amendment to Section 36(1)(va) and 43B by the Finance Act, 2021, which clarified that the provisions of Section 43B do not apply to employee contributions. The CIT(A) emphasized the distinction between employees' and employers' contributions, noting that failure to pay employees' contributions by the due date results in permanent disallowance, whereas employers' contributions are only deferred until payment. The CIT(A) referred to judicial pronouncements supporting this distinction and concluded that the amendments were clarificatory and applied retrospectively. 2. Applicability of the amendment to Section 36(1)(va) and Section 43B by the Finance Act, 2021: The tribunal found that the explanatory memorandum to the Finance Act, 2021, indicated that the amendments to Sections 36(1)(va) and 43B were applicable prospectively from 01.04.2021. The tribunal cited several decisions, including the Karnataka High Court's ruling in Essae Teraoka Pvt. Ltd., which held that employees' contributions made before the due date for filing the return are deductible. The tribunal concluded that the amendments could not be applied retrospectively and deleted the disallowance made under Section 36(1)(va). 3. Taxability of the award received from the Government of Karnataka under Section 10(17A): The assessee received an award of ?3,75,000 from the Government of Karnataka, which was claimed as exempt under Section 10(17A). The CIT(A) denied the exemption, stating that the assessee failed to provide details regarding the award. The tribunal reviewed the criteria for the award and determined that it did not meet the public interest requirement specified in Section 10(17A). Consequently, the tribunal confirmed the CIT(A)'s decision to treat the award as taxable income. 4. Credit for TDS denied due to mismatch in Form 26AS: The assessee's claim for TDS credit was denied due to a mismatch in Form 26AS. The tribunal noted that the assessee possessed a physical TDS certificate as per Form 16A. Referring to CBDT Instruction No. 5/2013, which mandates credit for TDS when physical certificates are produced, the tribunal remanded the issue to the AO to consider Form 16A and grant TDS credit as per the law. Conclusion: The appeal was partly allowed, with the tribunal deleting the disallowance under Section 36(1)(va), confirming the taxability of the award under Section 10(17A), and remanding the TDS credit issue to the AO for reconsideration based on Form 16A.
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