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TMI Blog2022 (3) TMI 1310X X X X Extracts X X X X X X X X Extracts X X X X ..... the amended provisions of Section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year under consideration i.e. 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue raised in assessee s appeal is allowed. Decided in favour of assessee. - ITA. No. 18/JP/2022 And ITA. No. 33/JP/2022 And ITA. No. 24, 25 And 26/JP/2022 And ITA. No. 28/JP/2022 - - - Dated:- 22-2-2022 - Shri N.K. Saini, Vice President And Dr. S. Seethalakshmi, JM For the Assessee : Shri Rohan Sogani (C.A.), Shri B.P. Mundra (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. 18/JP/2022 Pratap Technocrats Private Limited ITBA/NFAC/S/250/2021-22/1038137853( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of operation and maintenance of telecom towers. The assessee has filed its Income Tax return (ITR) for the assessment year 2018-19 on 31.10.2018 declaring total income of ₹ 24,87,27,450/-. Subsequently the return of the assessee company was processed U/s 143(1) of the IT Act, 1961 (herein after referred as to Act) vide intimation dated 24.12.2019, wherein CPC made disallowance of ₹ 5,61,32,750/- and thereby creating demand of ₹ 1, 70,86,793/-. 5. Being aggrieved by the impugned order issued U/s 143(1) of the IT Act, the assessee is preferred an appeal before the 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 2 to 15. 6. The assessee before the ld. CIT(A) contended that when the amount of employee s contribution to ESI PF is deposited before the due date of filing of return of income, no disallowance U/s 36(1)(va) can be made and that this issue is settled in favour of the assesseee by the judgments of Hon ble Supreme Court, which are produced as under:- CIT vs. Rajasthan State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal, which may require attention of this Court. Hon ble Delhi Court CIT vs. AIMIL Ltd [2010] 188 Taxman 265 (Delhi) [PB 36-42] ...17. if the employees' contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income-tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed. 18. We, thus, answer the question in favour of the assessee and against the Revenue. As a consequence, the appeals filed by the assesses stand allowed and those filed by the Revenue are dismissed... CIT vs. P.M. Electronics Ltd [2009] 177 Taxman 1 (Delhi [PB 4346] 1. . . .The only issue which arises for consideration is the allowability of deduct ion under sect ion 36(1) (va) read with sect ion 2(24) (x) and sect ion 43(B) to the assessee in respect of employer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dyar Ananda Bhavan vs. ACIT in ITA No. 402 403/Chny/2021 order dated 08.12.2021 where in the Tribunal held that 6.9 Thus, from the above, it is clear that the amendment brought in the statue i.e., by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the act amended by inserting explanation in prospective and not retrospective. Hence, the amended provisions of Section 43B r.w.s. 36(1)(va) of the act are not applicable for the assessment year 2018-19 but will apply from assessment year 2021- 22 and subsequent assessment year. Hence, this issue of assessee s appeal is allowed. 10. Similarly the Jaipur Bench of the ITAT in the case of Dhabriya Polywood Ltd. vs. ADIT, CPC, Bengaluru 133 taxmann.com 135 (Jaipur- Trib.) held as under:- Admittedly and undisputedly, the employee s contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act. Further, it is noted that the ld CIT(A) has referred to the explanation to section 36(1)(va) and section 43B introduced by the Finance Act, 2021 and has also referred to the rationale of the amendme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the contribution of PF ESI belated in terms of section 36(1)(va) of the Act, however, the said deposits were made prior to filing of return of income u/s 139(1) of the Act. 8.1 Identical issue with the similar facts have already been adjudicated by the various Benches of the ITAT. 8.2 In the case of Harendra Nath Biswas vs DCIT Koltaka, ITA No. 186/Kol/2021 for the A.Y. 2019-20, similar issue has been decided vide order dated 16.7.2021 by the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribution before filing of Return of Income. Therefore, the assessee succeeds and we allow the appeal of the assessee. 9. Similar view has been taken by the ITAT Hyderabad SMC Bench in ITA No. 644/Hyd./2020 for the AY 2019-20 in the case of Salzgitter Hydraulics Private Ltd, Hyderabad vs ITO vide order dt 15.6.2021. The relevant findings given in para 2 of the said order read as under:- 2. Coming to the sole substantive issue of ESI/PF disallowance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Sec.43(B)(b) and analyzing the judgments rendered, in our view as well, it is clear that the legislature brought in the statute Section 43(B)(b) to curb the activities of such tax payers who did not discharge their statutory liability of payment of dues, as aforesaid; and rightly so as on the one hand claim was being made under Section 36 for allowing the deduction of GPF, CPF, ESI etc. as per the system followed by the assessees in claiming the deduction 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 dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e PF and ESI dues are paid after the due date under the respective statues but before filing of the return of income under section 139(1), the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act. 17. We further note that though the ld. CIT(A) has not disputed the various decisions of Hon ble Rajasthan High Court but has decided to follow the decisions rendered by the Hon ble Delhi, Madras, Gujarat and Kerala High 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2002-03 the assessee had deposited employer s contribution as well as employees contribution towards provident fund and ESI after the due date, as prescribed under the relevant Act/Rules but before the due date for filing the return under the Income-tax Act: Held accordingly, that no disallowance could be made in view of the provisions of Section 43B as amended by the Finance Act, 2003. 