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TMI Blog2022 (3) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Since the issues involved are common in all the above appeals and the appeals were heard together, therefore, these are being disposed off by this common order for the sake of convenience and brevity. 3. As a lead case, for deciding the appeals, we take ITA No. 250/JP/2021 for the A.Y. 2018-19 wherein following grounds have been raised by the assessee. "1.That the ld CIT(Appeals), National Faceless Appeal Centre, Delhi has erred in law in sustaining the addition made by CPC Banglore under Section 2(24)(x) read with section 36(1)(va) jof the Act of Rs. 3,97,112 and Rs. 1,73,243 on account of late deposit of employees contribution of PF and ESI respectively without appreciating the fact that the same was deposited before due date of filing of return and by not following the binding decision of jurisdictional High Court of Rajasthan that if the employees contribution is deposited before due date, no disallowance could be made u/s 36(1)(va) of the Act. 2. That without prejudice to the ground no. (1), the Ld. CIT(A), NFAC, Delhi is further wrong and has erred in law in holding that explanation 2 to section 36(1)(va) introduced by Finance Act, 2021 is prospective in nature and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the provisions of ESI Act or any other fund for the welfare of such employees. It needs to be emphasized that the employer's contribution towards welfare funds such as ESI and EPF is clearly distinguishable from the employee's contribution towards welfare funds. Employee's contribution is employee's own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee contribution, the employer gets unjustly enriched by keeping the money belonging to the employees. 4.3.1 Clause (va) of sub-section (1) of Section 36 of the Income Tax Act, 1961 was inserted vide Finance Act 1987 w.e.f. 1/4/1988 as a measure of penalizing those employers who mis-utilize employee's contributions. It is relevant to note that the Finance Act, 2021 has inserted explanations to Section 36(1)(va) as well as Section 43B. Explanation 2 to Section 36(1)(va) reads as under: - For the removal of doubts, it is hereby clarified that the provisions of section 43 B shall not apply and shall be deemed never to have been applied for the purposes of determining the "due date" under this clause. Further, Explanation 5 to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, it needs to be stressed that the employer's contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the employee's contribution towards welfare funds. 4.3.3 It is relevant to refer to the following case laws which have been decided against the appellant. (i) M/s Unifac Management Services (India) Pvt. Ltd. vs DCIT The Hon'ble Madras High Court vide its order dated October 23, 2018 has held "scope of Section 43B and Section 36(1)(va) is different and there is no question of reading both provisions together to consider as to whether the assessee is entitled to deduction in respect of the sum belatedly paid towards such contribution, especially when such sum is admittedly, a sum received by the assessee /employer from his employee. Therefore, for considering such question, application of Section 36(1)(va) rms. 2 (24)(x) alone is the proper course and any other interpretation would defeat the object and scope of both the provisions viz., 43B and 36(1)(va). Accordingly, the writ petition fails and the same is dismissed." (ii) Hon'ble Kerala High Court in CIT vs. Merchem Ltd. 378 ITR 443 (Ker) held that in case of employee's co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by assessee against the appeal order dated 05-11-2021 passed by Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi in Appeal No 2/10849/19-20. The appeal is filed against assessee has raised following grounds of appeal. 1. That the ld. CIT(Appeals), National Faceless Appeal Centre, Delhi has erred in law in sustaining the addition made by CPC Banglore under section 2(24)(x) read with section 36(1)(va) of the act of Rs. 3,97,113 and Rs. 1,73,243 on account of late deposit of Employees contribution of PF and ESI respectively without appreciating the fact that the same was deposited before due date of filing of return and by not following the binding decision of jurisdictional High Court of Rajasthan that if the employees contribution is deposited before due date, no disallowance could be made u/s 36(1)(va) of the Act. 2. That without prejudice to the ground no. (1), THE LD. Cit(a), NFAC, Delhi is further wrong and has erred in law in holding that explanation 2 to section 36(1)(va) introduced by Finance At, 2021 is prospective in nature and therefore disallowance confirmed by CIT(A) on this account is wrong and bad in law. 3. That the appellant craves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Admitted facts of the present case are that the payments of PF & ESI contribution relating employee's contribution are before the due date of filing of return of income U/s 139(1) of the Act. We have noted that the issue under consideration is covered by the decision of the Coordinate Bench in case of M/s Mohanlal Khatri vs. ACIT in ITA No. 144/JP/2021 order dated 29.11.2021 (Supra) wherein it is held as under:- "7. I have considered the submissions of both the parties and perused the material available on record. In the present cases, it is noticed that an identical issue having similar facts has already been adjudicated by the ITAT, Jodhpur Bench in the aforesaid referred to cases, wherein one of us is author of the order dated 27/09/2021. In the said order it has been held vide paras 7 to 11 in ITA No. 59/Jodh/2021 for the assessment years 2015-16 in the case of Mohangarh Engineers and Construction Company Vs. DCIT and in the case of Bikaner Ceramics Private Limited, Bikaner Vs. ADIT, CPC, Bangaluru, in ITA No. 60/Jodh/2021 for the A.Y. 2019-20 as under:- 7. We have considered the submission of both the parties and perused the material available on record. 