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TMI Blog2022 (7) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... /ESI which was added to income of the assessee u/s. 36(1)(va) read with Section 2(24)(x) along with relevant paid challans, for verification. While passing the above order, we also note that several Division Benches of ITAT across Country have now passed appellate orders, even after considering the amendments made to Section 36(1)(va) and 43B of the 1961 Act by Finance Act, 2021, holding that if the employee share of PF/ESI is deposited by employer to the credit of employee with the relevant fund maintained for PF/ESI before the due date of filing of return of income u/s. 139(1) of the 1961 Act, then the tax-payer shall be entitled for deduction u/s. 36(1)(va) of the 1961 Act. The assessee succeeds in this appeal. - ITA No. 21/VNS/2021 - - - Dated:- 7-7-2022 - SHRIVIJAY PAL RAO , JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER Appellant by : Sh. R. K. N. Jaiswal , Advocate Respondent by : Sh. A. K. Singh, Sr. DR ORDER PER SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER : This appeal, filed by assessee with Income Tax Appellate Tribunal, Circuit Bench, Varanasi(hereinafter called the tribunal ), being ITA No. 21/VNS/2021, is directed against an appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided under the relevant statute governing PF/ESI but claimed by assessee to have been deposited before the due date for filing of return of income as prescribed u/s. 139(1) of the 1961 Act, the assessee filed second appeal with tribunal. The ld. Counsel for the assessee opened arguments and submitted that the employee share of PF/ESI which is collected by employer is to be allowed as deduction u/s. 36(1)(va) of the 1961 Act despite the same being deposited late to the credit of employee with relevant fund concerning PF/ESI beyond the due date prescribed for depositing the said amount under the relevant statute concerning PF/ESI, provided the same is deposited before the due date of filing of return of income u/s. 139(1) of the 1961 Act. It was stated by ld. Counsel for the assessee before the Bench, that the entire amount of PF/ESI payable for the financial year 2017-18(ay: 2018-19) was duly deposited to the credit of the PF/ESI fund before the due date of filing of return of income u/s. 139(1). It was submitted by ld. Counsel for the assessee that Finance Act, 2021 made amendment in provision of Section 36(1)(va) and 43B of the 1961 Act, but the Memorandum to Finance Bill, 2021 cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Sr. DR fairly submitted that the Division Bench of tribunal at Allahabad (of which both of us were part of the DB who pronounced the order) has already taken a view on this matter in favour of tax-payer in this issue, but prayers were made that the contentions raised by ld. Sr. DR in earlier matters through oral as written submissions, be also taken into account and read in this appeal, as the issue is similar and recurring in nature. 5. We have considered rival contentions and perused the material on record including cited case laws. The only effective issue in this appeal is regarding delayed deposit of employee share of PF/ESI collected by employer from salaries of employees to the tune of Rs. 3,14,793/- which was not deposited before the due date prescribed under the statute governing PF/ESI and claimed by Revenue to be hit by provision of Section 36(1)(va) read with Section 2(24)(x) of the 1961 Act. There is a recent amendment by Finance Act, 2021 in Section 36(1)(va) and 43B of the 1961 Act. Similar issue was dealt with Division Bench of Allahabad tribunal in which both of us were part of Division Bench who pronounced the order, in the case of Commercial Auto Sales Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of DCIT v. Repco Home Finance Private Limited reported in (2020) 117 taxmann.com 233(in which one of us being Accountant Member was part of DB which pronounced the order), wherein the tribunal discussed the relevant law in details and then decided the issue in favour of tax-payer by following the jurisdictional Madras High Court decision, by holding as under: 10. The next effective issue, which is agitated by Revenue before tribunal, is with respect of disallowance of Rs. 6,31,788/- made under Section 36(1)(va) read with section 2(24)(x) by A.O being employee contribution to P.F. which is deposited by assessee to the credit of employee with Relevant fund beyond the time stipulated under the relevant P.F. Act, but admittedly the said amount stood deposited before the due date prescribed for filing of return of income u/s. 139(1) of the 1961 Act, against which the assessee filed files first appeal with learned CIT(A) who was pleased to allowed deduction u/s. 36(1)(va) read with Section 2(24)(x) of the 1961 Act, which issue is raised by the Revenue in Ground Nos. 4.1. to 4.5 in memo of appeal filed with the tribunal. Admittedly, the assessee has not deposited a sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the due date as prescribed under the statute governing Provident Fund. By relying on the provisions of section 36(1)(va) of the Act so far as employees contribution is concerned, the learned DR relied upon the decision of Hon'ble Madras High Court in the case of The Principal C.I.T. v. M/s. Orchid Pharma Ltd., in Tax case appeal Nos. 430 421 of 2019 CMP No. 13978 of 2019 for ay: 2013-14 and 2014-15, judgment dated 08.07.2019 and prayers were made by Ld. D.R. to restore the matter back to the file of learned CIT(A) for fresh adjudication after considering aforesaid decision of Hon'ble Madras High Court in the case of Orchid Pharma (cited supra). The Ld. Counsel for the assessee on the other hand submitted that this issue is squarely covered in favour of assessee by decision of Hon'ble Madras High Court in the case of CIT v. M/s. Industrial Security and Intelligence India Pvt. Ltd., (Tax Case Appeal No. 585 and 586 of 2015 dated 24.07.2015, for ay: 2003-04 and 2004-05) and it is also submitted by learned counsel for the assessee that the Chennai Tribunal in I.T.A. No. No. 3263/Chny/2018 for ay: 2013-14 in the case of the ACIT v. M/s. SPEL Semiconductor Ltd., vide o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him: [Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. 10.3.2 It is by virtue of Finance Act, 1987 w.e.f. 01.04.1988, the provisions of Section 36(1)(va) read with Section 2(24)(x) of the 1961 Act were inserted, which considered employee contribution towards PF/ESI and other employees welfare funds received by employer as income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees provided the said sum is actually paid during the previous year on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36 viz. the date prescribed under the relevant statute governing PF/ESI and other employee welfare funds for deposit of the contribution payable by assessee as an employer to an provident fund or superannuation fund or gratuity fund or any other fund for welfare of employees. 