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TMI Blog2022 (5) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... e objective and purpose of insertion of Section 43B applied it to both the contributions. It also observed clearly that Section 43B is with a non-obstante clause and therefore over ride even if, anything otherwise is contained in Section 36 or any provision of Act 1961. Therefore, we are clearly of the view that Section 43B is rightly applied in respect to both contributions i.e. employer and employee - Decided in favour of Assessee. - ITA Nos. 1 & 2/LKW/2022 - - - Dated:- 27-4-2022 - SHRI. A. D. JAIN , VICE PRESIDENT And SHRI T. S. KAPOOR , ACCOUNTANT MEMBER For the Appellant : Rakesh Garg , Advocate For the Respondents : Harish Gidwani , D. R. ORDER Per A. D. Jain , VP These are assessee's appeals against the respective orders of the Ld. CIT(A), NFAC, New Delhi, both dated 15.12.2021, for Assessment Years 2018-19 and 2019-20, raising the following common grounds of appeal, except the difference in amount: 1. Because the CIT (A) has erred on facts and in law in upholding the disallowance of Rs. 3,38,882/- (for Assessment Year 2018-19) and Rs. 8,19,475/- (for Assessment Year 2019-20) being employees contribution to ESIC and EPF under section 43B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see further submitted that the issue involved in these appeals is squarely covered in favour of the assessee by the judgment of the Hon'ble Jurisdictional High Court, in the case of 'Sagun Foundry (P.) Ltd. vs. CIT', [2017] 78 taxmann.com 47 (Allahabad), wherein, the Hon'ble High Court has relied upon and referred to the decision of the Hon'ble Supreme Court in the case of 'CIT vs. Alom Extrusions Ltd.', [2009] 319 ITR 306. It was submitted that therefore, the additions sustained by learned CIT(A) be deleted. 5. The Ld. D.R., on the other hand, placing reliance on the orders of the Ld. CIT(A), has submitted that the Ld. CIT(A) has relied on a number of case laws for sustaining the addition. In this regard, our attention was invited to the findings of the learned CIT(A). Placing reliance on the order of the Ld. CIT(A), the Ld. D.R. submitted that an amendment was brought in by the Finance Act, 2021, which is clarificatory or of curative nature, and has retrospective effect, and therefore, the addition sustained by the Ld. CIT(A) be upheld. 6. We have heard the rival parties and have gone through the material placed on record. We find that with regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll towards employers contributory provident fund and disallowed the same under Section 43B of Act 1961. He also disallowed the said amount of Rs. 1,93,55,580/- from expenses claimed by Assessee for the A.Y. in question i.e. 2005-06 as per provisions under Section 43B. Dissatisfied with assessment order, Assessee preferred appeal before CIT(A) who vide order dated 25.06.2009 partly allowed the same and deleted disallowance of Rs. 24,89,41,130/- (short fall in employees' contribution to provident fund) and Rs. 1,93,55,580/- (short fall in employers' contribution to provident fund) observing that employees' contribution/employers' contribution was deposited before filing Return under Section 139(1) of Act 1961 for the relevant period. Revenue, in its turn, preferred appeal before Tribunal. Relying on judgment in Commissioner of Income Tax vs. Alom Extrusions Ltd. (supra), Tribunal dismissed appeal and confirmed order passed by CIT(A). That is how matter came before High Court in appeal. Court considered following question, posed in para 7.01, reads as under: Short question which is posed for consideration of this court is with respect to the disallowance of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the assessee has not credited the said sum to the employees' account in the relevant fund or funds on or before the due date mentioned in the Explanation to Section 36(1)(va), the assessee shall not be entitled to deductions of such amount in computing the income referred to in Section 28 of the Act. 20. Gujarat High Court distinguished judgment of Commissioner of Income Tax vs. Alom Extrusions Ltd. (supra) on the ground that therein actual dispute relates to employers' contribution and whether amendment in Section 43B by Finance Act, 2003 would operate retrospective or not, Supreme Court had no occasion to consider deduction with reference to Section 36(1)(va). For the same reason Gujrat High Court dissented with the judgments of Rajasthan High Court in Commissioner of Income-Tax vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd., (2014) 366 ITR 163, Punjab Haryana High Court in Commissioner of Income-Tax vs. Hemla Embroidery Mills P. Ltd., (2014) 366 ITR 167, Himachal Pradesh High Court in Commissioner of Income Tax vs. Nipso Polyfabriks Ltd., (2013) 350 ITR 327 and Karnataka High Court in Commissioner of Income-Tax vs. Sabri Enterprises, (2008) 298 ITR 141. 