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TMI Blog2022 (6) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(1) of the IT Act, 1961 (herein after referred to as Act) vide intimation dated 16.10.2019, wherein CPC made disallowance of Rs. 2,47,833/- & Rs. 21,067/- total Rs. 2,68,900/- and thereby creating demand of Rs. 8,01,217/-. 4. 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. 5. 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 assessee by the judgments of Hon'ble High Courts, which are produced as under:- * "Rajasthan Renewable Energy Corp. Ltd. August 6, 2019 (Raj HC) Contribution towards provident fund -- HELD THAT:- It is not in dispute that this Court in Commissioner of Income Tax vs. M/S. State Bank of Bikaner and Jaipur (2014) Rajasthan High Court! binds and covers the dispute against the revenue. However the learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. The Ld. AR for the assessee at the time of hearing submitted that the payment to employee's contribution towards PF and ESI was made before the date of filing the return of income by the assessee U/s 139(1) of the Act. The ld. Counsel for the assessee apart from that relied on the decisions in case of Dhabriya Plywood Ltd. vs. ADIT, CPC, Bengaluru 133 taxmann.com 135 (Jaipur-Trib.), Nazin Ahmad vs. ADIT in ITA No. 269/JP/2021 and Ravi Goenka vs. ADIT in ITA No. 265 & 268/JP/2021. Further, he relied on the decision of the Chennai Bench of the ITAT in the case of M/s. Adyar 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases, it is noticed that an identical issue having similar facts has already been adjudicated by the ITAT, Jodhpur Bench in the aforesaid referred to cases, wherein one of us is author of the order dated 27/09/2021. In the said order it has been held vide paras 7 to 11 in ITA No. 59/Jodh/2021 for the assessment years 2015-16 in the case of Mohangarh Engineers and Construction Company Vs. DCIT and in the case of Bikaner Ceramics Private Limited, Bikaner Vs. ADIT, CPC, Bengaluru, in ITA No. 60/Jodh/2021 for the A.Y. 2019-20 as under:- 7. We have considered the submission of both the parties and perused the material available on record. 8. In the present cases, it is not in dispute that the assessees deposited 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 Kolkata, 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, K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act. We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal. Urgent xerox certified copy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities." In the light of the aforesaid discussion we do not accept the Ld. CIT(A)'s stand denying the claim of assessee since assessee delayed the employees contribution of EPF & ESI fund and as per the binding decision of the Hon'ble High Court in Vijayshree Ltd. (supra) u/s. 36(1)(va) of the Act since assessee had deposited the employees contribution 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 Rs. 1,09,343/- and Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The issue is no more res integra in light of series of decisions rendered by the Hon'ble Rajasthan High Court starting from CIT vs. State Bank of Bikaner & Jaipur (supra) and subsequent decisions. 15. In this regard, we may refer to the initial decision of Hon'ble Rajasthan High Court in case of CIT vs. State Bank of Bikaner & Jaipur wherein the Hon'ble High Court after extensively examining the matter and considering the various decisions of the Hon'ble Supreme Court and various other High Courts has decided the matter in favour of the assessee. In the said decision, the Hon'ble High Court was pleased to held as under: "20. On perusal of Sec. 36(1)(va) 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 allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g such deposit on or before the return of income under sub-section (1) of Section 139 of the IT Act. 23. Thus, we are of the view that where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(1)(va) of the IT Act." 16. The said decision has subsequently been followed in CIT vs. Jaipur Vidyut Vitran Nigam Ltd. (supra), CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (supra), and CIT vs Rajasthan State Beverages Corporation Limited (supra). In all these decisions, it has been consistently held that where the 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Fund should be made within the time mentioned in section 36(1)(va), that is, the time allowed under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, as well as the Employees' State Insurance Act, 1948, it treated as retrospective in nature. If the employees' contribution is not deposited thereafter, the employer not only pays interest and delayed payment but can incur penalties also, for which specific provisions are made in the those Acts. In so far as Income-tax Act, 1961, is concerned, the assessee can get the benefit of deduction of the payments, if the actual payment is made before the return is filed. Where for the assessment 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." 