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TMI Blog2022 (5) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the prevailing situation of Covid-19 Pandemic. 3. Since, the facts of both the cases are identical, we have heard these cases together and passing the order together. The facts and grounds are taken from the folder of Lalit Kumar Chabra in ITA No. 71/JP/2022 and this case is taken as lead case. In this appeal the assessee has raised following grounds:- 4. There was delay of about 157 days in filling this appeal. The assessee has moved an application for seeking the condonation of delay vide their application dated 10.01.2022. The contentions raised in the petition are that the order was passed by NFAC, Delhi on 17.05.2021. Due to pandemic Covid-19, offices of the counsels remained closed from mid-March till 31.05.2021. That on 27.04.2021, owing to the new surge of cases, the Supreme Court vide miscellaneous Application no. 665/2021 in SMW (C) No. 03/2020, restored its order dated 23.03.2020 and 08.03.2021 (whereby limitations were extended originally) and further suspended limitation under general or special laws in respect of all judicial or quasi-judicial proceedings till further orders under article 142 read with article 141 and listed the matter for 19.07.2021. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rincipal of natural justice and various other statutory, principal of natural justice and various other statutory reasons and hence, kindly be deleted. 4. That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing. 8. The main issue arises in this appeal of the assessee is regarding disallowance of employee s contribution of PF and ESI deposited after the due date under the specified act but before due date of filing of return of income U/s 139(1) of the Income Tax Act, 1961 (in short, the Act). 9. The assessee filed its return of income on 30.09.2018 which was processed u/s 143(1) of the Act whereby an adjustment was made on account of disallowance of claim of deduction with respect to employees contribution towards PF and ESIC deposited after the due date specified under the respective Act. During the course of assessment proceedings, the CPC, Bangalore made disallowance of Rs.6,95,850/- on account of late deposit of employees contribution towards PF/ESI as prescribed under the respective act but before due date of filling return of income. The assessee challenged the said adjustment before the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that various courts have considered that Section 43B of the Act is applied only to the extent of the Employer's contributions and has uphold the disallowances made on delayed payments on account of Employee's contribution. Thus, this issue has become a debatable. However, certain amendments to the sections 43B 36(10)(va) of the Act were made in the Finance Bill of 2021 by insertion of Explanations to those sections. Explanation 5 to Section 43B, reads as under:- Explanation 5. -For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applies. Explanation 2 to section 36(1)(va) reads 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. 5.1 It may be noted that both the explanations use the phrase shall not apply and shall be deemed never to hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid. To curb this practice, it is proposed to provide that deduction for any sum payable by the assessee by way of tax or duty under any law for the time being in force (irrespective of whether such tax or duty is disputed or not) or any sum payable by the assessee as an employer by way of contribution to any provident fund, or superannuation fund or gratuity fund or any other-fund for the welfare of employees shall be allowed only in computing the income of that previous year in which such sum is actually paid by him. (emphasis supplied) It could be seen that at each instance, the Memorandum mentions only employers' contribution and not employees' contribution . Similarly, sec 43B(b) also specifically mentions 'employer's contribution and not employees' contribution . The only conclusion to be drawn is that employee's contribution to PF ESI would not be covered by sec 43B. 5.2 The present amendment to Sec 43B of the Act through insertion of Explanation 5 and to Sec 36(1)(va) of the Act through insertion of Explanation 2, serve to only reiterate and reinforce this intention of the Legislature. Firstly, as discussed earlier in this order, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as well. There is a distinction between employer's 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 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 438 does not apply and deemed to ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is lacuna Explanation 2 was inserted by the Finance Act, 1989 with retrospective effect from 01/04/1984. While making the amendment the memorandum to Finance Bill was quite specific in stating that the amendment by way insertion of the Explanation 2 is with retrospective effect from 01/04/1984. The controversy and various interpretations gained a quietus by the decision of the Hon ble Supreme Court in the case of Allied Motors (P) Ltd. vs. CIT reported in 91 Taxman 205 (SC).Therein, it was held that the proviso to Section 43B allowing payment till the due date for filing the return was to have retrospective effect from 01/04/1984 even though the same was inserted w.e.f. 01/04/1984. While holding so, Hon'ble Supreme Court took into account the intent of the proviso as well as of the Explanation 2 and taking a combined view of both the amendments, it held that the proviso has been brought in to cure undue difficulty for the tax payers and hence held to be having retrospective application. It is therefore now settled law that the proviso to Sec 43B itself