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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 ..... both the parties in open Court through physical hearing mode. 2. The brief facts of the case are that the assessee filed its return of income on 26.10.2018, declaring total income at Rs. 1,31,08,690/-, which was processed by CPC, Bengaluru u/s. 143(1) of the 1961 Act and intimation vide orders dated 22.08.2019 was issued assessing total income of the assessee at Rs. 1,34,23,492/-, wherein an amount of Rs. 3,14,793/- was added to income of the assessee.. 3. The assessee being aggrieved by aforesaid order/intimation u/s. 143(1), dated 22.08.2019, filed first appeal with ld. CIT(A), which appeal stood dismissed by ld. CIT(A) (National Faceless Appeal Centre, Delhi), vide appellate order dated 29.07.2021. The ld. CIT(A) while dismissing the appeal of the assessee upheld the adjustment made while processing return u/s. 143(1) of the 1961 Act, by referring to provisions of Section 143(1)(a)(iv) of the 1961 Act. The ld. CIT(A) also referred to amendment in statute made by Finance Act, 2021 in Section 36(1)(va) and 43B of the 1961 Act. The ld. CIT(A) held that so far as employee contribution towards PF/ESI is concerned, the same shall be allowed as deduction from income only when the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2021 in Section 36(1)(va) and 43B are retrospective in nature as it is merely clarificatory in nature. The ld. Sr. DR submitted that the statute is very clear as Section 36(1)(va) clearly mandates that employees share of PF/ESI collected by employer from the salary of employees is to be deposited with the relevant fund maintained for PF/ESI to the credit of employees before the due date prescribed under the relevant statute governing PF/ESI, and the extended period of time of due date prescribed u/s. 139(1) for filing of return of income is not available as is enshrined in Section 43B to employee share of contribution to PF/ESI, as in the opinion of ld. Sr. DR the language of statute is very clear and unambiguous and hence so far as employee share of contribution towards PF/ESI is concerned, the deduction while computing income chargeable to tax can only be allowed provided the same is deposited to the credit of employee with the relevant fund maintained for PF/ESI within the due date prescribed for depositing the same under relevant statute governing PF/ESI. The ld. Sr. DR submitted that it is only because of interpretation by the Constitutional Courts of the provisions of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not deposited before the due date prescribed under the statute governing PF/ESI and hence 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 was part of Division Bench who pronounced the order, in the case of JCIT(OSD), Allahabad v. Bharat Pumps and Compressors Limited, Allahabad, in ITA no. 147 and 148/Alld/2016 for ay: 2005-06, vide orders dated 12.08.2021, wherein the tribunal considered the amendment made by Finance Act, 2021 in Section 36(1)(va) and 43B, and decided this issue in favour of the tax-payer, by holding as under: 10. We have considered rival contentions and perused the material on record. We have observed that the issue before us is regarding allowability of employees contribution of Rs. 1,82,98,490/- towards PF received by assessee from its employees, but which was deposited by assessee to the credit of employees with PF trust late beyond the time provided under the relevant PF Act, but albeit the same was admittedly deposited within the due date presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 1961 Act. Aggrieved by an assessment framed by AO u/s. 143(3) of the Act, the assessee filed first appeal with learned CIT(A) who was pleased to delete the addition to the income to the tune of Rs. 6,31,788/- made by AO on account of delayed remission of employee's contribution towards EPF to the credit of employee with relevant fund beyond the time prescribed under relevant PF statute but admittedly the said amount stood deposited by assessee to the credit of employee with relevant fund before the due date prescribed for filing of return of income u/s. 139(1) of the 1961 Act, by relying on following judicial decisions) as stipulated hereunder:- 1. CIT v. Alom Extrusions Ltd., in 319 ITR 306(SC) 2. CIT v. Industrial Security and Intelligence India Pvt. Ltd., (Mad) Tax Case Appeal Nos. 585 and 586 of 2015 and M.P No. 1 of 2015, dated 24.07.2015 3. ACIT v. M/s. Easun Products of India (P) Ltd., in I.T.A. No. No. 182/Mds./2016, vide order of Chennai Tribunal dated 19.05.2016, for ay: 2012-13. 10.2 Aggrieved by an appellate order dated 30.08.2017 passed by learned CIT(A), the Revenue has now filed an appeal before the tribunal agitating against the decision of learned CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning Provident Fund, but the same was admittedly deposited before the due date of filing of return of income as is prescribed u/s. 139(1) of the 1961 Act. Before proceeding further, it will be profitable to reproduce the relevant provisions of the 1961 Act as were applicable for ay: 2013-14, which are reproduced hereunder: "Definitions. 2. In this Act, unless the context otherwise requires,- ** ** ** (24) "income " includes- ** ** ** (x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund 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;] " "Other deductions. 36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- [(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. Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a) ** ** ** (b) 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, [or] [(c) ** ** ** 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 referred to in clause (a) [or clause (c)] 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: Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. ** ** ** 10.3.4 It is pertinent at this stage to reproduce the decision of Hon'ble Supreme Court in the case of Alom Extrusions Limited (supra) wherein the amendments made by Finance Act, 2003 w.e.f. 01.04.2004 were held to be curative in nature and applicable retrospectively effective from 01.04.1988, which decision of Hon'ble Supreme Court is reproduced hereunder: "6. The lead matter in this batch of civil appeals is CIT v. Alom Extrusions Ltd. [Civil Appeal arising out of S.L.P. (C) No. 23851 of 2007]. Prior to the amendment of section 43B of the Act, vide Finance Act, 2003, the two provisos to section 43B of the Act read as under: "Provided that nothing contained in this section shall