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TMI Blog2022 (3) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... hing the return of income. 1.2 On the facts and circumstances of the case the learned Commissioner of Income Tax (Appeals) has erred in disallowing the claim in respect of belated remittance of Employee's provident fund based on the insertion to explanation to section 36 of Income Tax Act, 1961 by the Finance Act, 2021 has prospective effect and not explanation to section 36 by Finance Act, 2021 has prospective effect and not retrospective effect. Hence, the addition of Rs. 24,53,002/- needs to be deleted. Your appellant seeks leave to add to, to amend any of the foregoing grounds as and when considered necessary/at the time of hearing." 3. Brief facts of the case are as follows: The assessee filed its returns of income for the assessment year 2018-2019 on 30.10.2018 declaring income of Rs. 6,99,75,320 and for assessment year 2019-2020 on 26.10.2019 declaring income of Rs. 8,74,24,310. Notices u/s. 143(1)(a) of the Income Tax Act (the Act) were served on the assessee wherein the CPC proposed to disallow Provident fund and ESI contribution amounting to Rs. 24,53,002 for A.Y. 2018-2019 and Rs. 7,69,184 for A.Y. 2019-2020 u/s. 36(1)(va). 4. The assessee submitted the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s State Insurance and Employees Provident Fund as long as the same has been paid within the return filing date as per 139(1) of the Act. 7. The CIT (A) dismissed the appeals of the assessee on the following grounds (i) That with reference to employees' contribution to PF and ESI, referred to the provisions of section 2(24)(x) and 36(1)(va) of the Act and held that section 36(1)(va) specifically covers the employees' contribution to PF and ESI the same cannot be considered under any other provisions including the provisions of section 37 or section 43B. (ii) That section 43B of the Act relates to allowing certain deductions only on actual payments. Clause (b) of section 43B provides that any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees shall be allowed (irrespective of the previous year in which the liability pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year, in which such sum is actually paid by him. Proviso t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the "due date" under this clause." 8.2. Finance Act, 2021 also amended section 43B by inserting explanation 5 thereto which reads thus:- "Explanation 5. - For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applies." 8.3. The CIT(A) based on various judicial pronouncements held that the amendment to section 36(1)(va) by inserting explanation 2 and the amendment to section 43B by insertion to explanation 5 by the Finance Bill 2021 was only declaratory/clarificatory in nature and therefore was applicable with retrospective effect and dismissed the appeal of the assessee. 9. Aggrieved by the orders of the CIT(A), the assessee has filed this appeal before us. Following are the issues for our consideration (i) Whether the assessee would be entitled to deduction of employees' contribution to PF and ESI provided the payments were made prior to the due date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agraph-38 of the PF Scheme provides for Mode of payment of contributions. As provided in sub para (1), the employer shall, before paying the member, his wages, deduct his contribution from his wages and deposit the same together with his own contribution and other charges as stipulated therein with the provident fund or the fund under the ESI Act within fifteen days of the closure of every month pay. It is clear that the word "contribution" used in Clause (b) of Section 43B of the IT Act means the contribution of the employer and the employee. That being so, if the contribution is made on or before the due date for furnishing the return of income under sub-section (1) of Section 139 of the IT Act is made, the employer is entitled for deduction. 21. The submission of Mr. Aravind, learned counsel for the revenue that if the employer fails to deduct the employees' contribution on or before the due date, contemplated under the provisions of the PF Act and the PF Scheme, that would have to be treated as income within the meaning of Section 2(24)(x) of the IT Act and in which case, the assessee is liable to pay tax on the said amount treating that as his income, deserves to be reje ..... X X X X Extracts X X X X X X X X Extracts X X X X
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