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TMI Blog2021 (8) TMI 1219X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the addition of ₹ 94,33,788 /- u/ s 36(1)(va) of the Income Tax Act, 1961 . Brief facts as noted from the impugned order are that an addition u/s 36 (1)(va) has been made by the DCIT, CPC, Bangalore on account of delay in depositing the ESI and EPF. The copy of tax audit report which is part of the income tax return filed by the assessee and it can be found that the amount has been paid beyond the due date as prescribed in the ESI PF Act under the IT Act. However, there is no dispute that it is deposited before the due date of filing of return for the assessment year 2018-19. 3. The issue at hand regarding allowability of deduction on account of deposit of employee s contribution to provident fund and ESI. The ld. CIT (A) held that the same have not paid before the due date are not eligible for claim of deduction. 4. Before us, the ld. AR relied on a plethora of case laws which have been mentioned at page nos. 4 5 of the order of the ld. CIT (A) and canvassed relying on the provisions of Section 43B. 5. We have gone through the provisions of the Section 36(1)(va) and Section 43B, cases cited and also the judgments on this issue. To mention a few ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Decision of the Hon' ble Supreme Court relied upon by the assessee cited as CIT vs. Alom Extrusions Ltd. (supra) is not applicable to the facts and circumstances of the case because Hon' ble Supreme Court has decided the issue in Alom Extrusions Ltd. case qua employers contribution as per section 43B(b) of the Act and not qua employees contribution u/ s 36 (1)(va) of the Act. 7. Clause (24) of section 2 of the Income Tax Act, 1961 (The Act) provides an inclusive definition of the income. Sub- clause (x) to the said clause provides that income to include any sum received by the assessee from his employees as contribution to any provident fund or superannuation fund or any fund set up under the provisions of ESI Act or any other fund for the welfare of such employees. Section 36 of the Act pertains to the other deductions. Sub-section (1) of the said section provides for various deductions allowed while computing the income under the head 'Profits and gains of business or profession. Clause (va) of the said sub-section provides for deduction of any sum received by the assessee from any of his employees to which the provisions of sub- clause (x) of clause (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarity and certainty on non applicability of section 43B on employees' contribution to specified funds, the Budget 2021 has proposed to amend the provisions of section 36(1)(va) and section 43B as under: (a) amend section 36 (1)(va) of the Act by inserting another explanation 2 to the said clause to clarify that the provision of section 43B does not apply and deemed to never have been applied for the purposes of determining the due date under this clause; and (b) amend section 43B of the Act by inserting Explanation 5 to the said section to clarify that the provisions of the said section do not apply and deemed to never have been applied to a sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section 2 applies. 12. The language of newly proposed explanation 2 to section 36(1)(va) and explanation 5 to section 43B makes it clear that the amendment is retrospective. 13. The rational of the amendment was explained by the Memorandum to the Finance Bill, 2021 as below: There is a distinction between employer contribution and employee' s contribution towards welfare fund. It may be noted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s account in the relevant fund under any Act or rule or order or notification issued thereunder or any standing order or award or service or otherwise. Meaning thereby, in case, employer fails to deposit the entire amount towards employees contribution on account of PF ESI with concerned department on or before the due date under PF ESI, the assessee shall not be entitled for deduction to that extent. 10. Decision of the Hon'ble Supreme Court relied upon by the assessee cited as CIT vs. Alom Extrusions Ltd. (supra) is not applicable to the facts and circumstances of the case because Hon'ble Supreme Court has decided the issue in Alom Extrusions Ltd. case qua employers contribution as per section 43B(b) of the Act and not qua employees contribution u/ s 36 (1)(va) of the Act. 11. Hon'ble jurisdictional High Court in case of CIT vs. Bharat Hotels Ltd. (2019) 410 ITR 417 (Delhi) (supra) decided the identical issue qua delayed deposit of employees contribution on account of PF ESI against the assessee by holding that assessee would be entitled to deduction in terms of section 36(1)(va) of the Act to the extent if the employees contribution on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tedly was entitled to claim the benefit and properly treat such amounts as having been duly deposited, which were in fact deposited within the period prescribed (i.e. 15 + 5 days in the case of EPF and 21 days + any other grace, period in terms of the extent notification). As far as the amounts constituting deductions from employees' salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns. 9. In view of this discussion, the Revenue' s appeal is partly allowed. The AO is directed to examine the contributions made with reference to the dates when they were actually made and grant relief to such of them which qualified for such relief in terms of the prevailing provisions and notifications. We also clarify that the assessee would be entitled to deduction in terms of Section 36(1)(va) of the Act. 12. In view of what has been discussed above and following the decision rendered by the Hon'ble jurisdictional High Court in case of CIT vs. Bharat Hotels Ltd. (supra), we are of the considered view that the assessee company is not entitled for deduction of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X
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