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of any sum payable by the assessee as an employer by way of contribution to any fund such as provident fund shall be allowed if it is paid on or before the due date as contemplated under Section 139(1) of the Income Tax Act. This provision has nothing to do with the consequences, provided for under the PF Act/PF Scheme/ESI Act, for not depositing the contribution on or before the due dates therein. (emphasis added) 22. It also said that the word contribution used in clause (b) of Section 43B of Act 1961 means the contribution of employer and employee, both, and that being so, if contribution is deposited on or before due date for furnishing Return of income under sub-section (1) of Section 139 of Act 1961, employer is entitled for deduction. 23. Though in a short judgment, but Punjab Haryana High Court in Commissioner of Income Tax vs. Hemla Embroidery Mills (P.) Ltd., (supra) not only followed Commissioner of Income Tax vs. Alom Extrusions Ltd. (supra) but also its own earlier judgment in Commissioner of Income Tax vs. Rai Agro Industries Ltd., (2011) 334 ITR 122, to hold that Section 43B shall apply to both 'contributions' i.e. employers' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t inserted first proviso w.e.f. 01.04.1988 which inter alia provides that any sum payable by Assessee by way of tax, duty, cess or fee, if payment is made after closing of accounting year but before date of filing of Return under Section 139(1), Assessee would be entitled to deduction on actual payment basis. This proviso did not include within its ambit, contributions under labour welfare statutes. By Finance Act, 1988, Second Proviso thus Second proviso was further amended by Finance Act, 1989 w.e.f. 01.04.1989. 27. Court held that Assessee/employer thus would be entitled to deduction only if contribution stands credited on or before due date given in the Act 1952 or Act 1948. Second proviso created difficulties, inasmuch as under Act, 1981, due date was after the date of filing of returns and thus industries made representations to the Ministry of Finance. Court, looking to the history of amendments held, it is evident that Section 43B, when enacted in 1984, commences with a non obstante clause. The underlying object being to disallow deductions claimed merely by making a book entry based on the mercantile system of accounting. At the same time, Section 43B made it mandator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find expedient to dissent therewith. 30. In view of above all the questions formulated above are answered against Revenue and in favour of Assessee. 8. We find that in the aforesaid judgment passed by Hon'ble Jurisdictional High Court, the Hon'ble Court has dealt with various case laws of different High Courts and the Hon'ble Apex Court, and has decided the issue in favour of the assessee. 9. The Lucknow Bench of the Tribunal, in the following cases, has decided a similar issue in favour of the assessee, following the judgment in the case of 'Sagun Foundry' (supra): 1. 'Tirubala International Pvt. Ltd. vs. DCIT' in I.T.A. No. 726/Lkw/2016, order dated 17.05.2018. 2. 'Axis Motors Pvt. Ltd. vs. DCIT' in I.T.A. No. 289/Lkw/2019, order dated 31.7.2019. 10. As regards the argument of Ld. D.R. that after the passing of the judgment in the case of 'Sagun Foundry' (supra), there has been amendment in section 36(1)(va) of the Act, we find that the said amendment is applicable w.e.f. 1.4.2021 and is prospective in nature and not retrospective. 11. The Allahabad Bench of the Tribunal, in the case of 'JCIT, Circle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 139(1) of the 1961 Act. The above amendment from the plain reading of the Section indicates that it ought to have retrospective effect, but on perusal of Memorandum to Finance Bill 2021, it transpires that the lawmakers have consciously made it applicable from ay: 2021-22 and subsequent assessment years. It is also recognised in the said Memorandum that some courts have applied the provision of section 43B on employee contribution as well and have decided this issue in favour of taxpayer. The said explanation was inserted to rationalise the provisions of Section 36(1)(va) and 43B of the 1961 Act and it is stated in Memorandum to Finance Bill, 2021 that the said explanation is inserted to provide certainty. It is specifically stated in Memorandum to Finance Bill, 2021 that these amendments to Section 36(1)(va) and 43B shall take effect from 01st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years. It is also to be noted that several of the tax-payers (except in the State of Gujarat and Kerala, and such other States where Hon'ble jurisdictional High Court has decided this issue in favour of Revenue) situated in the States where Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 contribution and employee's contribution towards welfare fund. It may be noted that empl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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