apply in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other words, if an assessee(s)-employer(s) is maintaining his books on Accrual System of Accounting, even after collecting the contribution from his employee(s) and even without remitting the amount to the Regional Provident Fund Commissioner [R.P.F.C.], the assessee(s) would be entitled to deduction as business expense by merely making a provision to that effect in his Books of Account. The same situation arose prior to 1st April, 1984, in the context of assessees collecting sales tax and other indirect taxes from their respective customers and claiming deduction only by making provision in their Books without actually remitting the amount to the exchequer. To curb this practice, section 43B was inserted with effect from 1-4-1984, by which the Mercantile System of Accounting with regard to tax, duty and contribution to welfare funds stood discontinued and, under section 43B, it became mandatory for the assessee(s) to account for the afore- stated items not on Mercantile basis but on cash basis. This situation continued between 1-4-1984 and 1-4-1988, when the Parliament amended section 43B and inserted first proviso to section 43B. By this first proviso, it was, inter alia, laid d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting period of R.P.F.C. For example, in many cases, the time to make contribution to R.P.F.C. ended after due date for filing of returns. Therefore, the industry once again made representation to the Ministry of Finance and, taking cognizance of this difficulty, the Parliament inserted one more amendment vide Finance Act, 2003, which, as stated above, came into force with effect from 1-4-2004. In other words, after 1-4-2004, two changes were made, namely, deletion of the second proviso and further amendment in the first proviso, quoted above. By the Finance Act, 2003, the amendment made in the first proviso equated in terms of the benefit of deduction of tax, duty, cess and fee on the one hand with contributions to Employees' Provident Fund, superannuation fund and other welfare funds on the other. However, the Finance Act, 2003, bringing about this uniformity came into force with effect from 1-4-2004. Therefore, the argument of the assessee(s) is that the Finance Act, 2003, was curative in nature, it was not amendatory and, therefore, it applied retrospectively from 1-4-1988, whereas the argument of the Department was that Finance Act, 2003, was amendatory and it applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and which resulted in the enactment of Finance Act, 2003, deleting the second proviso and bringing about uniformity in the first proviso by equating tax, duty, cess and fee with contributions to welfare funds. Once this uniformity is brought about in the first proviso, then, in our view, the Finance Act, 2003, which is made applicable by the Parliament only with effect from 1-4-2004, would become curative in nature, hence, it would apply retrospectively with effect from 1-4-1988. Secondly, it may be noted that, in the case of Allied Motors (P.) Ltd. v. CIT [1997] 224 ITR 677(SC), the scheme of section 43B of the Act came to be examined. In that case, the question which arose for determination was, whether sales tax collected by the assessee and paid after the end of the relevant previous year but within the time allowed under the relevant Sales Tax law should be disallowed under section 43B of the Act while computing the business income of the previous year? That was a case which related to assessment year 1984-85. The relevant accounting period ended on 30-6-1983. The Income-tax Officer disallowed the deduction claimed by the assessee which was on account of sales tax collected by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng year] but before filing of the returns under the Income-tax Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under section 43B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right up to 1-4-2004, and who pays the contribution after 1-4-2004, would get the benefit of deduction under section 43B of the Act. In our view, therefore, Finance Act, 2003, to the extent indicated above, should be read as retrospective. It would, therefore, operate from 1-4-1988, when the first proviso was introduced. It is true that the Parliament has explicitly stated that Finance Act, 2003, will operate with effect from 1-4-2004. However, the matter before us involves the principle of construction to be placed on the provisions of Finance Act, 2003. 10. Before concluding, we extract herei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITAT was correct in law in deleting the addition relating to employees' contribution towards Provident Fund and ESI made by the Assessing Officer under section 36(1)(va) of the Income-tax Act, 1961?" 5. Section 36 of the Act deals with certain deductions which shall be allowed in respect of matters dealt with therein, in computing the income referred to in section 28 of the Act. Different types of deductions are provided therein in various clauses of section 36. Clause (iv) of sub-section (1) deals with deductions on account of contribution towards a recognized provident fund or an approved superannuation fund made by the assessee as an employer, subject to certain limits and also subject to certain conditions as the CBDT may think fit to specify. Clause (v) of sub-section (1) of section 36 enables the assessee to seek deduction in respect of sum paid by it 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. Then comes clause (va) which deals about employees' contribution in the provident fund and ESI and reads as under:- "(va) any sum received by the assessee fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred as aforesaid and the evidence of such payment is furnished by the assessee along with such return." [Emphasis supplied] 7. During the period in question with which we are concerned, section 43B contained second proviso also, which stands omitted by the Finance Act, 2003 with effect from 1 - 4-2004. Since, this provision existed at the relevant time, it also needs to be reproduced:- "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 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." 