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TMI Blog2022 (12) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees accounts on or before the due date as prescribed under the respective Acts - AR referred to section 5 of the Payment of Wages Act, 1936, to contend that deduction made from an employee s salary for the month of October should suffer disallowance only if it is not paid by 15th December - HELD THAT:- There is no merit in the contention of linking the date of deposit of the employees share in the relevant funds with the date of payment of wages. Section 5 of the Payment of Wages Act simply deals with the Time of payment of wages . It does not stipulate any time limit for deposit of the employees share in the relevant funds. For that purpose, the relevant Acts give a window for depositing the contribution within 15 days of the last month's salary. Thus, contribution to the relevant fund towards the salary for the month of October-ending should be deposited before 15th November. CIT(A) was justified in sustaining the adjustment u/s 143(1)(a) by means of disallowance made in these cases for late deposit of employees share to the relevant funds beyond the date prescribed under the respective Acts. Both the sides are agreeable that the facts and circumstances of all the appeals e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.36(1)(va) of the Income-tax Act, 1961 (hereinafter also called the Act ) made in the Intimations issued u/s.143(1) of the Act or thereafter its confirmation in the respective rectification orders for the assessment years 2017-18 to 2020-21. Due to commonness of the issue, we are proceeding to dispose this batch of appeals through a consolidated order for the sake of convenience. 2. On a representative basis, we are taking up the factual scenario from the appeal preferred by Cemetile Industries (in ITA No.693/PUN/2022) against the order u/s.154 of the Act, which was espoused for arguments by both the sides as a lead case. Briefly stated, the facts of the case are that the assessee filed its return, which was processed u/s.143(1) on 22-08-2019 making disallowance, inter alia, u/s.36(1)(va) amounting to Rs.3,40,347/- on the ground that the amount received by the assessee from employees as contribution to the Employees Provident Fund (EPF)/Employees State Insurance Corporation (ESIC) etc. (hereinafter called `the relevant funds ) was not credited to the employees accounts on or before the due date as prescribed under the respective Acts. Thereafter, the assessee applied for rectif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt in the relevant fund or funds on or before the due date. . The term `due date for the purposes of this clause has been defined in Explanation 1 to this provision to mean: `the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. Thus, it is axiomatic that deposit of the employees share of the relevant funds before the due date under the respective Acts is sine qua non for claiming the deduction. Au Contraire , if the contribution of the employees to the relevant funds is not deposited by the employer before the due date under the respective etc., then the deduction u/s.36(1)(va) is lost notwithstanding the fact that the share of the employees had already crystallized as income of the employer u/s.2(24)(x) of the Act. 5. Adverting to the facts of the case, it is seen that the assessee claimed the deduction for the employees share for depositing the same in the relevant funds beyond the due date as given in Explanation 1 to section 36(1)(va) on the strength of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in allowing deduction even where the amount was deposited in the employee s account before the time allowed u/s.139(1), ergo, got overturned. The net effect of this Apex Court judgment is that the deduction u/s.36(1)(va) can be allowed only if the employees share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts and further that the due date u/s.139(1) of the Act is alien for this purpose. 6. There is no quarrel that the enunciation of law by the Hon ble Supreme Court is always declaratory having the effect and application ab initio, being, the date of insertion of the provision, unless a judgment is categorically made prospectively applicable. The ld. AR candidly admitted that this judgment will equally apply to the disallowance u/s.36(1)(va) anent to all earlier years as well for the assessments completed u/s.143(3) of the Act. He, however, accentuated the fact that the instant batch of appeals involves the disallowance made u/s.143(1) of the Act. It was argued that no prima facie adjustment can be made in the Intimation issued u/s 143(1) of the Act unless a case is covered within the specific four corners of the provision. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of income or expenditure at two places in the return of income and there is inconsistency in them. For example, if deduction is claimed under a specific section for a sum of Rs.100/- in the Profit and loss account accompanying the return, but in the computation of income, the amount has been taken as Rs.110/-, leading to inconsistency, requiring an adjustment. Clause (ii) of Explanation (a) covers a situation in which claim is made, say, for a deduction u/s.80IA for which audit report is required to be furnished, but such report has not been furnished along with the return. Clause (iii) contemplates a situation in which deduction exceeds specified statutory limit. For example, section 24(a) provides for a standard deduction for a sum equal to 30% of the annual value, but the assessee has claimed deduction at 40%. These situations warrant an adjustment. It is obvious that none of the three clauses of Explanation (a), defining an incorrect claim apparent from any information in the return, gets magnetized to the facts of the present case. 10. Now we turn to clause (iv) of section 143(1)(a) which provides for `disallowance of expenditure or increase in income indicated in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited before the due date under the respective Acts. If the audit report mentions the due date of payment and also the actual date of payment with specific reference in column no. 20(b) having heading: `Details of contributions received from employees for various funds as referred to in section 36(1)(va) , it is an apparent indication of the disallowance of expenditure u/s 36(1)(va) in the audit report in a case where the actual date of payment is beyond the due date. Though the audit report clearly indicated that there was a delay in the deposit of the employees share in the relevant funds, which was in contravention of the prescription of u/s.36(1)(va), the assessee chose not to offer the disallowance in computing the total income in the return, which rightly called for the disallowance in terms of section 143(1)(a) of the Act. 11. The ld. AR vehemently argued that it was a case of increase in income which has been enshrined in clause (iv) of section 143(1)(a) w.e.f. 01-04-2021 and hence cannot be take note of for the year under consideration. In our considered opinion, the contention is ill-founded. We have noted above that clause (iv) of section 143(1)(a) talks of two diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustment u/s 143(1)(a)(iv) due to `increase in income is jettisoned. 12. Another argument point was put forth on behalf of the assessee that the assessee did not claim any deduction in the Profit and loss account of the amount under consideration and hence no disallowance should have been made. This argument is again bereft of force. The assessee claimed deduction for salary on gross basis, inclusive of the employees share to the relevant funds. To put it simply, if gross salary is of Rs.100, out of which a sum of Rs.10 has been deducted as contribution to relevant fund, then the debit of Rs.100 in the Profit and loss account means deduction has been claimed for Rs.10 as well. Ex consequenti , if deduction of Rs.10 is not allowed u/s 36(1)(va) for late deposit of the amount before the due date under the respective Act, it would mean that the claim of Rs.10 included in Rs.100 is not allowed deduction. 13. The ld. AR referred to section 5 of the Payment of Wages Act, 1936, to contend that deduction made from an employee s salary for the month of October should suffer disallowance only if it is not paid by 15th December. This argument was premised on the language of section 5, which sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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