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TMI Blog2022 (5) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 2 is 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 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. - ITA. No. 79 & 80/JP/2022 ITA. No. 311/JP/2021 - - - Dated:- 25-4-2022 - DR. S. SEETHALAKSHMI, JM And SHRI RATHOD KAMLESH JAYANTBHAI, AM Assessee by : Shri Manish Agarwal (C.A.) Shri P.C. Godha (C.A.) Revenue by : Ms. Monisha Choudhary (JCIT) 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. 311/JP/2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, the intimation issued deserves to be quashed. 1.1. On the facts and in the circumstances of the case the ld. CIT(A) has grossly erred in confirming the disallowance of Rs. 2,45,637/- made u/s 36(1)(va) r.w.s. 2(24)(x) of the Income Tax Act, 1961 of deduction claimed on account of payment of contribution of employees provident fund by brushing aside the submission that as per the provision of section 43B of the Act, assessee s claim has to be allowed where the contribution is deposited before the due date or filing of return of income. Thus the addition of Rs. 2,46,637/- deserves to be deleted. 1.2 That the ld. AO has further erred in ignoring the fact that the deduction was claimed on the basis of ruling of jurisdictional High Court prevailing at the time of filing return of income. Appellant prays that no liability can be fastened upon the assessee on the basis of subsequent amendment made in statue, therefore consequent disallowance deserves to be deleted. 2. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal. 7. Brief facts of the case are that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO rightly invoked provisions of S.143(1)(a)(ii) of the Act and made the adjustment for such incorrect claim made by the assessee. 12. During the course of hearing the ld. AR of the assessee prayed that the ld. CIT(A)/NFAC, Delhi has erred in sustaining the addition of Rs. 2,45,637/- on account of late payment of ESI/PF u/s 36(1)(va) of the I.T. Act. The ld. AR also relied upon ITAT, Jaipur Bench Judgment dated 11.03.2022 in ITA No. 46/JP/2022 for the assessment year 2018-19 in the case of Shri Vinod Kumar Sharma vs. CPC, Bengaluru/ACIT, Circle-1, Kota wherein the Bench had deleted the addition confirmed by the CIT(A) on similar issue. This, the ld. AR prayed that the addition confirmed by the ld. CIT(A) on account of late deposit of PF and ESI contribution may kindly be deleted. 13. The reliance was also placed on the decisions of the ITAT Jaipur Bench in the following cases:- Moona Dewan vs. CPC, Bengalure in ITA No. 282/JP/2021 dated 19.01.2022 (Jaipur-Trib.) M/s Punjab Engineering Works vs. DCIT in ITA No. 132/JP/2021 dated 15.11.2021 (Jaipur-Trib.) M/s Mohanlal Khatri vs. ACIT in ITA No. 144/JP/2021 dated 29.11.2021 (Jaipur-Trib.) 14. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the appeal preferred by the Revenue against the order of CIT(A). The only issue involved in this appeal is as to whether the deletion of the addition by the AO on account of Employees Contribution to ESI and PF by invoking the provision of Section 36(1)(va) read with Section 2(24)(x) of the Act was correct or not. It appears that the Tribunal below, in view of the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (2000) 242 ITR 114 (Ker) (iv) CIT vs. GTN Textiles Ltd. (2004) 269 ITR 282 (Ker) (v) CIT vs. Jairam Sons [2004] 269 ITR 285 (Ker) The impugned ESI/PF disallowance is directed to be deleted therefore. 10. On an identical issue, this Bench of the Tribunal vide order dated 12.8.2021 in the case of Mohangarh Engineers and Construction Company, Jodhpur Others vs CPC, Banglore in ITA No. 5/J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a). 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 out of their gross total income. It is also clear that Sec.43B starts with a notwithstanding clause would thus override Sec.36(1) (va) and if read in isolation Sec. 43B would become obsolete. Accordingly, contention of counsel for the revenue is not tenable for the reason aforesaid that deductions out of the gross income for payment of tax at the time of submission of return under Section 139 is permissible only if the statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Rs 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 involved in the aforesaid referred to cases, therefore respectfully following the earlier orders as referred to herein above of the different Benches of the ITAT, the impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing 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 F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 the provisions are reproduced as under:- Rationalisation of various Provisions Payment by employer of employee contribution to a fund on or before due date Clause (24) of section 2 of the Act provides an inclusive definition of the income. Sub-clause (x) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 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 to never have been applied for the purposes of determining the [1] due date‖ under this clause; and (ii) amend section 43B of the Act by inserting Explanation 5 to the said section to clarify that the provisions of the said section do not apply and deemed to never have been ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for the first time by the insertion of proviso to Section 113 of the Act, by Finance Act, 2002, it is clearly a substantive provision and is to be construed as prospective in operation. The Hon ble Supreme Court held that the amendment neither purports to be 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, would be prospective i.e. it will take effect from 1st June, 2002. (f) Finance Act, 2003, again makes the position clear that surcharge in respect of block assessment of undisclosed income was made prospective. Such 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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