8. As per the first proviso, if the payment is actually made on or before the due date applicable in his case for filing the return, it would be admissible as deduction. Thus, the 'due date' is the date on which return is to be filed. The case of the Revenue is that for employees' contribution, the 2nd proviso was specifically incorporated and in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se from the salary/wages of the employees, it will be treated as 'income' at the hands of the assessee. It clearly follows therefrom that if the assessee does not deposit this contribution with provident fund/ESI authorities, it will be taxed as income at the hands of the assessee. However, on making deposit with the concerned authorities, the assessee becomes entitled to deduction under the provisions of section 36(1)(va) of the Act. Section 43B(b), however, stipulates that such deduction would be permissible only on actual payment. This is the scheme of the Act for making an assessee entitled to get deduction from income insofar as employees' contribution is concerned. It is in this backdrop we have to determine as to at what point of time this payment is to be actually made. 12. Since the ITAT while holding that the amount would qualify for deduction even if paid after the due dates prescribed under the Provident Fund/ESI Act but before the filing of the income-tax returns by placing reliance upon the Supreme Court judgment in Vinay Cement Ltd.'s case (supra). at this juncture we take note of the discussion of ITAT on this aspect:- "11. We have carefully cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court was dismissed making the aforequoted observations. The reasons are given and, thus, it amounts to affirmation of the view taken by the High Court of Guwahati. 14. When we keep that proposition in mind and also take into consideration various judgments where Vinay Cement Ltd. 's case (supra) is applied and followed, it will not be possible to accept the contention of the Revenue. 15. In CIT v. Dharmendra Sharma [2008] 297ITR 320, this Court specifically dealt with this issue and relying upon the aforesaid judgment of the Guwahati High Court, as affirmed by the Supreme Court in Vinay Cement Ltd. 's case (supra), the appeal of the Revenue was dismissed. More detailed discussion is contained in another judgment of this Court in CIT v. P.M. Electronics Ltd. [2009] 177 Taxman 1. Specific questions of law which were proposed by the Revenue in that case were as under:- "(a) Whether amounts paid on account of PF/ESI after 'due date' are allowable in view of section 43B, read with section 36(1)(va) of the Act? (b) Whether the deletion of the 2nd proviso to section 43B by way of amendment by the Finance Act, 2003 is retrospective in nature" (p. 2) 16. These q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its own Court in CIT v. Assam Tribune [2002] 253 ITR 93 and CIT v. Bharat Bamboo & Timber Suppliers [1996] 219 ITR 212 the Division Bench dismissed the appeal of the revenue. It transpires that the aforesaid matter was taken up in appeal along with other matters including Vinay Cement Ltd.'s case (supra). The order in Vinay Cement Ltd.'s case (supra) was passed by the Supreme Court on 7-3-2007 wherein it observed as follows:- 'Delay condoned. In the present case we are concerned with the law as it stood prior to the amendment of section 43B. In the circumstances, the assessee was entitled to claim the benefit in section 43B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return. Special leave petition is dismissed'. 10. In view of the above, it is quite evident that the special leave petition was dismissed by a speaking order and while doing so the Supreme Court had noticed the fact that the matter in appeal before it pertain to a period prior to the amendment brought about in section 43B of the Act. The aforesaid position as regards the state of the law for a period prior to the amendment to sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are in respectful agreement with the reasoning of the Madras High Court in Nexus Computer (P.) Ltd.'s case (supra). Judicial discipline requires us to follow the view of the Supreme Court in Vinay Cement Ltd.'s case (supra) as also the view of the Division Bench of this Court in Dharmendra Sharma's case (supra). 13. In these circumstances, we respectfully disagree with the approach adopted by a Division Bench of the Bombay High Court in Pamwi Tissues Ltd.'s case (supra). 14. In these circumstances indicated above, we are of the opinion that no substantial question of law arises for our consideration in the present appeal. The appeal is, thus, dismissed." (p. 3) It also becomes clear that deletion of the 2nd proviso is treated as retrospective in nature and would not apply at all. The case is to be governed with the application of the 1st proviso. 17. We may only add that if the employees' contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had remitted the employees contribution beyond the due date for payment, but within the due date for filing the return of income. Hence, following the above-said decision, we find no reason to differ with the findings of the Tribunal. Accordingly, we find no question of law much less any substantial question of law arises for consideration in these appeals. Accordingly, both the Tax Case(Appeals) stand dismissed. No Costs. Consequently, M. P. N. 1 of 2015 is also dismissed." 10.3.7 We have also observed that Co-ordinate Division Bench of Chennai Tribunal in ACIT v. SPEL Semiconductor Limited in I.T.A. No. 3263/Chny/2018 for ay: 2013-14 has decided this issue in favour of the tax-payer as in that case the employee contribution of the Provident Fund was deposited by employer to the credit of employees with respective PF fund after the due date as prescribed in the applicable PF Act, but was deposited before the due date as prescribed for filing of return of income under Section 139(1) of the 1961 Act, by relying on decision of Hon'ble Madras High Court in the case of CIT v. Industrial Security & Intelligence India Private Limited (supra). One of us namely Hon'ble Judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Madras High Court observed in the case of Orchid Pharma (supra) that tribunal has decided the issue in favour of tax-payer by relying on decision of Hon'ble Madras High Court in the case of Industrial Security and Intelligence Private Limited (supra). The Revenue brought to the notice of the Hon'ble Madras High Court, decision(s) of Hon'ble Kerala High Court in the case of CIT v. Merchem Limited reported in (2015) 378 ITR 443(Ker.) and also decision in the case of Popular Vehicles and Services Private Limited v. CIT reported in (2018) 96 taxmann.com 13(Ker.), wherein this issue is decided by Hon'ble Kerala High Court in favour of Revenue and with this background, Hon'ble Madras High Court remanded the matter back to the file of learned CIT(A) for fresh adjudication of the issue, after considering entire law in statute and decisions of Courts post the decision of Hon'ble Delhi High Court in the case of Aimil Limited (supra). We have observed that Hon'ble Supreme Court in the case of Alom Extrusion (cited supra) while adjudicating on applicability of amended provision of Section 43B of the 1961 Act by virtue of deletion of second proviso and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion Nos. 2, 3 & 4 are accordingly answered in favour of the assessee and against the revenue." 