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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 ..... of the return of income u/s 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee. - ITA. No. 250/JP/2021 And ITA. No. 310/JP/2021 And ITA. No. 35/JP/2022 - - - Dated:- 1-3-2022 - Shri N.K. Saini, Vice President And Dr. S. Seethalakshmi, JM For the Assessee : Shri Surendra Shah (C.A.), Shri P.C. Godha (C.A.), Shri Anil Garg (C.A.) For the Revenue : Smt. Runi Pal (Addl. CIT) ORDER PER: DR. S. SEETHALAKSHMI, J.M. All these above appeals by the different assessees are directed against the separate orders of the CIT(Appeal), National Faceless Appeal Centre, (NFAC), Delhi, as per following details: Sl.No. Appeal No. Name of Case DIN Order No. Order dt. 1. ITA No. 250/JP/2021 Group Zero ITBA/NFAC/S/250/2021-22/1036740753(1) 05/11/2021 2. ITA No. 310/JP/2021 Karni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A). The assessee filed complete details of the entire payments i.e. employee s PF ESI contribution paid before the due date of filing of return of income which are produced in CIT(A) order at pages 4 to 11. 6. In first appeal the assessee carried the matter before the CIT(A) who confirmed the disallowance made by AO by observing as under:- 4. Observation and decision: 4.1 The CPC Bangalore has been the addition/adjustment of ₹ 5,70,356/- u/s 143(1) of the Income Tax Act, 1961 on the ground that those payments were not made before the due date as per Section 36(1)(va) of the Income Tax Act, 1961. Appellant has filed this appeal against the addition/adjustment u/s 143(1) of the Income Tax Act, 1961. 4.2 The appellant has contended that the payments deposited as Employee Contribution under ESI and EPF are allowable even if deposited beyond the due date specified in the prescribed ESI and EPF Act but before the due date of filing of ITR. The contention of the appellant is that once the payment has been made before the due date of filing of ITR, the benefit of deduction is allowable to the appellant for ESI and EPF. 4.3 I have gone throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressly not apply to the Employee's contribution. 4.3.2 It is also pertinent to refer to the Explanatory Notes to Finance Bill 2021 which states that clause (va) of Sub-section (1) of the Section 36 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 provides that due date means 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. This provision does not cover employee contribution referred to in clause (va) of sub-section. (1) of Section 36 of the Act. The Explanatory Memorandum to Finance Bill 2021 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (MP) (vi) The decision of CIT vs. Alom Extrusions Ltd. The Hon'ble Supreme Court 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 employer's contribution as per Section 43B(b) of the Act and not employees contribution u/s 36(1)(va) of the Act. (vii) An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision of an explanation can add to and widen the scope of the main section. 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. [Shyam Sunder vs. Ram Kumar (2001) 8 SCC 24 (para 44)] [Brij Mohan Das Laxman Das vs. CIT (1997) 138 CTR (SC) 214] 4.4 In view of the above discussion, decisions of the various High Courts as discussed supra, the explanation and the intention of the legislature set out through the Memorandum to the Finance Act, 2021, it is evident that the employee's contribution was never intended to be covered by Section 43B. This has been reiterated and reinf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minor delay in depositing the contribution but same has been deposited before due date of filing of return u/s 139(1) of the IT Act, 1961 which is verifiable from the Tax audit report and CIT(A) order. Hon ble Bench, ITAT, Jaipur by following the binding judgments of Rajasthan High Court in the case of CIT Jaipur v/s JVVNL (2014) 265 CTR 62 and in other cases, has consistently held that if the Employees contribution of PF ESI is deposited before due date of filing return, no disallowance could be made u/s 43 B or 36(1)(va) of the Income Tax Court. Hon'ble Bench has also in number of cases including in appellant's own case has held that the as the explanation inserted by the Finance Bill, 2021 section 43B and Sec 36(1)(va) has prospective effect and the same will be applicable only from 01-04-2021. The appellant relying on the various judgments of the Hon ble Bench including in its own case prays that addition made by CPC on account of late deposit of Employees contribution to PF ESI aggregating to ₹ 570356.00 may kindly be deleted as same were deposited prior to due date of filing of Income Tax Return for A Y 2018-19. 9. The reliance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITAT B Bench, Kolkata. The Relevant findings have been given in para 4 of the said order, which read as under;- 4. We have heard both the parties and perused the record. First of all we do not countenance this action of the Ld. CIT(A) for the simple reason that the Explanation 5 was inserted by the Finance Act, 2021, with effect from 01.04.2021 and relevant assessment year before us is AY 2019-20. Therefore the law laid down by the Jurisdictional Hon ble High Court will apply and since this Explanation- 5 has not been made retrospectively. So we are inclined to follow the same and we reproduce the order of Hon ble Calcutta High Court in the case of Vijayshree Ltd. supra wherein the Hon ble Calcutta High Court has taken note of the Hon ble Supreme Court decision in CIT vs. Alom Extrusion Ltd. reported in 390 ITR 306. The Hon ble Calcutta High Court s decision in Vijayshree Ltd. supra is reproduced as under: This appeal is at the instance of the Revenue and is directed against an order dated 28th April, 2011 passed by the Income Tax Appellate Tribunal, A Bench, Kolkata in ITA No.1091/Kol/2010 relating to assessment year 2006- 07 by which the Tribunal dismissed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of ₹ 1,09,343/- and ₹ 3,52,622/-, the assessee s and revenue s stand is that the same has been paid before the due date of filing sec. 139(1) return and after the due date prescribed in the corresponding statutes; respectively. I notice in this factual backdrop that the legislature has not only incorporated necessary amendments in Sections 36(va) as well as 43B vide Finance Act, 2021 to this effect but also the CBDT has issued Memorandum of Explanation that the same applies w.e.f. 1.4.2021 only. It is further not an issue that the forergoing legislative amendments have proposed employers contributions; disallowances u/s 43B as against employee u/s 36 (va) of the Act; respectively. However, keeping in mind the fact that the same has been clarified to be applicable only with prospective effect from 1.4.2021, I hold that the impugned disallowance is not sustainable in view of all these latest developments even if the Revenue s case is supported by the following case law. (i) CIT vs. Merchem Ltd, [2015] 378 ITR 443(Ker) (ii) CIT vs. Gujarat State Road Transport Corporation (2014) 366 ITR 170 (Guj.) (iii) CIT vs. South India Corporation Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction i.e. accrual basis and the same was being allowed, as the liability did exist but the said amount though claimed as a deduction was not being deposited even after lapse of several years. Therefore, to put a check on the said claims/deductions having been made, the said provision was brought in to curb the said activities and which was approved by the Hon'ble Apex Court in the case of Allied Motors (P) Ltd. (supra). 