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TMI Blog2022 (4) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2021-22 and subsequent assessment years. In the present case also, before insertion of Explanation 2 to Section 36(1)(va) of the Act, there is ambiguity regarding due date of payment of employees contribution on account of provident fund and ESI, whether the due date is as per the respective Acts or up to the due date of filing of return of income of the assessee. As noted in the case of CIT vs. Vatika Township Pvt. Ltd [ 2014 (9) TMI 576 - SUPREME COURT] amendment made to a taxing statute can be said to be intended to remove hardship only of the assessee and not of the Department. Imposing of a retrospective levy on the assessee would cause undue hardship and for that reason Parliament specifically chose to make the proviso affective from a particular date. In the present case also, the amendment brought out by Finance Act, 2021 by way of Explanation-2 to s. 36(1)(va) of the Act along with Explanation-5 to s. 43B of the Act w.e.f. 01.04.2021 i.e. for and from assessment year 2021-22, cannot be applied retrospectively. Thus, from the above, it is clear that the amendment brought in the statute i.e., by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PF/ESI is not to be allowed as per section 36(1)(va). The Finance Bill 2021 recently introduced in the Parliament has also clarified by inserting explanation in section 36 of the Income Tax Act, 1961 to the above effects as under. Explanation 2 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 purposes of determining the due date under this clause. 4. Aggrieved by the order of the Ld.CIT(A), the assessee filed appeal before the Tribunal and raised the following grounds of appeal. The order of the learned Commissioner of Income Tax(Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as CIT(A') is bad and unsustainable in the eyes of law as the same is passed without proper application of mind, as it is also contrary to the spirit and provisions of the Income Tax Act, 1961 (hereinafter referred to as the Act ). The only dispute in this appeal is the addition of ₹ 92,679/- made by the CIT(Appeals) National faceless assessment centre, towards disallowance of employee's contribution to PF ESI. The appellant sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade within the due date of filing of return of income. The Revenue has disputed that the employees contribution received by the assessee would be treated as income of the assessee because the same has not been deposited in the Government account within the due date as prescribed under the respective Acts. 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. This amendment has brought in the statute book to provide certainty about the applicability of provisions of Section 43B of the Act in spite of belated payment of employees contribution. We also noted from the memorandum explaining the provisions to Finance Act, 2021, wherein relevant Clauses to said memorandum clearly intended that the amendment shall take effect from 01.04.2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years. The relevant Clauses 8 9 of the memorandum explaining th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 measures of penalizing employers who mis-utilize employee s contributions. Accordingly, in order to provide certainty, it is proposed to (i) amend clause (va) of sub-section (1) of section 36 of the Act by inserting another explanation to the said clause to clarify that the provision of section 43B does not apply and deemed t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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