10.3.3. Then came the amendment by Finance Act, 2003 w.e.f 01.04.2004, wherein the second proviso to Section 43B stood deleted and first proviso to Section 43B was amended so that now even 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 provided the said sum is actually paid during the previous year on or before the due date as prescribed under Section 139(1) for filing of return of income shall be allowed. The amended Section 43B, as amended by Finance Act, 2003 wef 01.04.2004, is reproduced hereund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realized within fifteen days from the due date. 7. By Finance Act, 2003, the second proviso to section 43B of the Act not only got deleted but the said Finance Act, 2003, also amended the first proviso with effect from assessment year 2004-05. We quote hereinbelow the first proviso to section 43B of the Act after its amendment by Finance Act, 2003, which reads as under: Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. To answer the above controversy, we n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bution made by the assessee(s) to the labour welfare funds. To this effect, first proviso stood introduced with effect from 1-4-1988. Vide Finance Act, 1988, the second proviso came to be inserted. It reads as follows: Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid during the previous year on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36. At this stage, we also quote hereinbelow the Explanation below clause (va) of sub-section (1) of section 36: Explanation.-For the purposes of this clause, 'due date' means 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 thereunder or under any standing order, award, contract of service or otherwise. 7. However, the second proviso stood further amended vide Finance Act, 1989, with effect from 1-4-1989, which reads as under: Provided further that no deduction shall, in respect of any sum referred to in clause (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to this aspect, the Parliament consciously kept that dichotomy alive up to 1-4-2004, by making Finance Act, 2003, come into force only with effect from 1-4-2004. Hence, according to the Department, Finance Act, 2003 should be read as amendatory and not as curative [retrospective] with effect from 1-4-1988. 9. We find no merit in these civil appeals filed by the Department for the following reasons: firstly, as stated above, section 43B [main section], which stood inserted by Finance Act, 1983, with effect from 1-4-1984, expressly commences with a non obstante clause, the underlying object being to disallow deductions claimed merely by making a Book entry based on Mercantile System of Accounting. At the same time, section 43B [main section] made it mandatory for the Department to grant deduction in computing the income under section 28 in the year in which tax, duty, cess, etc., is actually paid. However, Parliament took cognizance of the fact that accounting year of a company did not always tally with the due dates under the Provident Fund Act, Municipal Corporation Act [octroi] and other Tax laws. Therefore, by way of first proviso, an incentive/relaxation was sought to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inserted with effect from 1-4-1988, it was entitled to the benefit of that proviso because it operated retrospectively from 1-4-1984, when section 43B stood inserted. This is how the question of retrospectivity arose in Allied Motors (P.) Ltd.'s case (supra). This Court, in Allied Motors (P.) Ltd.'s case (supra) held that, when a proviso is inserted to remedy unintended consequences and to make the section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read into the section to give the section a reasonable interpretation, it could be read retrospective in operation, particularly to give effect to the section as a whole. Accordingly, this Court, in Allied Motors (P.) Ltd.'s case (supra), held that the first proviso was curative in nature, hence, retrospective in operation with effect from 1-4-1988. It is important to note once again that, by Finance Act, 2003, not only the second proviso is deleted but even the first proviso is sought to be amended by bringing about an uniformity in tax, duty, cess and fee on the one hand vis- -vis contributions to welfare funds of employee(s) on the other. This is one more reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction.... (p. 339) For the afore-stated reasons, we hold that Finance Act, 2003, to the extent indicated above, is curative in nature, hence, it is retrospective and it would operate with effect from 1-4-1988 [when the first proviso came to be inserted]. For the above reasons, we find no merit in this batch of civil appeals filed by the Department which are hereby dismissed with no order as to costs. Civil Appeal No. 7755/2009 @ S.L.P. (C) No. 20581/2008 and Civil Appeal No. 7757/2009 @ S.L.P. (C) No. 18380/2009: 11. Leave granted. 12. In view of our judgment in the case of CIT v. Alom Extrusions Ltd. [Civil Appeal arising out of S.L.P. (C) No. 23851 of 2007], we set aside the impugned judgment and order of the Bombay High Court and allow these civil appeals filed by the assessees with no order as to costs. 10.3.5 It is also pertinent to reproduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract or service or otherwise. 6. It would also be appropriate to take note of section 43B of the Act primarily for the reason that in Vinay Cement Ltd. 's case (supra) it was this provision which came up for discussion before the Supreme Court and also keeping in view the contention of learned counsel for the Revenue that this judgment would be of no avail to the assessee while discussing the matter under section 36(1)(va) of the Act. Section 43B stipulates that certain deductions are to be given only on actual payment. Clause (b) thereof talks about contribution by the assessee as employer to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees. Since we are concerned only with clause (b), we reproduce the same for clearer understanding:- 43B. Certain deductions to be only on actual payment.-Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- ** ** ** (b) any sum payable by the assessee as an employer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that when employees' contribution is recovered from their salaries/wages, that is trust money in the hands of the assessee. For this reason, rigours of law are provided by treating it as income when the assessee receives the employees' contribution and enabling the assessee to claim deduction only on actual payment by due date specified under the provisions. 10. Ms. Prem Lata Bansal, learned counsel for the Revenue, thus, argued that the second proviso to section 43B, as it stood at the relevant time, clearly mentioned that deduction in respect of any sum referred to in clause (b) shall not be allowed unless such sum has actually been paid in cash or by issuance of cheque or draft or by any other mode on or before the due date, as defined in the Explanation below clause (va) of sub-section (1) of section 36. Thus, the assessee would earn the entitlement only if the actual payment is made before the due date specified in Explanation below clause (va) of sub-section (1) of section 36 of the Act. As per the said Explanation, 'due date' means the date by which the assessee is required, as an employer, to credit the employees' contribution to the employees& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed between 23rd May, 2001 to 23rd April, 2002. The latest payment is made on 23rd April, 2002 and assessee being limited company had filed its return on 20th October, 2002 which is a date not beyond the due date of filing of the return. Thus, it is clear beyond doubt that all the payments which have been disallowed were made much earlier to the due date of filing of the return. The disallowance is not made by the Assessing Officer on the ground that there is no proof of making such payment but disallowance