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TMI Blog2022 (2) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case is a company engaged in the business of trading in chemicals. The return of income for the year under consideration was filed by it on 28/10/2017 declaring total income of Rs. 37,96,850/-. In the said return, dividend income of Rs. 2,86,695/- and long term capital gains of Rs. 39,919/- was claimed to be exempt by the assessee and a disallowance of Rs. 42,110/- was offered u/s 14A of the Act on account of direct expenses incurred in relation to the said exempt income on account of D-MAT charges. During the course of assessment proceedings, the Assessing Officer found that direct expenses in the form of STT paid amounting to Rs. 24,174/- were also incurred by the assessee in relation to the earning of exempt income and the same, therefore, were liable to be disallowed as per Clause (i) of Rule 8D(2). He also invoked Clause (ii) of Rule 8D (2) and made a further disallowance of Rs. 2,37,473/- being 1% of the annual average of the monthly average of the opening and closing balances of the value of the investment, income from which was exempt from tax. Accordingly, a total disallowance of Rs. 2,61,647/- was made by the Assessing Officer u/s 14A r.w.r. 8D. On appeal, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds by relying on CBDT Circular No. 22/2015 dated 17.12.2015 and by taking note of the decision of Hon'ble Gujrat High Court in the case of M/s Gujrat State Road Transport (supra) and ITAT (Mumbai) decision in the case of M/s LKP Securities(supra) that the employees contribution to PF/ESI can be allowed only if the same has been deposited within the due date prescribed under the respective Act (PF and ESI Act) and not before the due date of filing of return of income. On appeal, the Ld. CIT(A) has taken note of the amendment brought in by Finance Act, 2021, by virtue of it has been clarified that Section 43B does not apply to Section 36(1)(va) of the Act and it is deemed to never have been applied to a sum received by the assessee from any of his employees to which provisions of Section 2(24)(x) applies. And thus according to Ld. CIT(A), it is a clarificatory amendment and so is retrospective in operation and therefore he upheld the action of AO which action of Ld. CIT(A) has been challenged before us. 9. Assailing the action of Ld. CIT(A) the Ld. A.R. Shri Miraj D Shah submitted that the amendment brought in by the Finance Act 2021 is prospective in nature and for buttressing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n so as to include with effect from 1979, "income payable for service rendered in India". 19. When the Explanation seeks to give an artificial meaning to "earned in India" and brings about a change effectively in the existing law and in addition is stated to come into force with effect from a future date, there is no principle of interpretation which would justify reading the Explanation as operating retrospectively. 23. This being the case, Explanation 3C is clarificatory - it explains Section 43B(d) as it originally stood and does not purport to add a new condition retrospectively, as has wrongly been held by the High Court. 24. Third, any ambiguity in the language of Explanation 3C shall be resolved in favour of the assessee as per Cape Brandy Syndicate v. Inland Revenue Commissioner (supra) as followed by judgments of this Court - See Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 at paras 60 to 70 per Kapadia, C.J. and para 333, 334 per Radhakrishnan, J." 10. And according to Ld. A.R. the Ld. CIT(A) erred in holding the later amendment brought in by Finance Act, 2021 to be retrospective and for that proposition he cited the Constitution Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 1980-1981 because the amended provision was brought on the statute book after the assessment years in question. 30. In conclusion, we therefore, hold that the amendment which was brought by Parliament to the Explanation to Section 73 by the Finance (No 2) Act 2014 was with effect from 1 April 2015. In its legislative wisdom, the Parliament amended Section 43(5) with effect from 1 April 2006 in relation to the business of trading in derivatives, Parliament brought about a specific amendment in the Explanation to Section 73, insofar as trading in shares is concerned, with effect from 1 April 2015. The latter amendment was intended to take effect from the date stipulated by Parliament and we see no reason to hold either that it was clarificatory or that the intent of Parliament was to give it retrospective effect. 31. The consequence is that in A.Y. 2008-2009, the loss which occurred to the assessee as a result of its activity of trading in shares (a loss arising from the business of speculation) was not capable of being set off against the profits which it had earned against the business of futures and options since the latter did not constitute profits and gains of a spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clause, "due date" to mean the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. Section 43B specifies the list of deductions that are admissible under the Act only upon their actual payment. Employer's contribution is covered in clause (b) of section 43B. According to it, if any sum towards employer's contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date for furnishing the return of the income under subsection (1) of section 139, assessee would be entitled to deduction under section 43B and such deduction would be admissible for the accounting year. This provision does not cover employee contribution referred to in clause (va) of sub-section (1) of section 36 of the Act.. Though section 43B of the Act covers only employer's contribution and does not cover employee contribution, some courts have applied the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Jurisdictional Calcutta High Court is binding on this issue as held in the case of CIT vs. M/s Vijayshree Ltd. in ITAT No.243 of 2011 & GA No. 26607 of 2011, CIT vs. Philips Carbon Black Ltd. in GA No. 1382 of 2014 & ITAT 31 of 2014, CIT vs. M/s Coal India Ltd. in ITA 12 of 2015, M/s Akzo Nobel India Ltd. vs. CIT in ITA No. 110 of 2011 and therefore the claim of the assessee should be allowed. According to him, the jurisdictional High Court's decision on this issue is therefore binding on this Tribunal ; and since the employees' contribution was remitted by the assessee before the due date of filing of return of income u/s 139(1) of the Act it is an allowable deduction. Therefore he wants us to overturn the decisions of the lower authorities and uphold the claim of deduction on this issue. 14. Per contra, the Ld. D.R. Shri Jayanta Khanra supporting the decision of authorities below has contended that the Hon'ble Delhi High Court in the case of CIT vs. Bharat Hotel Ltd. in 410 ITR 417 has decided this issue in favour of the revenue and the Delhi Tribunal has followed the order of the Hon'ble Delhi High Court in Bharat Hotel (supra) and upheld the action of the Department disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act is concerned, the assessee can get the benefit of deduction if the actual payment is made before the return is filed as per the principle laid down by the Hon'ble Supreme Court in Vinay Cements reported in 213 CTR 268 (SC). Therefore, according to Ld. A.R., since the later judgment of the Division Bench of Hon'ble Delhi High Court in Bharat Hotels Ltd.(supra) did not consider the Co-ordinate Bench decision as the case of CIT vs. Aimil Ltd. (supra) it cannot be a stare-decise. And moreover it is settled position of law that when there is conflict between two decisions of the High Court of equal strength [(DB) in this case], it cannot be said that later judgment need to be followed, unless a Full Bench of the High Court settled the issue either wise. However, when it comes to fiscal statutes, according to Shri Miraj D Shah, in such circumstance [i.e, conflict of decisions/views of Benches of same strength and when there is no decision on the issue of jurisdictional High Court] then, the decision in favour of assessee should be followed as held by the Hon'ble Supreme Court in the Vegetable Products Ltd. 82 ITR 192 (SC) wherein it is settled when two views/interpretations are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the removal of doubts, it is hereby clarified that the provisions of Section 43B shall not apply and shall be deemed never to have been applied for the purpose of determining the 'due date' under this clause' 18. We find that this amendment has been brought in the Act to provide certainty about the applicability of Section 43B in respect of belated payment of employees' contribution. In order to test whether the amendment brought in later is retrospective or not one has to apply the test as laid by the Hon'ble Supreme Court in the case of M/s Snowtex Investment Ltd. (supra) wherein the Hon'ble Supreme court took note of the law laid down on this issue by the Constitution Bench in M/s Vatika Township Ltd. and held that the intent of the Parliament/legislature need to be looked into for ascertaining whether the amendment should be retrospective or not. In Vatika Township Ltd. (supra) the Hon'ble Supreme Court held that the notes on clauses appended to the Finance Bill will throw light as to the legislative intent; because it has to be borne in mind that Parliament/legislature is aware of three concepts before an amendment is brought in, which can be discerned from reading of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed payment of employees contribution towards Provident Fund. Ground No. 3 of the assessee's appeal is allowed. 8. As regards the issue raised in Ground No. 4 relating to the addition of Rs. 2,61,647/- made by the Assessing Officer and confirmed by the ld. CIT(A) on account of disallowance u/s 14A while computing the book profit of the assessee company u/s 115JB of the Act, it is observed that this issue is squarely covered in favour of the assessee by the decision of the Special Bench of the Tribunal at Delhi in the case of ACIT v Vireet Investments Pvt Ltd-58 1TR 313 Delhi (SB) wherein it is held that no disallowance u/s 14A r.w.r. 8D can be made while computing book profit of the assessee company u/s 115JB of the Act. However, Clause (f) of Explanation 1 to Section 115JB of the Act provides that the amount or amounts of expenditure relatable to any income to which Section 10 [other than the provisions contained in Clause (38) thereof] is required to be added while computing the book profit u/s 115JB of the Act and this amount has to be worked out by the Assessing Officer independently without reference to Section 14A or Rule 8D. I accordingly restore this issue to the file of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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