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TMI Blog2021 (12) TMI 1030X X X X Extracts X X X X X X X X Extracts X X X X ..... , Vice-President (KZ):- These three appeals filed by the assessee are directed against the orders of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as CIT(A)] dated 26.07.2021, 27.07.2021 27.07.2021 and the solitary issue involved therein relates to the disallowance of ₹ 4,05,566/- (for A.Y. 2017-18), ₹ 6,78,449/- (for A.Y. 2018-19) ₹ 3,36,680/- (for A.Y. 2019-20) made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of delayed payment of employees contribution to PF and ESI paid after the due dates prescribed in the relevant Statutes but before the due date of filing of return under section 139(1) of the Income Tax Act, 1961. 2. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that a similar issue relating to the disallowance on account of delayed payment of employees contribution towards PF and ESI was involved in the case of Lumino Industries Limited and after considering the relevant provisions of the Income Tax Act as amended from time to time as well as the relevant judicial pronounce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court which reads as under: 22. Second a retrospective provision in a tax act which is 'for the removal of doubts' cannot be presumed to be retrospective, even where such language is used, if it alters or changes the law as it earlier stood. This was stated in Sedco Forex International Drill. Inc. vs. CIT (2005) 12 SCC 717 as follows: 17. As was affirmed by this Court in Goslino Mario [ (2000) 10 SCC 165] a cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See also Reliance Jute and Industries Ltd. v. CIT [(1980) 1 SCC 139].) An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section [See Sonia Bhatia v. State of U.P., (1981) 2 SCC 585, 598]. If it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time that the main provision came into force [See Shyam Sunder v. Ram Kumar, (2001) 8 SCC 24 (para 44); Brij Mohan Das Laxman Das v. CIT, (1997) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to give retrospective operation of law by taking note of the decision in the case of Vatika Township (supra) and held as under: The Test to be applied is essentially one of the intent of the legislature. 28. In a more recent decision in Commissioner of Income Tax vs. Vatika Township Pvt. Ltd. (2015) 1 SCC 1, a Constitution Bench of this Court held thus: 42.1. Notes on Clauses appended to the Finance Bill, 2002 while proposing insertion of proviso categorically states that 'this amendment will take effect from 1.6.2002.' These become epigraphic 1 words, when seen in contradistinction to other amendments specifically stating those to be clarificatory or retrospectively depicting clear intention of the legislature. It can be seen from the same notes that a few other amendments in the Income tax Act made by the same Finance Act specifically making those amendments retrospective. For example, clause 40 seeks to amend S. 92-F. Clause (iii-a) of S. 92-F is amended so as to clarify that the activities mentioned in the said clause include the carrying out of any work in pursuance of a contract . (emphasis supplied). This amendment takes effect retrospectively from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention to the Constitution Bench decision of Hon'ble Supreme Court in Vatika Township Ltd. (supra) pointed out that Parliament/Legislature is aware of the three concepts before an amendment is brought in, which can be discerned from reading of the Notes on Clauses to the Bill which are (i) prospective amendment with effect from a fixed date; (ii) retrospective amendment with effect from a fixed anterior date; and (iii) clarificatory amendments which are retrospective in nature. 12. So according to the Ld. A.R. in order to understand whether the amendment brought in by Finance Act, 2021, is retrospective or prospective in operation in respect of the present case, he drew our attention to the memorandum explaining the Notes on Clauses of Finance Act, 2021. According to him, the clause 8 9 of the memorandum is relevant which are reproduced hereunder: Rationalisation of various Provisions Payment by employer of employee contribution to a fund on or before due date Clause (24) of section 2 of the Act provides an inclusive definition of the income. Sub-clause (x) to the said clause provide that income to include any sum received by the assessee from his empl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch as ESI and PF needs to be clearly distinguished from the employee's contribution towards welfare funds. Employee's contribution is employee own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee contribution, the employers get unjustly enriched by keeping the money belonging to the employees. Clause (va) of sub-section (1) of Section 36 of the Act was inserted to the Act vide Finance Act 1987 as a measures of penalizing employers who mis-utilize employee's contributions. Accordingly, in order to provide certainty, it is proposed to- (i) amend clause (va) of sub-section (1) of section 36 of the Act by inserting another explanation 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 (ii) 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that even though the Delhi High Court in the case of Bharat Hotels Ltd. (supra) had held in favor of the revenue, however the Hon'ble High Court in that case (Bharat Hotels Ltd.) had not considered the earlier Division Bench judgment of the Delhi High Court which was binding on a Division Bench in the case of CIT vs. Aimil Ltd. Ors. Reported in 321 ITR 508 (Delhi) wherein the head notes reads as under: Late deposit of PF and ESI - During the assessment proceedings, the Assessing Officer (AO) found that the assessee had deposited employers' contribution as well as employees' contribution towards provident fund and ESI after the due date, as prescribed under the relevant Act/Rules. Accordingly, he made addition of ₹ 42,58,574/- being employees' contribution under Section 36(1)(va) of the Act and ₹ 30,68,583/- being employers' contribution under Section 43B of the Act. CIT(A) deleted the addition by holding that the assessee had made the payment before the due date of filing of the return, which was a fact apparent from the record - that if the employees' contribution is not deposited by the due date prescribed under the relevant Acts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erabad Bench decision in ACIT vs. Nava Bharat Ventures Ltd. (2021) 10 TMI 403 wherein Tribunal was pleased to direct deletion of the disallowance made by the AO in respect of the payment of employees contribution to ESI/PF. Therefore he prayed that the disallowance made by authorities below be deleted on this score. 17. Have heard both the parties. We note that the Finance Bill, 2021 has brought in an amendment which disallows the employees' contribution made in PF and ESI if not made within the due date as prescribed by the respective statutes (PF and ESI Act). So after the amendment has been inserted according to Shri Miraj D. Shah takes effect from 1st April, 2021 i.e. AY 2021-22 and subsequent assessment year and if the remittance of PF/ESI Employees' Contribution is not made within the time prescribed by the PF/ESI Act then the remittance cannot be allowed as a deduction which is prospective in operation. Whereas according to Ld. CIT(A), the amendment brought in is clarificatory in nature so, retrospective in operation. So we have to adjudicate this issue whether the amendment brought in by Finance Act, 2021 is prospective or retrospective in operation. We note th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en we adjudicate whether the view of Ld. CIT(A) that the explanation 2 brought in by Finance Act, 2021 is retrospective, let us look at the Notes on Clauses and the relevant clauses 8 9 of the Finance Bill, 2021 (supra) pertaining to the issue in hand which in clear and unambiguous terms spells out the intention of Parliament that the amendment shall take effect from 1st April, 2021 and therefore will accordingly apply to Assessment Year 2021-22 and subsequent years. So since the legislative intent is clear, the amendment brought in by Finance Act, 2021 on this issue as discussed is prospective and Ld. CIT(A) erred in holding otherwise. So till AY 2021-22, the Jurisdictional High Court's view in favor of assessee will hold good and is binding on us. As discussed the decision of the Hon'ble Delhi High Court in Bharat Hotels Ltd. (supra) which was in favor of revenue has not considered the decision of the Co-ordinate Division Bench decision in M/s. Aimil Ltd. (supra) which is in favour of assessee. So we note that later decision of the Delhi/Hyderabad Tribunal have followed the decision favouring assessee in the light of the Hon'ble Supreme Court decision in M/s. Veget ..... X X X X Extracts X X X X X X X X Extracts X X X X
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