is made only on the ground that these payments have been made beyond the due dates of making these payments under the respective statute. Thus, it was not an issue that the payments were not made by the assessee on the dates which have been stated to be the dates of deposits in the assessment order. If such is a factual aspect then according to latest position of law clarified by Hon'ble Supreme Court in the case of CIT v. Vinay Cement Ltd. that no disallowance could be made if the payments are made before the due date of filing the return of income. This issue came before Hon'ble Supreme Court in the case of CIT v. Vinay Cement Ltd. which was a special leave petition fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been followed by a Division Bench of this Court in the case of CIT v. Dharmendra Sharma [2008] 297 ITR 320 8. Despite the aforesaid judgments, the learned counsel for the Tribunal has contended that in view of the judgment of the Division Bench of the Madras High Court in the case of CIT v. Synergy Financial Exchange Ltd.: [2007] 288 ITR 366 and that of the Division Bench of the Bombay High Court in the case of CIT v. Pamwi Tissues Ltd. [2008] Taxindiaonline.com 104 (TIOL) the issue requires consideration. According to us, in view of the dismissal of the Special Leave Petition in the case of Vinay Cement Ltd. (supra) by the Supreme Court by a speaking order, the submission of the learned counsel for the revenue has to be rejected at the very threshold. The reason for the same is as follows:- 9. The Gauhati High Court in the case of CIT v. George Williamson (Assam) Ltd. [2006] 284 ITR 619 dealt with the very same issue. In the said judgment the Division Bench of the Gauhati High Court noted a contrary view taken by the Kerala High Court in the case of CIT v. South India Corporation Ltd. [2000] 242 ITR 114. After noting the said judgment the fact that the amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of CIT v. Nexus Computer (P.) Ltd. by a judgment dated 18-8-2008 passed in Tax Case (A) No. 1192/2008 discussed the impact of both the dismissal of the special leave petition in the case of George Williamson (Assam) Ltd. (supra) and Vinay Cement Ltd.'s case (supra) as well as a contrary view of the Division Bench of its own Court in Synergy Financial Exchange's case (supra). The Division Bench of the Madras High Court has explained the effect of the dismissal of a special leave petition by a speaking order by relying upon the judgment of the Supreme Court in the case of Kunhayammed v. State of Kerala 119 STC 505 at page 526 in paragraph 40 and noted the following observations:- 'If the order refusing leave to appeal is a speaking order, i.e., gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the Court, Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. 's case (supra). 18. We, thus, answer the question in favour of the assessee and against the Revenue. As a consequence, the appeals filed by the assessees stand allowed and those filed by the Revenue are dismissed. No costs. 10.3.6 We have also observed that Hon'ble Madras High Court in the case of CIT v. M/s. Industrial Security and Intelligence India Pvt. Ltd. (cited supra), has decided this issue in favour of the tax-payer and deduction towards employees contribution to PF/ESI was allowed provided the same is deposited to the credit of employees with respective PF/ESI funds before the due date prescribed u/s. 139(1) of the 1961 Act, albeit the same was deposited after the due date as prescribed for payment under statute governing PF/ESI. The Hon'ble Madras High Court while adjudicating the aforesaid appeal in the case of Industrial Security (supra) in favour of tax-payer referred to the decision of Hon'ble Supreme Court in the case of CIT v. Alom Extrusions Limited reported in 319 ITR 306(SC) and decision of Hon'ble Delhi High Court in the case of CIT v. Aimil Limited reported in (2010) 321 ITR 508(Del.), and Hon'ble Madras High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds beyond the date prescribed under statute governing PF/ESI and other employee welfare funds bur deposited prior to due date for filing of return of income u/s. 139(1) of the 1961 Act, in favour of the tax-payer, while we have also observed that Hon'ble Kerala High Court and Hon'ble Gujarat High Court has taken a view on this issue favorable to Revenue. Our Hon'ble Jurisdictional High Court has taken a view in favour of the taxpayer and judicial discipline demands that we follow the judgment of Hon'ble Jurisdictional High Court viz. in the case of CIT v. M/s. Industrial Security and Intelligence India Pvt. Ltd. (supra), which judgment is binding on us. At this stage we would like to refer to order in writ petition passed by Single Judge of Hon'ble Madras High Court in the case of Unifac Management Services (India) Private Limited v. DCIT in WP no. 5264 of 2020, WMP No. 6461 of 2018, vide order dated 23.10.2018 (reported in (2018) 409 ITR 225(Mad.), wherein Single Judge of Hon'ble Madras High Court decided this issue in favour of Revenue. However, subsequently, the said decision of Single Judge of Hon'ble Madras High Court was challenged by the tax-paye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC) to hold amendment made by Finance Act, 2003 to be retrospective. While holding the same to be retrospective, the Hon'ble Supreme Court referred to its decision in the case of CIT v. J.H. Gotla reported in (1985) 156 ITR 323(SC) wherein it held that if strict interpretation leads to absurd results which are not intended by the object of the legislation, and if other construction is possible, then that construction should be preferred to the strict legal construction. The Hon'ble Supreme Court observed that though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to literal construction. We have observed that Hon'ble Bombay High Court in the case of CIT v. Ghatge Patil Transports Limited reported in (2014) 368 ITR 749(Bom.) held that decision of Hon'ble Supreme Court in the case of Alom Extrusion (cited supra) shall apply both to employees as well employers contribution to various employees welfare funds, and if the amount towards employee's contribution to employees welfare funds is deposited before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Judges of Delhi High Court while adjudicating in the case of Bharat Hotels (supra). The Hon'ble Punjab and Haryana High Court has decided this issue in favour of the tax-payer in the case of CIT v. Rai Agro Industries Limited reported in (2011) 334 ITR 122 (Punj Har.); CIT v. Hemla Embroidery Mills Private Limited reported in (2014) 366 ITR 167(Punj. Har.). Hon'ble Rajasthan High Court in the case(s) of CIT v. State Bank of Bikaner and Jaipur reported in (2014) 43 taxmann.com 411(Raj.) and in CIT v. Jaipur Vidyut Vitran Nigam Limited reported in (2014) 49 taxmann.com 540(Raj) has decided this issue in favour of the tax-payer. Similarly, Hon'ble Karnataka High Court and Hon'ble Himachal Pradesh High Court has decided this issue in favour of the tax-payer. However, Hon'ble Gujarat High Court has decided this issue in favour of Revenue in CIT v. Gujarat State Road Transport Corporation reported in (2014) 366 ITR 170(Guj.); Checkmate Facility Electronic Solutions (P.) Ltd. v. Dy. CIT [Tax Appeal No. 1256 of 2018, dated 15-10-2018 and PCIT v. Suzlon Energy Limited reported in (2020) 115 taxmann.com 340(Guj). Thus, Hon'ble Gujarat High Court held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 28- ** ** ** (v) any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust; (va) any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation.- for the purposes of this clause, due date means 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 thereunder or under any standing order, award, contract of service or otherwise . S. 43B. Certain deductions to be only on actual payment Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- ** ** ** (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to notice that sub-clause (b) of Section 43B speaks of sum payable by the employer which is the 'employer's contribution', payable by the employer without deduction from the salary of the employee. Employees contribution though remitted to the fund by the employer, it is deducted from the employees salary, which deduction is statutorily enabled. Deduction from the salary of the employee, of course, is the liability of the employer and so is the remittance to the fund but it does not change the essential nature of the contribution; which is of the employee. A contribution deducted from the employee's salary and paid by the employer cannot, for a moment, be termed as the employer's contribution. There is a clear distinction insofar as the contributions payable under the EPF MP Act as also the ESI Act. The employer's contribution has to be paid by the employer himself and there is possible no deduction from the salary of the employee, whereas with respect to the employee's contribution, it has to be deducted from the salary of the employee and paid to the relevant fund. 11. The Supreme Court in Alom Extrusions Ltd.'s case (supra) as was notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e distinction between employee's and employer's contribution. In this context we have to necessarily dwell upon the various amendments over the years and look at the sequence in which they were brought in. Only on introduction of Section 43B with effect from 01.04.1984, there was an insistence that there should be actual payment of amounts claimed as deductions, enumerated under the provision. Section 43B (b) spoke of sum payable by the employer by way of contribution to a welfare fund. At that point it could be understood that the sub-clause took in both employee's and employer's contribution. The legislature then took note of the circumstance that many claim the deduction on the ground of maintaining accounts on mercantile or accrual basis and fail to discharge the liability. Hence by Finance Act 1987, clause (x) under Section 2 (24), sub-clause (va) of Section 36 (1) and the 2nd proviso to Section 43B were brought in. From that date the statute treats the employee's and employer's contribution differently. 13. Otherwise there was no requirement for bringing in a sub-clause under the definition clause of 'income' including the employee's c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des any sum received by the assessee from his employee as contribution to any Provident Fund or superannuation fund or funds set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948) or any other fund for the welfare of such employees. According to us, on a reading of Sec. 36(1)(va) along with Sec. 2(24)(x), it is categoric and clear that the contribution received by the assessee from the employee alone was treated as income for the purpose of Sec. 36(1)(va) of the Act and therefore we are of the considered opinion that the assessee was entitled to get deduction for the sum received by the assessee from his employees towards contribution to the fund or funds so mentioned only if, the said amount was credited by the assessee on or before the due date to the employees account in the relevant fund as provided under Explanation 1 to Sec. 36(1)(va) of the Act. According to us, so far as Sec. 43B(b) is concerned, it takes care of only the contribution payable by the employer/assessee to the respective fund. Therefore, in that circumstances, Sec. 36(1)(va) and Sec. 43B(b) operate in different fields i.e. the former takes care of employee's contribution a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court in Merchem Ltd. 's case (supra). We, hence, answer the substantial question of law raised with respect to reconsideration of Merchem Ltd.'s case (supra) in the negative, against the assessee and in favour of the Revenue. 17. The other question of law framed refer to the 'amounts payable', the reference obviously is to 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 funds for the welfare of employees as found in sub-clause (b) of Section 43B, which refers only to the employer's contribution and not the employee's contribution. Employee's contribution, as has been already held by us, is covered by clause (va) of Section 36(1) and the deduction is restricted by the Explanation below it. With respect to employer's contribution, the deduction is allowable only on actual payment, as per Section 43B restricted only by the proviso as is now available in the Act, which requires payment before the filing of return. Any sum paid as employer's contribution, which is actually paid by the assessee on or before the due date applicable in his case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not have any relevance here. We, hence, answer the other questions of law framed, also against the assessee and in favour of the Revenue. We dismiss the appeal, leaving the parties to suffer their respective costs. 10.3.10 Thus, it can be clearly seen that the Hon'ble High Courts in India have taken a different views so far as to allowability of employee contribution to PF/ESI and other welfare funds which is deposited to the credit of employee with revenant funds beyond the time stipulated under the relevant statute applicable to PF/ESI and other funds for welfare of employees, but deposited prior to due date of filing of return of income u/s. 139(1) of the 1961 Act. If we apply strict interpretation as is normally applied as there is no equity in tax laws, we have observed that the employee contribution received by an employer is treated as income under the provisions of Section 2(24)(x) of the 1961 Act, while deduction is allowed u/s. 36(1)(va) read with Explanation of the amount received by an employer from employees as their contribution which stood deposited by employer to the credit of employee with relevant fund on or before the due date as is prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds on or before the due date prescribed under the statute governing PF/ESI and other employees welfare funds. But once at threshold stage of Section 36(1)(va) read with Explanation 1 and Section 2(24)(x) of the 1961 Act, infringement took place viz. the employer fail to deposit the employee contribution towards PF/ESI and other employees welfare funds to the credit of employee with relevant fund before due date as prescribed under relevant statute governing PF/ESI and other employees welfare fund, then at threshold itself no deduction u/s. 36(1)(va) read with Explanation 1 and Section 2(24)(x) of the 1961 Act can be allowed and consequently there cannot be any question of entering further into Section 43B of the 1961 Act as the deduction at threshold level of Section 36(1)(va) of the 1961 Act is itself not available. This are the literal and strict interpretation of provisions of Section 2(24)(x) read with Section 36(1)(va) of the 1961 Act. The deduction provisions are to be strictly construed and onus is on the assessee to prove that it is entitled for deduction/exemption as it falls within four corners of the statute. There