2022 (4) TMI 1055 - AT - Income Tax

Disallowance of the employee s contribution to the Employee Provident Fund and Employee State Insurance Fund on account of its delayed deposit with the prescribed authority u/s. 36(1)(va) - HELD THAT - The view expressed by the Tribunal is in fact in agreement with that projected by the Board per its Circular (No. 22/2015, dtd. 17/12/2015), as also that canvassed per the impugned order with reference to the cited decisions, both explaining, as did the Explanatory Notes on the insertion of s. 36(1)(va) on the statute, the object of the said provision. It is this view, which in fact, as also noticed by the Tribunal, represented the uniform view across all the Hon ble Courts prior to the deletion of the second proviso to s. 43B by Finance Act, 2003, w.e.f. 01/4/2004, which the Explanations to ss. 36(1)(va) and 43B by Finance Act, 2021 seek to statutorily clarify in view of the conflict of judicial opinion, passing thus the test of retrospectivity, even as unequivocally expressed per the unambiguous language thereof. The Explanations under reference were therefore clarificatory and, thus, retrospective. The said Explanations , the Tribunal continued, had however been, as clear from a reference to the Notes on the Clauses to, and the Memorandum explaining the Provisions of, the Finance Bill, 2021, reproducing the same, proposed as prospective amendments. The amendments by way of Explanation 5 to s. 43B and Explanation 2 to s. 36(1)(va), it concluded, are to therefore take effect only from AY 2021-22, and which view is unmistakable on a plain reading of the said documents.. There is, in view of the foregoing, no question of the said Explanations being read as retrospective, so as to apply for the relevant year, sustaining the impugned additions, which therefore fail. This is, however, subject to any decision/s by the Hon ble jurisdictional High Court, which would, where so, hold, even justifying a rectification u/s. 154/254(2), even where rendered after the date of the order sought to be rectified (Asst. CIT v. Saurashtra Kutch Stock Exchange Ltd. 2008 (9) TMI 11 - SUPREME COURT ; CIT v. Aruna Luthra 2001 (8) TMI 84 - PUNJAB AND HARYANA HIGH COURT No such decision has been found, or otherwise pointed out by the parties, as was the case before the Tribunal in Nikhil Mohine 2021 (11) TMI 927 - ITAT JABALPUR Any such decision, even if discovered later, may operate to amend this order, or the order giving appeal effect thereto, to bring it in conformity or agreement with the said decision/s, of course, after allowing a fair opportunity of hearing to the assessee. - Decided in favour of assessee.

Summary

Issues:
Appeals against Orders by CIT(A) for assessment years 2017-18 to 2019-20 regarding employee welfare fund contributions.

Analysis:
The appeals concern the addition of employee contributions to welfare funds in the assessee's income under section 143(1) of the Income Tax Act. The appellant argued that since the contributions were made before the due date for filing returns, no addition should be made. The Tribunal referred to its decision in Nikhil Mohine case, emphasizing the conflicting judicial opinions on the matter. The Tribunal held that adjustments under section 143(1) could not be made contrary to decisions holding employee contributions as covered by section 43B(b). The Tribunal discussed the retrospective effect of the Explanations inserted by Finance Act, 2021, clarifying the treatment of employee contributions. It concluded that the Explanations were clarificatory and retrospective, impacting the deductibility of contributions.

The Tribunal noted that the Explanations were proposed as prospective amendments but clarified the conflict of judicial opinions. It emphasized that the Explanations should take effect from AY 2021-22, not retrospectively. The Tribunal ruled that in the absence of a decision by the jurisdictional High Court justifying the additions, the impugned additions failed. The Explanations were not to be read retrospectively for the relevant years before AY 2021-22. The Tribunal highlighted the possibility of amending the order if a decision by the High Court was later discovered, after providing a fair hearing to the assessee. Consequently, the impugned additions were directed to be deleted, and the assessee's appeals were allowed.

In conclusion, the Tribunal's decision in the present case relied on the Nikhil Mohine judgment and the retrospective effect of the Explanations inserted by the Finance Act, 2021. The Tribunal emphasized the importance of High Court decisions in justifying additions and clarified the prospective application of the Explanations. The Tribunal's detailed analysis of the legal provisions and judicial opinions ensured a fair and reasoned outcome in favor of the assessee.