10.3.9 The Hon'ble Bombay High Court has consistently held this issue in favour of the tax-payer in its other decisions also such as Geekay Security Services Private Limited v. DCIT reported in (2019) 101 taxmann.com 192(Bom.), CIT v. Hindustan Organics Chemicals Limited (2014) 366 ITR 1(Bom.). The Hon'ble Delhi High Court in AIMIL Limited (supra) held that if employees contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payments but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. It further held that the statutes governing PF/ESI permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the 1961 Act is concerned, the assessee can get the benefit if the actual payment made is before the return of income is filed, as per the principle laid down by the Supreme Court in Vinay Cement Ltd.'s case(supra). However, Hon'ble Delhi High Court has now decided this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sited to the credit of employee with relevant funds within the due date as prescribed under the statute governing PF/ESI keeping in view provisions of Section 36(1)(va) read with Explanation 1 and provisions of Section 2(24)(x) of the 1961 Act, thus applying strict interpretation and holding that otherwise Section 36(1)(va) read with Explanation 1 will become otiose which was not the intention of legislature. It further went on to hold that the issue before Hon'ble Supreme Court while adjudicating appeal in the case of Alom Extrusion (supra) was never with respect of employees contribution to PF/ESI and it was only in context of employers contribution to PF/ESI, wherein amendments brought in by Finance Act, 2003 were held to be retrospective by Hon'ble Supreme Court in the case of Alom Extrusion (supra). The decision of Hon'ble Kerala High Court in the case of Popular Vehicles (supra) is reproduced as hereunder: "7. We will first notice the provisions. "S. 2(24) "income " includes- ** ** ** (x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees welfare fund which is the employer's contribution. 9. We have carefully gone through the decisions of the Hon'ble Supreme Court as also of the Division Bench. The primary question to be considered is whether there should be a reconsideration of Merchem Ltd.'s case (supra). Alom Extrusions Ltd.'s case (supra) and Merchem Ltd.'s case (supra) applied in two different fields; the former with reference to Section 43B(b), being employer's contribution and the latter dealing with employee's contribution as covered by Section 36(1)(va). We would first deal with Alom Extrusions Ltd.'s case (supra) which has dilated upon the history of the legislation and the reason for the various amendments brought in. We first notice that the question which arose for consideration in Alom Extrusions Ltd. 's case (supra) was as to "whether omission (deletion) of the second proviso to section 43B of the Income-tax Act, 1961, by the Finance Act, 2003, operated with effect from April 1, 2004, or whether it operated retrospectively with effect from April 1, 1988" (sic para 4). The Hon'ble Supreme Court noticed that prior to Finance Act, 2003, the second proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introduced to grant a relief by way of deduction insofar as the tax, duties, cess or fee paid before the filing of the return under the IT Act though after the previous year; the liabilities having accrued in that previous year. This relaxation, however, was restricted to tax, duties, cess and fee and not applied to contributions to labour welfare funds. The reason also stated by the Hon'ble Supreme Court "to be that the employer(s) should not sit on the collected contributions and deprive the workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the welfare funds" (sic - para 16). It is this declaration by the Hon'ble Supreme Court which is relied on by the learned Counsel for the appellant to contend that the Hon'ble Supreme Court was considering the question of employee's contribution also. Otherwise, there would not have been a reference to an 'employer sitting on the collected contribution', is the compelling argument. 12. We have to understand this statement with reference to the question framed by the Hon'ble Supreme Court at the first instance in the opening paragraph of the judgment. We also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion that the question with respect to employee's contribution is regulated by clause (x) of Section 2(24) and sub-clause (va) of Section 36(1) and would not be affected by Section 43B. Section 43B though a non-obstante clause, makes deductions to be allowable only on actual payment; when such deductions are otherwise allowable. Primarily it is to be noticed that it is a restrictive clause, the amendments to which or the deletion of a proviso in which cannot lead to it being converted as an enabling provision permitting deduction even when there was no deduction permissible by the other provisions of the Act. The non-obstante clause has no effect insofar as the employee's contribution which is specifically covered by sub-clause (va) of Section 36(1). By virtue of the Explanation below sub-clause (va), no deduction could be claimed if the contribution has not been paid, after collection from the employees by way of deduction from their salaries, within the due date under the EPF&MP Act. The deletion of a proviso under Section 43B cannot render otiose the Explanation under Section 36(1)(va). 15. Merchem Ltd.'s case (supra), we notice, dealt with the specific questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an employer, which reads thus: "For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or clause (b) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1983 or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him." Therefore, according to us, since the Respondent has admittedly not paid the deduction so made within the due date as provided under Sec. 36(1)(va), the Respondent was not entitled to get deduction of the amounts deducted thereunder for and on behalf of the employees'. 