is no equity in tax laws and exemption/deduction provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the entitlement of the assessee or the rate of tax? The reference to the Constitution Bench was necessitated essentially for the reason that in a few decisions, one of them by a 3-Judge Bench of this Court in the case of Sun Export Corpn. v. Collector of Customs: [1997] 6 SCC 564, the proposition came to be stated that any ambiguity in a tax provision/notification must be interpreted in favour of the assessee who is claiming benefit thereunder.14 17.1. In Dilip Kumar Co., the Constitution Bench of this Court examined several of the past decisions including that by another Constitution Bench in CCE v. Hari Chand Shri Gopal: [2011] 1 SCC 236 as also that by a Division Bench of this Court in the case of UOI v. Wood Papers Ltd.: [1990] 4 SCC 256 wherein, the principles were stated in clear terms that the question as to whether a subject falls in the notification or in the exemption clause has to be strictly construed; and once the ambiguity or doubt is resolved by interpreting the applicability of exemption clause strictly, the Court may construe the exemption clause liberally. This Court found that in Wood Papers Ltd. (supra), some of the observations in an earlier decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification are possible, it should be construed in favour of the subject as notification is part of a fiscal enactment. This observation may appear to support the view that ambiguity in a notification for exemption must be interpreted to benefit the subject/assessee. A careful reading of the entire para, as extracted hereinabove would, however, suggest that an exception to the general rule of tax has to be construed strictly against those who invoke for their benefit. This was explained in a subsequent decision in Wood Papers Ltd. case. In para 6, it was observed as follows: (SCC p. 262) 6.... In CCE v. Parle Exports (P) Ltd., this Court while accepting that exemption clause should be construed liberally applied rigorous test for determining if expensive items like Gold Spot base or Limca base or Thums Up base were covered in the expression food products and food preparations used in Item No. 68 of First Schedule of Central Excises and Salt Act and held 'that it should not be in consonance with spirit and the reason of law to give exemption for non-alcoholic beverage basis under the notification in question'. Rationale or ratio is same. Do not extend or widen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cedure set out in Chapter 10 of the Central Excise Rules, 1994, for consideration? The Constitution Bench answering the said question concluded that a manufacturer qualified to seek exemption was required to comply with the preconditions for claiming exemption and therefore is not exempt or absolved from following the statutory requirements as contained in the Rules. The Constitution Bench then considered and reiterated the settled principles qua the test of construction of exemption clause, the mandatory requirements to be complied with and the distinction between the eligibility criteria with reference to the conditions which need to be strictly complied with and the conditions which need to be substantially complied with. The Constitution Bench followed the ratio in Hansraj Gordhandas case, to reiterate the law on the aspect of interpretation of exemption clause in para 29 as follows: (Hari Chand case, SCC p. 247) 29. The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ductions, exemptions, rebates et cetera are the different species of incentives extended by the Act of 1961 15. In other words, incentive is a generic term and 'deduction' is one of its species; 'exemption' is another. Furthermore, Section 80-O is only one of the provisions in the Act of 1961 dealing with incentive; and even as regards the incentive for earning or saving foreign exchange, there are other provisions in the Act, including Section 80HHC, whereunder the appellant was indeed taking benefit before the assessment year 1993-94. 19. Without expanding unnecessarily on variegated provisions dealing with different incentives, suffice would be to notice that the proposition that incentive provisions must receive liberal interpretation or to say, leaning in favour of grant of relief to the assessee is not an approach countenanced by this Court. The law declared by the Constitution Bench in relation to exemption notification, proprio vigore, would apply to the interpretation and application of any akin proposition in the taxing statutes for exemption, deduction, rebate et al., which all are essentially the form of tax incentives given by the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its decision in Alom Extrusion (supra) to its earlier decision in CIT v. J.H. Gotla [1985] 156 ITR 323(SC), para 10 that intention of the legislature is to be found out from the language used and if strict literal construction leads to an absurd result i.e. result not intended to be subserved by the object of the legislation found in the manner indicated before, then if another construction is possible apart from strict literal construction, then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. The Hon'ble Delhi High Court and Hon'ble Bombay High Court after considering, analyzing and interpreting the decision in the case of Alom Extrusion (supra) has held that it will apply both to employers and employee contribution and if the same is deposited before the due date of filing of return of income u/s. 139(1) of the 1961 Act, the deduction shall be allowed, even if the same is deposited beyond the time stipula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me as is prescribed u/s. 139(1) of the 1961 Act. We at tribunal being inferior judicial body to Hon'ble Madras High Court, are bound by decision of Hon'ble jurisdictional High Court in the case of Industrial Security (supra) as a cardinal principles of judicial discipline and to instill certainty among tax-payers, thus, Respectfully following the decision of Hon'ble Madras High Court in the case of Industrial Security and Intelligence (supra), we allow the claim of the assessee for deduction of Rs. 6,31,788/- towards employees contribution to PF which was deposited late beyond due date as prescribed under relevant statute governing PF, but the same stood deposited to the credit of employees with relevant fund before the due date for filing of return of income as prescribed u/s. 139(1) of the 1961 Act. The Revenue fails on this issue for the reasons cited above. We order accordingly. The Hon'ble jurisdictional High Court in the case of Sagun Foundry Private Limited v. CIT, Kanpur in ITA No. 87 of 2006, vide judgment dated 21.12.2016 has decided this issue in favour of the tax-payer, by holding that Section 43B is applicable to both employer and employee contrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntially for the reason that in a few decisions, one of them by a 3-Judge Bench of this Court in the case of Sun Export Corpn. v. Collector of Customs: [1997] 6 SCC 564, the proposition came to be stated that any ambiguity in a tax provision/notification must be interpreted in favour of the assessee who is claiming benefit thereunder.14 17.1. In Dilip Kumar Co., the Constitution Bench of this Court examined several of the past decisions including that by another Constitution Bench in CCE v. Hari Chand Shri Gopal: [2011] 1 SCC 236 as also that by a Division Bench of this Court in the case of