has retrospective effect as held by the Hon'ble Supreme Court in the case of Allied Motors (supra). It naturally follows th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and the explanatory notes to Finance Act 1983, that employees' contribution was never intended to be covered by Sec 43B of the Act. This has been reiterated and reinforced through Explanation 5 to Sec 43B and Expl 2 to Sec 36(1)(va) inserted by Finance Act 2021. If such was the intention of the Legislature expressly made clear in the Finance Act 2021, through the explanatory notes, it would necessarily to be held that Expl 5 to Sec 43B Expl 2 to Sec 36(1)(va) would apply to all pending matters as on date. On these arguments, it is held that the late payment of PF, ESI etc are not covered by Sec 43B of the Act. 5.5 The Appellant has also relied on the decision of the Hon'ble Rajasthan High Court in the case of CIT vs. JWNL RRVUNL (2014) 363 ITR 307 (Raj.) in his favor. These decisions are not applicable in the present case of the appellant in view of the subsequent clarifications and explanations brought in the Finance Act by the Parliament in this regard by inserting explanations to 36(1)(va) and 43B (cited supra). 6. Admittedly in the present appeal, the facts indicate that the sum of Rs. 6,95,850/- being employees contribution to PF/ESI has been paid late ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees contribution towards PF and ESI and depositing the same in the government account before the due date of filing of return of income U/s 139(1) of the Act was settled and decided in favour of the assessee by various binding precedents of Hon ble High Courts including the Jurisdictional High Court. The limited controversy is whether the amendment brought to Section 36(1)(va) as well as 43B of the Act is applicable retrospective or from assessment year 2021-22 as it is specifically stated in the memorandum of Finance Bill, 2021. At the outset, it is noted that the Coordinate Bench of this Tribunal in the case of M/s Kogta Financial (India) Ltd. Vs CPC (supra) has considered this issue in para 5 to 7 as under: 5. We have heard the rival contentions and perused the material available on record. In case of Mohangarh Engineers and Construction Company vs DCIT, CPC (Supra), speaking through one of us, we have extensively dealt with the identical matter relating to employee s contribution towards ESI/PF and our findings therein read as under:- 13. We have heard the rival contentions and perused the material available on record. On perusal of the details submitted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), 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 liability of payment of PF or other contribution referred to in Clause (b) are paid within the due date under the respective enactments by the assessees and not under the due date of filing of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 6. In the instant case, admittedly and undisputedly, the employees 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, the ld D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, I find that there are express wordings in the said memorandum which says these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . In the instant case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his issue and by following decisions of the Coordinate Benches of the Tribunal, this issue was decided in favour of the assessee by holding that amendment in Section 36(1)(va) as well as Section 43B of the Act by way of inserting the explanation vide Finance Bill, 2021 are applicable only from A.Y. 2021-22 and subsequent assessment years and therefore, the said amendment is not applicable to the assessment year under consideration. 4.8. Similar view has been taken by the Delhi Benches of the Tribunal in the case of Chatru Mal Garg Vs ACIT (supra) in para 7 as under: 7. I have heard the rival submissions and perused the materials on record. The issue in the present ground is with respect to disallowance under section 36(1)(va) of the Act. It is an undisputed fact that there has been slight delay in the deposit of employees contribution of PF and ESI by the assessee and the contribution have been deposited beyond the due date prescribed by the relevant authorities but at the same time it is also a fact that the amounts have been deposited with the appropriate authorities by the assessee before filing the return of income for the relevant assessment year. I find that Hon b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on towards PF ESIC deposited before due date of filing of return of income U/s 139(1) of the Act amounting to Rs. 2,90,435/- is deleted. 15. Respectfully following the order of this Bench in the case of Shri Sanjay Porwal (supra), the disallowance made on account of employees contribution towards PF ESI deposited before due date of filing of return of income u/s 139(1) of the Act amounting to Rs. 6,95,850/- is deleted and thus, the appeal of the Assessee in ITA NO. 71/JPR/2022 is allowed. 16. The fact of the case in ITA No. 72-JP-2022 is similar to the case in ITA No. 71-JP-2022 and we have heard both the parties and persuaded the materials available on record. The bench has noticed that the issues raised by the assessee in this appeal No. 72/JP/2022 is equally similar on set of facts and grounds. Therefore, it is not imperative to repeat the facts and various grounds raised by both the parties. Hence, the bench feels that the decision taken by us in ITA No. 71/JPR/2022 for the Assessment Year 2018-19 shall apply mutatis mutandis in the case of Lalit Kumar Chabra in ITA No. 72-JP-2022 for the Assessment Year 2019- 20. 17. In the result, both the appeals of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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