16. The learned Judges had elaborately considered the decision in Alom Extrusions Ltd.'s case (supra) and has found the provisions having application in different fields. Section 43B(b) dealt with the employer's contribution and sub-clause (va) of Section 36(1) was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employees which had to be paid to the welfare fund within the due date; as provided under the statute which created the welfare fund. The contributions which are deducted at the time of payment of salary is received by the employer- Company and is treated as income under Section 2(24). On remittance of this contribution, within the due date, it is allowed as a deduction under Section 36. If it is not paid to the welfare fund within the due date provided under the relevant statute, it remains as an income in the books of accounts of the assessee/employer Company. The said contribution having not been paid to the applicable welfare fund within the due date provided, the assessee for all time is deprived of claiming such a remittance, made subsequently, as deduction from the income. This, as the Hon'ble Supreme Court noticed, is looking at the spirit behind the labour welfare legislation and the need for the employer to satisfy the remittance within the time provided under the statute creating the welfare fund. At least with respect to the employee's contributions, which the employer deducts from the salary of the employees, if it is not remitted into the fund within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 Act, by a proviso stipulates 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 u/s. 139(1) of the 1961 Act. So, what is important for entering into provisions of Section 43B of the 1961 Act is that the deduction ought to be firstly allowable under the provision of the 1961 Act before recourse to Section 43B of the 1961 Act can be taken. Provisions of Section 36(1)(va) allows deduction towards employees contribution to PF/ESI and other welfare funds of employees which is required to be deposited by employer to the credit of employee with relevant fund on or before the due date as is prescribed under the relevant statute applicable for PF/ESI and other welfare funds of employees, otherwise deduction u/s. 36(1)(va) of the 1961 Act is not allowable and employee contribution towards PF/ESI and other employees welfare funds received by employer shall be deemed to be income of the assessee u/s. 2(24)(x) of the 1961 Act. Thus, firstly to get deduction u/s. 36(1)(va) of the 1961 Act of the employee contribution received by employers towards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PF contribution being deposited to the credit of employee with relevant fund by assessee-employer beyond the time stipulated as due date under PF Act, there is no question of entering into provisions of Section 43B of the 1961 Act which deals with allowing deduction on payment basis provided the deduction is otherwise allowable under the provisions of the 1961 Act. Section 36(1)(va) of the 1961 Act is a provision which entitles taxpayer to claim deduction from the income and hence the provision is to be strictly construed and the onus is on the assessee to prove that it fulfills all the conditions as stipulated under Section 36(1)(va) read with Explanation before claiming deduction from its income. The decision of Constitution Bench of Hon'ble Supreme Court in the case of Commissioner of Customs (Imports) v. Dilip Kumar & Co. reported in (2018) 9 SCC 1 is relevant. The recent decision of Hon'ble Supreme Court in the case of Ramnath & Co. v. CIT reported in (2020) 116 taxmann.com 885(SC) is relevant (refer para 17 to 20), which is reproduced hereunder: Dilip Kumar & Co. 17. The core question referred for authoritative pronouncement to the Constitution Bench in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng shapes, specially, in a growing economy. For instance tax holiday to new units, confessional rate of tax to goods or persons for limited period or with the specific objective, etc. That is why its construction, unlike charging provision, has to be tested on different touchstone. In fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly speaking liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject, but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the ambit at stage of applicability. But once that hurdle is crossed, construe it liberally." 60. We do not find any strong and compelling reasons to differ, taking a contra view, from this. We respectfully record our concurrence to this view which has been subsequently, elaborated by the Constitution Bench in Hari Chand case " (emphasis in bold supplied) 17.2. The Constitution Bench decision in Hari Chand Shri Gopal (supra) was also taken note of, inter alia, in the following:- "50. We will now consider another Constitution Bench decision in CCE v. Hari Chand Shri Gopal (hereinafter referred as "Hari Chand case", for brevity). We need not refer to the facts of the case which gave rise to the questions for consideration before the Constitutional Bench. K.S. Radhakrishnan, J., who wrote the unanimous opinion for the Constitution Bench, framed the question viz. whether manufacturer of a specified final product falling under the Schedule to the Central Excise Tariff Act, 1985 is eligible to get the benefit of exemption of remission of excise duty on specified intermediate goods as per the Central Government Notification dated 11-8-1994, if captively consumed for the manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication. 66.2. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. 66.3. The ratio in Sun Export case is not correct and all the decisions which took similar view as in Sun Export case stand overruled." (emphasis in bold supplied) 17.4. Obviously, the generalised, rather sweeping, proposition stated in the case of Sun Export Corporation (supra) as also in other cases that in the matters of taxation, when two views are possible, the one favourable to assessee has to be preferred, stands specifically disapproved by the Constitution Bench in Dilip Kumar & Co. (supra). It has been laid down by the Constitution Bench in no uncertain terms that exemption notification has to be interpreted strictly; the burden of proving its applicability is on the assessee; and in case of any ambiguity, the benefit thereof cannot be claimed by the subject/assessee, rather it would be interpreted in favour of the revenue. 