UOI v. Wood Papers Ltd. [1990] 4 SCC 256 wherein, the principles were stated in clear terms that the question as to whether a subject falls in the notification or in the exemption clause has to be strictly construed; and once the ambiguity or doubt is resolved by interpreting the applicability of exemption clause strictly, the Court may construe the exemption clause liberally. This Court found that in Wood Papers Ltd. (supra), some of the observations in an earlier decision in the case of CCE v. Parle Exports (P) Ltd.:: [1989] 1 SCC 345 were also explained with all clarity. This Court note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. This observation may appear to support the view that ambiguity in a notification for exemption must be interpreted to benefit the subject/assessee. A careful reading of the entire para, as extracted hereinabove would, however, suggest that an exception to the general rule of tax has to be construed strictly against those who invoke for their benefit. This was explained in a subsequent decision in Wood Papers Ltd. case. In para 6, it was observed as follows: (SCC p. 262) 6.... In CCE v. Parle Exports (P) Ltd., this Court while accepting that exemption clause should be construed liberally applied rigorous test for determining if expensive items like Gold Spot base or Limca base or Thums Up base were covered in the expression food products and food preparations used in Item No. 68 of First Schedule of Central Excises and Salt Act and held 'that it should not be in consonance with spirit and the reason of law to give exemption for non-alcoholic beverage basis under the notification in question'. Rationale or ratio is same. Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed construe it liberally. Since the respondent did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said question concluded that a manufacturer qualified to seek exemption was required to comply with the preconditions for claiming exemption and therefore is not exempt or absolved from following the statutory requirements as contained in the Rules. The Constitution Bench then considered and reiterated the settled principles qua the test of construction of exemption clause, the mandatory requirements to be complied with and the distinction between the eligibility criteria with reference to the conditions which need to be strictly complied with and the conditions which need to be substantially complied with. The Constitution Bench followed the ratio in Hansraj Gordhandas case, to reiterate the law on the aspect of interpretation of exemption clause in para 29 as follows: (Hari Chand case, SCC p. 247) 29. The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the statute and the obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In other words, incentive is a generic term and 'deduction' is one of its species; 'exemption' is another. Furthermore, Section 80-O is only one of the provisions in the Act of 1961 dealing with incentive; and even as regards the incentive for earning or saving foreign exchange, there are other provisions in the Act, including Section 80HHC, whereunder the appellant was indeed taking benefit before the assessment year 1993-94. 19. Without expanding unnecessarily on variegated provisions dealing with different incentives, suffice would be to notice that the proposition that incentive provisions must receive liberal interpretation or to say, leaning in favour of grant of relief to the assessee is not an approach countenanced by this Court. The law declared by the Constitution Bench in relation to exemption notification, proprio vigore, would apply to the interpretation and application of any akin proposition in the taxing statutes for exemption, deduction, rebate et al., which all are essentially the form of tax incentives given by the Government to incite or encourage or support any particular activity16. 20. The principles laid down by the Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention of the legislature is to be found out from the language used and if strict literal construction leads to an absurd result i.e. result not intended to be subserved by the object of the legislation found in the manner indicated before, then if another construction is possible apart from strict literal construction, then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. The Hon'ble Delhi High Court and Hon'ble Bombay High Court after considering, analyzing and interpreting the decision in the case of Alom Extrusion (supra) has held that it will apply both to employers and employee contribution and if the same is deposited before the due date of filing of return of income u/s. 139(1) of the 1961 Act, the deduction shall be allowed, even if the same is deposited beyond the time stipulated as due date as prescribed under the provisions of Statute governing PF/ESI Act. The Hon'ble jurisdictional High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees, to the credit of employee with relevant funds within time stipulated as due date by respective statute governing PF/ESI etc. but at the same time if the employer does not deposit the contribution towards PF/ESI etc. within due date as prescribed under relevant statute governing PF/ESI etc., the employers are visited with Interest for delayed deposit of PF/ESI as well Penalties for late deposit beyond the time stipulated under the relevant statute governing PF/ESI and other employees welfare funds. Reference is drawn to Section 7Q and 14 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. There is an recent amendment to Section 36(1)(va) by Finance Act, 2021, wherein Explanation 2 was inserted, which reads as under: 36(1)(va)**** **** 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; Correspondingly, there was an amendment to Section 43B of the 1961 Act by Finance Act, 2021, wherein Explanation 5 was inserted, which reads as under: 43B**** ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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'ble Jurisdictional High Court has decided this issue in favour of tax-payers, have already been allowed the deduction towards employee contribution received by employer which was deposited late by employer beyond the time stipulated u/s. 36(1)(va), but before the due date as prescribed for filing of return of income u/s. 139(1) of the 1961 Act, and there cannot be a class different now at this stage where the deduction is to be denied on the ground of strict interpretation of the provisions of Section 36(1)(va), unless the amendment made by Finance Act, 2021 is made specifically applicable retrospectively from the date of insertion of the provision or any other specified earlier date in the Finance Act, rather on the other hand, the Memorandum to Finance Bill, 2021 has specifically made this amendment applicable from 01.04.2021 and specified that the same shall be made applicable from assessment year 2021-22 and subsequent assessment years. We are presently concerned with ay: 2005-06. The relevant clause to Memorandum to Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yee contribution as well. There is a distinction between 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 43B does not apply and deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. This assessee's appeal is allowed. We have observed that Hon'ble Jurisdictional High Court in the case of Sagun Foundry Private Limited (supra) has held that deduction is to be allowed for belated payment of employee contribution to PF/ESI which is deposited beyond