14. From the above discussion, it is clear that there are series of decisions of various Hon'ble High Courts on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te. Explanation to the said clause provides that, for the purposes of this clause, "due date" to mean the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been processed at Rs. 8,01,217/- after making adjustment u/s. 143(1)(a)(ii) for Rs. 2,68,900/- by disallowing PF and other contribution paid after due date prescribed by respective labour laws, out of sum collected from employees contribution to PF/ESIC etc. The assessee has stated that disallowance of Rs. 2,68,900/- was not in accordance with the provision of Section 43B of the Act as the said amount were duly remitted before the due date of filling of return of income. The appellant has referred to the decisions of various High Courts including the decision of jurisdictional Rajasthan High Court in the case of Rajasthan State Beverages Corporation Ltd. 392 ITR 2 and similar other decisions on this issue. 16. In the present case, we have gone through the observation of ld. CIT(A), recorded in para 9 page- 7 to 12 of the impugned order which reads as under:- "9. Determination 9.1 The 1st and 2nd grounds of appeal pertain to the adjustment done by the CPC on account of delayed deposit of employees contribution to PF and ESI and are taken up together for adjudication. 9.2 The provision of Section 143(1) is reproduced below: 143.(1) Where a return has been made under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplies, provided such sum is credited to the employees account in the relevant fund on or before the due date. 9.4.3 A deduction from the amount of income received by the employer from employees as contributions to any provident fund or superannuation fund etc. is provided u/s. 36(1)(va). According to this section any sum received by the appellant from any of his employees to which the provisions of section 2(24)(x) will be allowed as deduction, is such sum is credited by the appellant to the employee's account in the relevant fund or funds on or before the due date. "Due date" here means the date by which the appellant is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued there under or under any standing order, award, contract of service or otherwise. 9.4.4 The Act also allows certain deductions, one of them being the employers contribution to the PF and ESI, u/s. 43B of the Act. 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. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shing 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 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 employer get unjustly enriche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the wordings at para 9.4.8 & 9.4.9, it is also clear that the above clarificatory amendment brought in by the Finance Act, 2021 applies to the issue in the instant appeal also. While in the Explanatory Memorandum to the Finance Bill, it was stated that "these amendments will take effect from 1st April, 2021 and will accordingly apply to the as moment year 2021-22 and subsequent assessment years", but the said lines are not there in the Finance Act, 2021, which has been finally passed by the Parliament and received Presidential Assent. 9.4.13 Reference is also made to the Supreme Court Judgement in the case of Commissioner of Income Tax-I, Ahmedabad vs Gold Coin Health Food Pvt. Ltd. (2008) 304 ITR 308, wherein while dealing with a similar issue, Hon'ble Supreme Court in Para 15 of its decision has quoted the following: "In Principles of Statutory Interpretation, 11th Edn. 2008, Justice G.P. Singh has stated the position regarding retrospective operation of statutes as follows: "The presumption against retrospective operation is not applicable to declaratory statutes. As stated in Craies and approved by the Supreme Court: For modern purposes a declaratory Act may be def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative or merely declaratory of the previous law retrospective operation is generally intended.... An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 468-69)". "where a statute is passed for the purpose of supplying an obvious omission in a former statute or to 'explain' a former statute, the subsequent statute has relation back to the time when the prior Act was passed. The rule against retrospectively is inapplicable to such legislations as are explanatory and declaratory in nature."- Zile Singh vs. State of Haryana, (2004) 8 SCC 1. 9.4.14 Thus, it can be safely concluded that the clarificatory amendment brought out by the Finance Act, 2021 will be applicable to the issue in the instant appeal also. It is also clear that the scope of Section 43B and Section 36(1)(va) are different and thus, there is no question of reading both provisions together to consider as to whether the taxpayer is entitled to deduction in respect of the sum belatedly paid towards such contribution, especially when such sum is, admittedly, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Section 113 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 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions 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 sub-section (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 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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