18. It has been repeatedly emphasised on behalf of the appellant that Section 80- O of the Act is essentially an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of its applicability cannot be expanded or widened and remains subject to strict interpretation but, once eligibility is decided in favour of the person claiming such deduction, it could be construed liberally in regard to other requirements, which may be formal or directory in nature. 10.3.11 Thus, keeping in view strict and literal interpretation of provisions of Section 36(1)(va) of the 1961 Act read with Explanation 1 and Section 2(24)(x) of the 1961 Act, the assessee will not be entitled for deduction as the employee contribution towards PF received by assessee was deposited late beyond the time stipulated under the relevant statute governing PF. 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. 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 Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ideal situation, the said amounts ought to have been deposited by employer which it collected from its employees, 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. Similarly, Hon'ble Madras High Court in the case of Industrial Security and Intelligence India Private Limited (supra) after considering and interpreting the decision of Hon'ble Supreme Court in the case of Alom Extrusion (supra) and Hon'ble Delhi High Court in the case of Aimil Limited (supra) 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 rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tution Bench decision of Hon'ble Supreme Court in the case of Commissioner of Customs (Imports) v. Dilip Kumar & Co. reported in (2018) 9 SCC 1, in which Constitution Bench of Hon'ble Supreme Court has held that Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. The recent decision of Hon'ble Supreme Court in the case of Ramnath & Co. v. CIT reported in (2020) 116 taxmann.com 885(SC) is also relevant (refer para 17 to 20), which are reproduced hereunder: "Dilip Kumar & Co. 17. The core question referred for authoritative pronouncement to the Constitution Bench in the case of Dilip Kumar & Co. (supra) was as to what interpretative rule should be applied while interpreting a tax exemption provision/notification when there is an ambiguity as to its applicability with reference to the entitlem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charging provision, has to be tested on different touchstone. In fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly speaking liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject, but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction." (emphasis supplied) ** ** ** 58. In the above passage, no doubt this Court observed that: (Parle Exports case, SCC p. 357, para 17) "17. when two views of a notification are possible, it should be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concurrence to this view which has been subsequently, elaborated by the Constitution Bench in Hari Chand case " (emphasis in bold supplied) 17.2. The Constitution Bench decision in Hari Chand Shri Gopal (supra) was also taken note of, inter alia, in the following:- "50. We will now consider another Constitution Bench decision in CCE v. Hari Chand Shri Gopal (hereinafter referred as "Hari Chand case", for brevity). We need not refer to the facts of the case which gave rise to the questions for consideration before the Constitutional Bench. K.S. Radhakrishnan, J., who wrote the unanimous opinion for the Constitution Bench, framed the question viz. whether manufacturer of a specified final product falling under the Schedule to the Central Excise Tariff Act, 1985 is eligible to get the benefit of exemption of remission of excise duty on specified intermediate goods as per the Central Government Notification dated 11-8-1994, if captively consumed for the manufacture of final product on the ground that the records kept by it at the recipient end would indicate its "intended use" and "substantial compliance" with procedure set out in Chapter 10 of the Central Excise Rules, 1994, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue. 66.3. The ratio in Sun Export case is not correct and all the decisions which took similar view as in Sun Export case stand overruled." (emphasis in bold supplied) 17.4. Obviously, the generalised, rather sweeping, proposition stated in the case of Sun Export Corporation (supra) as also in other cases that in the matters of taxation, when two views are possible, the one favourable to assessee has to be preferred, stands specifically disapproved by the Constitution Bench in Dilip Kumar & Co. (supra). It has been laid down by the Constitution Bench in no uncertain terms that exemption notification has to be interpreted strictly; the burden of proving its applicability is on the assessee; and in case of any ambiguity, the benefit thereof cannot be claimed by the subject/assessee, rather it would be interpreted in favour of the revenue. 18. It has been repeatedly emphasised on behalf of the appellant that Section 80- O of the Act is essentially an incentive provision and, therefore, needs to be interpreted and applied liberally. In this regard, we may observe that deductions, exemptions, rebates et cetera are the different species of incentives extended by the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard to other requirements, which may be formal or directory in nature." Thus, keeping in view strict and literal interpretation of provisions of Section 36(1)(va) of the 1961 Act read with Explanation 1 and Section 2(24)(x) of the 1961 Act, the assessee will not be entitled for deduction as the employee contribution towards PF received by assessee was deposited late beyond the time stipulated under the relevant statute governing PF. 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. 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 nature. The Hon'ble Supreme Court also referred in its decision in Alom Extrusion (supra) to its earlier decision in CIT v. J.H. Gotla [1985] 156 ITR 323(SC), para 10 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Gujarat High Court and Hon'ble High Court of Kerala in favour of Revenue. Thus, the applicable provision as is contained in 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 for ever 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 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. 