the due date stipulated under the relevant statutes governing PF/ESI, but the same stood deposited before the due date for filing of return of income as is prescribed u/s. 139(1) of the 1961 Act. We at tribunal being inferior judicial body to Hon'ble Allahabad High Court, are bound by decision of Hon'ble jurisdictional High Court in the case of Sagun Foundry (supra) as a cardinal principles of judicial discipline and to instill certainty among tax-payers, thus, Respectfully following the decision of Hon'ble Allahabad High Court in the case of Sagun Foundry (supra), we allow the claim of the assessee for deduction of Rs. 1,82,98,490/- towards employees contribution to PF which was deposited late beyond due date as prescribed under relevant statute governing PF, but the same stood deposited to the credit of employees with relevant fund before the due date for filing of return of income as pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r-taxpayer shall be entitled for deduction in the previous year relevant to ay to which such employee contribution to PF/ESI pertains, in the case of Commercial Auto Sales Private Limited for ay: 2019-20 in ITA no. 15/Alld/2021, vide orders dated 20.01.2022 in which both of us were part of the Division Bench who pronounced the order It is also pertinent to mention that Division Bench of Allahabad-tribunal in the case of M/s. Bharat Pumps and Compressors Limited in ITA no. 147/Alld/2016 for ay: 2005-06, vide orders dated 12.08.2021 (in which both of us were the part of the DB who pronounced the order), also decided this issue in favour of the taxpayer after considering the amendment made by Finance Act, 2021, by holding that if the employee share of contribution towards PF/ESI is deposited by employer-taxpayer with the relevant fund governing PF/ESI to the credit of employee before the due date for filing of return of income prescribed u/s. 139(1) for the relevant assessment year, the employer-taxpayer shall be entitled for deduction in the previous year relevant to ay to which such employee contribution to PF/ESI pertains. It is also pertinent to mention that Division Bench o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h) Hyderabad-tribunal SMC decision in the case of Salzgitter Hydraulics Private Limited v. ITO, reported in (2021) 128 taxmann.com 192(hyd.-trib.SMC) i) Jaipur-tribunal decision in the case of Dhabryia Plywood Limited v. ADIT, CPC, reported in (2021) 133 taxmann.com 135(Jp-trib.) j) Bangalore-tribunal decision in the case of Shakuntala Agarbathi Company v. The DCIT, in ITA no. 385/Bang/2021, vide orders dated 21.10.2021 k) Hyderabad-tribunal in the case of NCC Limited v. ACIT in ITA no. 595 596/Hyd/2020, vide common order dated 27.09.2021 l) Delhi-tribunal decision in the case of Indian Geotechnical Services v. ACIT, in ITA No. 622/Del/2018, vide order dated 27.08.2021(in which one of us, being Hon'ble Judicial Member was part of Division Bench which pronounced this order) m) Bangalore-tribunal decision in the case of Jana Urban Services for Transformation Private Limited v. DCIT, in ITA No. 307/Bang/2021, order dated 11.10.2021 n) Amritsar-tribunal decision in the case of Vinko Auto Industries Limited v. DCIT, CPC, in ITA no. 63 64/Asr./2021, vide order dated 08.11.2021 o) Bangalore-tribunal decision in the case of Infobell Interactive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SI Act are benevolent statute(s) with the social benefits for employees to build retirement corpus for the salaried employees. The contribution to fund is made both by employer and employee. The contention of the Revenue is that the employer deduct employee contribution from his/her salary and holds the same in fiduciary capacity, and thus the employer is under bounden duty to deposit to the credit of employee with the fund maintained for said purposes within prescribed period of fifteen days as is provided under the relevant statute governing PF/ESI. Thus, it is stated by Revenue that is the reason why Section 2(24)(x) stipulates that firstly said employee contribution shall be deemed as income of the assessee, and then deduction is to be allowed u/s. 36(1)(va) provided the same is deposited within time provided under the relevant statute governing PF/ESI. It is claimed so far as employer contribution is concerned, different consideration shall apply as the same is provided by employer out of its own funds and hence extended period shall be available as is provided u/s. 43B so far as employer contribution is concerned. On the first blush, the arguments of Revenue seems quite attra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided for deposit of said contribution as is stipulated/provided under the relevant statute governing PF/ESI. But, it is equally true that the Constitutional Courts viz. Hon'ble High Courts and Hon'ble Supreme Court in India have powers to read down the provisions of the 1961 Act to make it workable and to avoid absurdity. This issue was subject matter of different interpretation by different High Courts. The Hon'ble Gujarat High Court and Hon'ble Kerala High Court has decided this issue against the tax-payer and in favour of Revenue, while Hon'ble Allahabad High Court, Hon'ble Bombay High Court, Hon'ble Karnataka High Court, Hon'ble Rajasthan High Court, Hon'ble Himachal Pradesh High Court, Hon'ble Madras High Court have decided the issue in favour of assessee and against Revenue. On perusal of the decision of Hon'ble Supreme Court in the case of Alom Extrusion (supra), it is observed that Hon'ble Supreme Court has elaborately discussed provisions of Section 36(1)(va), 2(24)(x) and amendments made by Finance Act, 2003 to Section 43B of the 1961 Act, which amendments to Section 43B of the 1961 Act were held to be retrospective in natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 36(1)(va) is read down by most of the Constitutional Courts including our Jurisdictional High Court (barring Hon'ble Gujarat High Court and Hon'ble Kerala High Court) to make it workable as otherwise the tax-payer will lose the deduction forever if the employee contribution is not deposited within due date as prescribed under relevant statute, although the said contribution stood deposited by employer belatedly before the due date for filing of return of income u/s. 139(1) of the 1961 Act for relevant ay and the amount will stood brought to tax as income keeping in view provisions of Section 2(24)(x) of the 1961 Act so far employee share of contribution towards PF, ESI and other employees welfare funds is concerned. Revenue has also cited decisions of Courts taking a contrary view in favour of Revenue, but no decision of Hon'ble Jurisdictional High Court or of Hon'ble Apex Court is cited by Revenue, taking a view in favour of Revenue. No doubt it is well cherished objective that there should not be an unjust enrichment of the employer of the amount which it collects from its employees towards employees share of PF, ESI and other employees welfare funds and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of employee contribution to PF/ESI, in case of delayed deposit beyond the time stipulated for deposit under relevant statute governing PF by virtue of being hit by Section u/s. 36(1)(va) of the Act as it is stated in the Explanations that 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 so far as employee contribution to PF/ESI, although the said amounts were deposited before the due date as prescribed for filing of return of income u/s. 139(1) of the 1961 Act. The above amendments 