21. A conjoint reading of the proviso to Section 43-B which was inserted by the Finance Act, 1987 made effective from 01/04/1988, the words numbered as clause (a), (c), (d), (e) and (f), are omitted from the above proviso and, furthermore second proviso was removed by Finance Act, 2003 therefore, the deduction towards the employer's contribution, if paid, prior to due date of filing of return can be claimed by the assessee. In our view, the explanation appended to Section 36(1)(va) of the Act further envisage that the amount actually paid by the assessee on or before the due date admissible at the time of submitting return of the income under Section 139 of the Act in respect of the previous year can be claimed by the assessee for deduction ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Courts. Given the divergent views taken by the various High Courts and in the instant case, the fact that the jurisdiction over the Assessing officer lies with the Hon ble Rajasthan High Court, in our considered view, the ld CIT(A) ought to have considered and followed the decision of the jurisdictional Rajasthan High Court, as evident from series of decisions referred supra, as the same is binding on all the appellate authorities as well as the Assessing officer under its jurisdiction in the State of Rajasthan. 18. In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the addition by way of adjustment while processing the return of income u/s 143(1) amounting to ₹ 4,38,530/- so made by the CPC towards the delayed deposit of the employees s contribution towards ESI and PF though paid well before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted as the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act in view of the binding decisions of the Hon ble Rajasthan High Court. 11. Since the facts of the present cases are identical to the facts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that there are series of decisions of various Hon ble High Courts on this issue and even Hon ble Jurisdictional High Court in the case of M/s. Industrial Security Intelligence India P Ltd., (supra) held that the payment of employees contribution in regard to PF ESI if made before the due date of filing of return of income u/s.139(1) of the Act, the same is allowable as deduction as per the provisions of Section 2(24)(x) r.w.s. 36(1)(va) r.w.s. 43B of the Act. Now, the question arises, whether by the Finance Act, 2021, the provisions of Section 36(1)(va) by inserting the Explanation 2 r.w.s. 43B of the Act have been amended, whereby it is clarified that the provisions of Section 43B of the Act shall not apply and shall be deemed ought to have been applied for the purpose of determining the due date under this clause. In our opinion, this amendment has been brought in the statute book to provide certainty about the applicability of provisions of Section 43B of the Act inspite of belated payment of employee s contribution. We also noted from the memorandum explaining the provisions to Finance Act, 2021, wherein relevant Clauses to said memorandum clearly intended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Though section 43B of the Act covers only employer s contribution and does not cover employee contribution, some courts have applied the provision of section 43B on employee contribution as well. There is a distinction between employer 40 contribution and employee s contribution towards welfare fund. It may be noted that employee s contribution towards welfare funds is a mechanism to ensure the compliance by the employers of the labour welfare laws. Hence, 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e merely clarificatory nor is there any material to suggest that it was intended by parliament. The Hon ble Supreme Court finally held that the proviso to Section113 of the Act is prospective and not retrospective. For this proposition their lordships of the Hon ble Supreme Court observed at page 495 as under:- Notes on Clauses appended to Finance Bill, 2002 while proposing insertion of proviso categorically states that this amendment will take effect from 1st June, 2002 . These become epigraphic 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 few other amendments in the Income Tax Act were made by the same Finance Act specifically making those amendments retrospectively. For example, clause 40 seeks to amend S.92F. Clause iii (a) of S.92F 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. This amendment takes effect retrospectively from 01.04.2002. Various other amendments also take place retrospectively. The Notes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a stipulation is contained in second proviso to subsection (3) of Section 2 of Finance Act, 2003. This proviso reads as under: Provided further that the amount of income-tax computed in accordance with the provisions of section 113 shall be increased by a surcharge for purposes of the Union as provided in Paragraph A, B, C, D or E, as the case may be, of Part III of the First Schedule of the Finance Act of the year in which the search is initiated under section 132 or requisition is made under section 132A of the income-tax Act. Addition of this proviso in the Finance Act, 2003 further makes it clear that such a provision was necessary to provide for surcharge in the cases of block assessments and thereby making it prospective in nature. The charge in respect of the surcharge, having been created for the first time by the insertion of the proviso to Section 113, is clearly a substantive provision and hence is to be construed prospective in operation. The amendment neither purports to be merely clarificatory nor is there any material to suggest that it was intended by Parliament. Furthermore, an amendment made to a taxing statute can be said to be intended to remove 'ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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