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 in the ideal situation, the said amounts ought to have been deposited by employer which it collected from its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e' under this clause, 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 amendment from the plain reading of the Section indicates that it ought to have retrospective effect, but on perusal of Memorandum to Finance Bill 2021, it transpires that the lawmakers have consciously made it applicable from ay: 2021-22 and subsequent assessment years. It is also recognised in the said Memorandum that some courts have applied the provision of section 43B on employee contribution as well and have decided this issue in favour of taxpayer. The said explanation was inserted to rationalise the provisions of Section 36(1)(va) and 43B of the 1961 Act and it is stated in Memorandum to Finance Bill, 2021 that the said explanation is inserted to provide certainty. It is specifically stated in Memorandum to Finance Bill, 2021 that these amendments to Section 36(1)(va) and 43B shall take effect from 01st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years. It is also to be noted that several of the tax-payers (except in the State of Gujarat and Kerala, and such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 and does not cover employee contribution, some courts have applied the provision of section 43B on employee contribution as well. There is a dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ackdrop that the legislature has not only incorporated necessary amendments in Sections 36(va) as well as 43B vide Finance Act, 2021 to this effect but also the CBDT has issued Memorandum of Explanation that the same applies w.e.f. 1-4-2021 only. It is further not an issue that the foregoing legislative amendments have proposed employers contributions; disallowances u/s. 43B as against employee u/s. 36 (va) of the Act; respectively. However, keeping in mind the fact that the same has been clarified to be applicable only with prospective effect from 1-4-2021, I hold that the impugned disallowance is not sustainable in view of all these latest developments even if the Revenue's case is supported by the following case law. (i) CIT v. Merchem Ltd., [2015] 378 ITR 443(Ker) (ii) CIT v. Gujarat State Road Transport Corporation [2014] 366 ITR 170 (Guj.) (iii) CIT v. South India Corporation Ltd. [2000] 242 ITR 114 (Ker) (iv) CIT v. GTN Textiles Ltd. [2004] 269 ITR 282 (Ker) (v) CIT v. Jairam & Sons [2004] 269 ITR 285 (Ker) 3. The impugned ESI/PF disallowance is directed to be deleted therefore. 4. This assessee's appeal is allowed. " We have observed that Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid tax-audit report is placed on record in file. Thus for limited purposes, we are directing AO to verify the challans 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. 13,14,725/- 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. We order accordingly." This Division Bench (of which both of us are part of the Division Bench) also decided this issue in favour of the tax-payer 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 suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi-tribunal order in the case of Flying Fabrication v. DCIT, CPC, Bengaluru, in ITA no. 1049/Del/2021 for ay: 2018-19 and 1407/Del/2021 for ay: 2019-20, vide common order dated 17.11.2021 b) Delhi-tribunal order in the case of Adama Solution Private Limited v. ADIT, CPC, Bengaluru, SMC Bench in ITA no. 1800/Del/2020, vide orders dated 13.10.2021 c) Delhi-tribunal order in the case of Insta Exhibitions Private Limited v. Addl. CIT, in ITA No. 6941/Del/2017, vide orders dated 03.08.2021 d) Delhi-tribunal decision in the case of Aroon Facilitation Management Services Private Limited, SMC Bench in ITA no. 1824/Del/2020, vide order dated 13.10.2021 e) Jaipur-tribunal decision in the case of Bhivaram Pannalal Kumawat v. DCIT in ITA no. 76/JP/2021, order dated 12.10.2021 f) Hyderabad-tribunal decision in the case of Value Momentum Software Services Private Limited v. DCIT, in ITA no. 2197/Hyd/2017, order dated 19.05.2021 g) Hyderabad-tribunal decision in the case of Vijay Electricals Limited v. DCIT, in ITA no. 1533 & 1534/Hyd/2017, order dated 27.05.2021 h) Hyderabad-tribunal SMC decision in the case of Salzgitter Hydraulics Private Limited v. ITO, reported in (2021) 128 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No. 87 of 2006, vide judgment dated 17.08.2016, as the said decision holds the field, as it was also held that the amendment by Finance Act, 2021 in Section 36(1)(va) and 43B is prospective and is applicable to ay: 2021-22 and subsequent assessment years. There is no contrary decision of Hon'ble Allahabad High Court or of Hon'ble Apex Court is brought to our notice by Revenue. Since, the facts in the present appeal are similar to the facts in the case of Commercial Auto Sales Private Limited(supra), which was decided by us in favour of the tax-payer on this issue, vide orders dated 16.12.2021, thus keeping in view of principles of consistency, we decide this appeal in favour of the assessee. Admittedly, in this case, the assessee has deposited employee share of PF/ESI late beyond the time stipulated under the relevant statute governing PF/ESI, but the same was claimed by assessee to be deposited prior to the due date prescribed for filing of return of income u/s. 139(1). The main contention of Revenue is that the PF/ESI Act are benevolent statute(s) with the social benefits for employees to build retirement corpus for the salaried employees. The contribution to fund is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the 1961 Act, wherein for a single day delay in deposit of employee share of PF/ESI by employer to the credit of employee with relevant fund, beyond the time provided under these special statute for deposit of PF/ESI which is fifteen days from the end of the month to which such contribution pertain in case of PF, the same is to be held chargeable to tax and denying the deduction u/s. 36(1)(va) forever does not hold merit in the teeth of binding decision of Hon'ble jurisdictional High Court in the case of Sagun Foundries(supra). The Revenue is not able to place on record any contrary decision of Hon'ble Apex court and/or Hon'ble Allahabad High Court. No doubt, keeping in view strict and literal interpretation of provisions of Section 36(1)(va) of the 1961 Act read with Explanation 1 and Section 2(24)(x) of the 1961 Act even before amendment by Finance Act, 2021, the assessee will not be entitled for deduction as the employee contribution towards PF/ESI received by assessee was deposited late beyond the time provided for deposit of said contribution as is stipulated/provided under the relevant statute