8. In the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter going through the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., we find that the Supreme Court in the aforesaid case has held that the amendment to the second proviso to the Sec 43(B) of the Income Tax Act, as introduced by Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from 1st April, 1988. Such being the position, the deletion of the amount paid by the Employees' Contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act. We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal. Urgent xerox certified copy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities." In the light of the aforesaid discussion we do not accept the Ld. CIT(A)'s stand denying the claim of assessee since assessee delayed the employees contribution of EPF & ESI fund and as per the binding decision of the Hon'ble High Court in Vijayshree Ltd. (supra) u/s 36(1)(va) of the Act since assessee had deposited the employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome u/s 139(1) and the last of such deposits were made on 16.04.2019 whereas due date of filing the return for the impugned assessment year 2019- 20 was 31.10.2019 and the return of income was also filed on the said date. Admittedly and undisputedly, the employees's contribution to ESI and PF which have been collected by the assessee from its employees have thus been deposited well before the due date of filing of return of income u/s 139(1) of the Act. 14. The issue is no more res integra in light of series of decisions rendered by the Hon'ble Rajasthan High Court starting from CIT vs. State Bank of Bikaner & Jaipur (supra) and subsequent decisions. 15. In this regard, we may refer to the initial decision of Hon'ble Rajasthan High Court in case of CIT vs. State Bank of Bikaner & Jaipur wherein the Hon'ble High Court after extensively examining the matter and considering the various decisions of the Hon'ble Supreme Court and various other High Courts has decided the matter in favour of the assessee. In the said decision, the Hon'ble High Court was pleased to held as under: "20. On perusal of Sec.36(1)(va) and Sec.43(B)(b) and analyzing the judgments rendered, in our view as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been obtained by them in the shape of the amount having been claimed as a deduction but the said amounts were not deposited. It is pertinent to note that the respective Act such as PF etc. also provides that the amounts can be paid later on subject to payment of interest and other consequences and to get benefit under the Income Tax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or before the return of income under sub-section (1) of Section 139 of the IT Act. 23. Thus, we are of the view that where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(1)(va) of the IT Act." 16. The said decision has subsequently been followed in CIT vs. Jaipur Vidyut Vitran Nigam Ltd. (supra), CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (supra), and CIT vs Rajasthan State Beverages Corporation Limited (supra). In all these decisions, it has been consistently held that where the PF and ESI dues are paid after the due date under the respective statues but before f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Ld. CIT(A) are deleted." 12. A similar issue has been decided by the Hon'ble Delhi High Court in the case of CIT vs. AIMIL Ltd., (2010) 321 ITR 508 wherein it has been held as under:- "The deletion with effect from April 1, 2004 by the Finance Act, 2003 of the second proviso to section 43B of the Income-tax Act, 1961, which stipulates that contributions to the provided fund and Employees State Insurance Fund should be made within the time mentioned in section 36(1)(va), that is, the time allowed under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, as well as the Employees' State Insurance Act, 1948, it treated as retrospective in nature. If the employees' contribution is not deposited thereafter, the employer not only pays interest and delayed payment but can incur penalties also, for which specific provisions are made in the those Acts. In so far as Income-tax Act, 1961, is concerned, the assessee can get the benefit of deduction of the payments, if the actual payment is made before the return is filed. Where for the assessment year 2002-03 the assessee had deposited employer's contribution as well as employees' contribution towards provident fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation to the said clause provides that, for the purposes of this 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 there-under 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 retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2014) 367 ITR 466, wherein the Hon'ble Supreme Court held that unless contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. The law passed today cannot be applied to the events of the past. The Hon'ble Supreme Court held that if somebody does something today, he do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. According to Hon'ble Apex court every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit, which means law looks forward not backward. In the case of Vatika Township Pvt. Ltd., (Supra), the issue under challenge before Hon'ble Supreme Court was the insertion of proviso to section 113 of the Act by the Finance Act 2002 for charging of surcharge. Hon'ble Supreme Court noted that though provision for surcharge under the Finance Acts have been in existence since 1995, the charge of surcharge with respect to block assessments, having been created ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary, specific stipulation is added making the provision effective from 1st June, 2002. (e) There is yet another very interesting piece of evidence that clarifies the provision beyond any pale of doubt, viz. understanding of CBDT itself regarding this provision. It is contained in CBDT circular No.8 of 2002 dated 27th August, 2002, with the subject "Finance Act, 2002 - Explanatory Notes on provision relating to Direct Taxes". This circular has been issued after the passing of the Finance Act, 2002, by which amendment to Section 113 was made. In this circular, various amendments to the Income Tax Act are discussed amply demonstrating as to which amendments are clarificatory/retrospective in operation and which amendments are prospective. For example, explanation to Section 158BB is stated to be clarificatory in nature. Likewise, it is mentioned that amendments in Section 145 whereby provisions of that section are made applicable to block assessments is made clarificatory and would take effect retrospectively from 1st day of July, 1995. When it comes to amendment to Section 113 of the Act, this very circular provides that the said amendment along with amendments in Section 158BE, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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