15. From the above discussion, it is 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 ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atuity 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 sub-section (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 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 behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... everages Corporation Ltd 392 ITR 2 and similar other decisions on this issue. 17. In the present case, we have gone through the observation of ld. CIT(A), recorded in para 5 page-24 to 27of the impugned order which reads as under:- After considering the appellant's submission, I find that the provision of section 43B of the Act is not applicable to the expenses in the nature of employees contribution towards EPF/ESIC which were not paid within the due date as specified under Section 36(1)(va) of the Act. The provision of Section 43B being a non- obstante clause starting with the wording Notwithstanding anything contained in any other provisions of this Act, a deduction otherwise allowable under this Act .. , the deduction which is otherwise not allowable as per provision of section 36(1)(va) will not get any support from provision of Section 43B. I have gone through the various decisions of High Courts and Hon. Supreme Court on the issue of deduction pertaining to delayed payments of employees' contribution towards PF/ESIC. Most of the court decisions such as the decision of Hon'ble Delhi High Court in the case of CIT vs AIMIL Ltd. 321 ITR 508 a.s well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income Tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Supreme Court in Vinay Cement (supra). The above findings clearly indicate that the Hon'be Delhi High Court had decided the issue of deduction of employees contribution to PF/ESIC on the basis of Hon'ble Apex Court in the case of M/s Vinay Cements Ltd. whereas M/s Vinay Cement Ltd. decision dealt with only the issue of Section 43B(b) deduction pertaining to employers contribution. Even the whole text of judgment in the case of M/s AIMIL Ltd. discussed the issue of Section 43B(b) deduction pertaining to employers contribution and on no occasion, the Hon'ble Court dealt with the provision of 36(1)(va) r.w.s. 2(24)(x) of the Act before the decision on delayed payments of employees contribution to PF/ESIC deduction. Thus, the Hon'ble Gujarat High Court decision in the case of Gujarat State Road Transport Ltd. took into account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in the case of Rajasthan Beverages Corporation Ltd 392 ITR 2. This decision of Honble Rajasthan High Court is based on an earlier decision of the same High Court in the case of CIT vs State Bank Of Bikaner and Jaipur 363 ITR 70.After going through the texts of judgment in the case of State Bank of Bikaner and Jaipur, I find that this decision of Honble Rajasthan High Court was based on the decision of Hon ble Apex Court in the case of Vinay Cements Ltd(supra). As already discussed in the foregoing paras as to how the decisions of various high courts based on the Honble Apex Court decision in the case Vinay Cements Ltd fall in the category of subsilentio decision as the issue in the case of Vinay Cemnts Ltd was pertaining to s.43B(b) deduction on delayed payments of Employers contribution to PF/ESIC and not the Employees contributions. Thus, such sub-silentio decisions loose binding precedence . In view of these discussions, I hold that the appellant is not eligible for deduction of ₹ 5,61,32,750/- pertaining to employees contribution. Also, the AO was well within his jurisdiction u/s 143(1)(a)(ii) of the Act to disallow an incorrect claim of ₹ 5,61,32,750/- ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes 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 on Clauses show that the legislature is fully aware of 3 concepts: (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. Thus, it was a conscious decision of the legislature, even when the legislature knew the implication thereof and took note of the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 'hardships' only of the assessee, not of the Department. On the contrary, imposing a retrospective levy on the assessee would have caused undue hardship and for that reason Parliament specifically chose to make the proviso effective from June 1, 2002. 19. As per ratio laid down by the judgment of Hon ble Supreme Court in Vatika Township P. Ltd. (Supra), there cannot be imposition of any tax without the authority of l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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