governing PF/ESI. But, it is equally true that the Constitutiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(va) read with Section 2(24)(x) and 43B of the 1961 Act. The Hon'ble Jurisdictional High Court while deciding Sagun Foundry(Supra) has discussed the decision of Hon'ble Supreme Court in para 25 to 28 and then adjudicated this issue in favour of the tax-payer. The Hon'ble Jurisdictional High Court has in para 29 has taken a view that the law laid down by Hon'ble High Court of Karnataka, Hon'ble High Court of Rajasthan, Hon'ble High Court of Punjab and Haryana, Hon'ble High Court of Delhi, Hon'ble High Court of Bombay and Hon'ble High Court of Himachal Pradesh have rightly applied Section 43B in respect of both contributions i.e. employers and employees. The Hon'ble Jurisdictional High Court has with great respect dissented with the view taken by Hon'ble Gujarat High Court and Hon'ble High Court of Kerala, which view on the issue was decided by Hon'ble Gujarat High Court and Hon'ble High Court of Kerala in favour of Revenue. Thus, the applicable provision as is contained in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein Explanation 5 was inserted, which reads as under: "43B**** **** 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 applied." Although, on perusal of the above amendment by Finance Act, 2021, it transpires that the said Explanations were inserted in Section 36(1)(va) and 43B by way of removal of doubt to clarify the law as existed on the statute so far as employee contribution received by employer from employee which is to be deposited to the credit of employee with PF/ESI fund on or before the due date as provided in statute governing PF/ESI, to enable the employer to claim deduction u/s. 36(1)(va) of the 1961 Act read with Section 2(24)(x) of the Act, and no deduction shall be allowed by virtue of Section 36(1)(va) as Section 43B has no applicability in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to it, if any sum towards employer's contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date for furnishing the return of the income under sub-section (1) of section 139, assessee would be entitled to deduction under section 43B and such deduction would be admissible for the accounting year. This provision does not cover employee contribution referred to in clause (va) of sub-section (1) of section 36 of the Act. Though section 43B of the Act covers only employer's contribution and does not cover employee contribution, some courts have applied the provision of section 43B on employee contribution as well. There is a distinction between contribution and employee's contribution towards welfare fund. It may be noted that 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 toward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention of Parliament to accept the interpretation provided by Constitutional Courts in reading down provision of Section 36(1)(va) wherein extended period allowed u/s. 43B was applied even to employee contribution to PF/ESI, until assessment year 2020-21 and the Parliament chose to apply the said amendments w.e.f. 01st April, 2021 and made applicable effective from assessment year 2021-22 and subsequent assessment years. Thus, it is clear that the Parliament chose not to litigate this issue prior to assessment year 2021-22 and to close all disputes on this issue, prior to assessment year 2021-22, and made these stringent provisions applicable to employee contribution to PF/ESI effective from assessment year 2021-22 and subsequent assessment years. There is a cherished objective behind this not raising the dispute(s) on this issue prior to assessment year 2021-22 and accepting the position as laid down by Constitutional Courts up-till 2020-21, which is on consonance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct below the specified limits may be withdrawn/not pressed, and in the process facilitating a better and concerted focus on high demand litigations. CBDT has also clarified to the field officers that appeals should not be filed merely because the tax effect in a particular case exceeds the prescribed monetary limits and the filing of an appeal should be decided strictly on the merits of the case. Similarly, the field formations under the CBIC have been instructed to withdraw appeals pending in High Courts/Customs Excise and Service Tax Appellate Tribunal, where the Supreme Court has decided on identical matter. Besides, CBIC has also instructed its field formations not to contest further in appeal where the issue has been lost in two stages of appeals. It has been decided, however, that in cases where it is felt that the issue is fit for further appeal, then on proper justification and approval of the Zonal Chief Commissioner, an appeal can be filed 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 thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal with LIMBS is envisioned. The alternative mechanism for the resolution of Inter-Ministerial/Departmental disputes also provide for an institutionalized mechanism for resolution of such disputes, namely, Administrative Mechanism for Resolution of Disputes (AMRD). This was framed by the Department of Legal Affairs and circulated vide O.M. dated 31.03.2020. This mechanism, applicable to disputes other than taxation disputes, will reduce litigations in courts and resolve the cases outside the court system, 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 Sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable from assessment year 2021-22 and subsequent assessment years. Thus, the Parliament was fully aware that Some courts have decided this issue in favour of taxpayers by reading down the existing provisions of Section 36(1)(va) read with Section 2(24)(x) by applying provisions of Section 43B of the 1961 Act, but still the Parliament has made amendments to Section 36(1)(va) and 43B and made it applicable from ay: 2021-22 and subsequent assessment years, which we have already discussed in this 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in ITA no. 1533 & 1534/Hyd/2017, order dated 27.05.2021 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyee 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 assessee shall be entitled for deduction u/s. 36(1)(va) of the 1961 Act. The assessee's counsel has neither filed tax-audit report nor filed challans, before the tribunal. Thus for limited purposes, we are directing AO to verify the challans 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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