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 the amendments made to be applicable from ay: 2021-22 and subsequent assessment years. The relevant clause to Memorandum to Finance Bill, 2021 is reproduced hereunder: 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 X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - (iii) 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 due date under this clause; and (iv) 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 nev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with the Policy of Government of India to reduce litigations and to increase efficiency. Reference is drawn to recent statement given by Hon'ble Union Minister of Law and Justice in Lok Sabha on 17.12.2021, which clearly indicates that Government of India wants to minimise disputes and to maximise efficiency. This statement refers that formulation of National Litigation Policy which is under consideration of Government of India with the objective of laying down guidelines for preventing, controlling and reducing litigation, keeping in view the policy and plans of Government of India, in a cohesive and organised manner. This statement also refers to several steps taken by CBDT by issuing instructions and bringing in several measures, for reducing litigation and the resultant burdens of Courts. This also refers to measures taken by CBDT in enhancing monetary limits for filing appeal by Department before ITAT/Hon'ble High Courts and Hon'ble Apex Court, as under: National Litigation Policy Posted On: 17 DEC 2021 2:53PM by PIB Delhi With the objective to lay down guidelines for preventing, controlling and reducing litigation, keeping in view the policy pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the third time. Also, the field formation have been instructed to forward only those SLP proposals where in the issue involves substantial question of law or gross perversity or illegality in the appreciation of evidence. In this direction, both the CBDT and the CBIC have also enhanced the threshold monetary limit for filing appeals, the details of which are as follows: CBDT : For filing appeals Monetary limit Before Income Tax Appellate Tribunal Rs. 50 lakhs Before High Court Rs.1 Crore Before Supreme Court Rs.2 Crore CBIC : Monetary limits for filing appeals in cases relating to Central Excise and Service Tax Monetary limits for filing appeals in cases relating to Customs Before CESTAT Before High Court Before Supreme Court Before CESTAT Before High Court Before Supreme Court Rs.50 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , where both parties are Govt. Department or where one party is Govt. Department and other is its instrumentalities, (CPSEs/Boards/Authorities, etc.). To resolve the commercial disputes between Central Public Sector Enterprises inter-se and Central Public Sector Enterprises and Government Departments/Organizations in place of the earlier 'Permanent Machinery of Arbitration', a new scheme, namely, Administrative Mechanism for Resolution of CPSE Disputes (AMRCD) evolved by Department of Public Enterprises has been brought into effect w.e.f. 22.05.2018. The Commercial Courts Act, 2015 was amended in 2018 to inter-alia provide for Pre-Institution Mediation and Settlement (PIMS) mechanism. Under this mechanism a party which does not contemplate any urgent interim relief in a subject-matter of commercial dispute of specified value of Rs. 3 lakh and above has to first exhaust the remedy of PIMS to be conducted by the authorities constituted under the Legal Services Authorities Act, 1987, before approaching the Court. Further for facilitating quick disposal of disputes outside the court systems by way of alternate dispute redressal mechanism of mediation, the Media ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order earlier that it was with an object to end dispute and litigation with respect to this issue for assessment years prior to assessment year 2021-22. We are presently concerned with ay: 2018-19. It is also claimed that there is a CBDT circular No. 22/2015 dated 17.12.2015 which has clarified that Section 43B has applicability so far as employer contribution to PF/ESI is concerned and such extended period as provided u/s. 43B has no applicability so far as employee contribution is concerned. It is well settled that CBDT circulars are binding on income-tax authorities. Once the Constitutional Courts including Hon'ble Jurisdictional High Court have read down the provision as is contained in Section 36(1)(va) read with Section 2(24)(x) of the 1961 Act and then decided this issue in favour of tax-payer by holding that extended period as provided under Section 43B shall be applicable even to employee contribution towards PF/ESI, there is no reasons for us to take a different view by following aforesaid CBDT circular. The ld. Sr. DR has also stated that Hon'ble Supreme Court while deciding Alom Extrusion(supra) was seized of issue concerning employer contribution to PF/ESI and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 21.10.2021 k) Hyderabad-tribunal in the case of NCC Limited v. ACIT in ITA no. 595 596/Hyd/2020, vide common order dated 27.09.2021 l) Delhi-tribunal decision in the case of Indian Geotechnical Services v. ACIT, in ITA No. 622/Del/2018, vide order dated 27.08.2021(in which one of us, being Hon'ble Judicial Member was part of Division Bench which pronounced this order) m) Bangalore-tribunal decision in the case of Jana Urban Services for Transformation Private Limited v. DCIT, in ITA No. 307/Bang/2021, order dated 11.10.2021 n) Amritsar-tribunal decision in the case of Vinko Auto Industries Limited v. DCIT, CPC, in ITA no. 63 64/Asr./2021, vide order dated 08.11.2021 o) Bangalore-tribunal decision in the case of Infobell Interactive Solutions v. DCIT, in ITA No. 411/Bang/2021, order dated 03.11.2021 p) Jodhpur-tribunal decision in the case of Mohan Ram Chaudhary v. ITO, in ITA no. 51, 54 55/Jodh./2021, vide order dated 28.09.2021 q) Bangalore-tribunal decision in the case of Gopalakrishna Aswini Kumar v. ADIT, reported in (2022) 134 taxmann.com 18(Bang.-trib.) r) Chennai-tribunal decision in the case of Adyar Ananda Bhavan Sweets Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lans evidencing deposit of aforesaid employee share of PF/ESI and that it was deposited before the due date prescribed for filing of return of income u/s. 139(1), before allowing claim of deduction u/s. 36(1)(va) of the 1961 Act. The assessee is directed to file before AO complete details/bifurcation of employees share of PF/ESI, to the tune of Rs. 3,14,793/- which was added to income of the assessee u/s. 36(1)(va) read with Section 2(24)(x) along with relevant paid challans, for verification. While passing the above order, we also note that several Division Benches of ITAT across Country have now passed appellate orders, even after considering the amendments made to Section 36(1)(va) and 43B of the 1961 Act by Finance Act, 2021, holding that if the employee share of PF/ESI is deposited by employer to the credit of employee with the relevant fund maintained for PF/ESI before the due date of filing of return of income u/s. 139(1) of the 1961 Act, then the tax-payer shall be entitled for deduction u/s. 36(1)(va) of the 1961 Act. The assessee succeeds in this appeal. We order accordingly. 6. In the result, appeal filed by the assessee is in ITA No. 31/VNS./2021 for ay: 2018-19 is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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