GUJRAL HOTELS PRIVATE LIMITED,JABALPUR vs. DCIT, CIRCLE 2(1) JABALPUR, JABALPUR

At the very outset, it was submitted by the ld. counsel for the assessee, Sh. Usrethe, that the only issue arising in the instant appeals is the addition of the employee’s contribution to the employee welfare funds for the reason of the same having been deposited beyond the due date specified in its respect u/s. 36(1)(va), even as the same stand deposited by the due date/s of filing the return of income u/s. 139(1) of the Act for the relevant year/s. He would, toward the same, take us to the audit report u/s. 44AB of the Act for both the years (at PB pgs. 12-13 / PB pgs.27-28). The addition, being debatable, could not have been made under section 143(1), even as clarified by the Hon’ble jurisdictional High Court in CIT v. Shikarchand Jain [2003] 263 ITR 221 (MP); CIT v. GEI Engineering Ltd. [2009] 310 ITR 112 (MP), as indeed by the Tribunal in Nikhil Mohine v. Dy. CIT (in & 38/Jab/2021, dated 18.11.2021/PB pg. 17), a decision which is squarely on the point, and on which the assessee places total reliance. He, on being inquired by the Bench, stated of there being no decision by the Hon'ble jurisdictional High Court to the contrary, i.e., opining that the employee’s contribution to the employee welfare funds is to be, as required u/s. 2(24)(x) r/w s. 36(1)(va), deposited by the assessee-employer by the due date of deposit under the relevant Act for the same not to be added to his total income under the Act. The ld. Sr. DR, Sh. Gupta, even as he relied on the impugned orders, could not rebut the said contentions by Sh. Usrethe and, further, on asking, could not state of any decision by the Hon'ble jurisdictional High Court directly on the point, even as he relied on the impugned order.

The only manner, therefore, available for the Revenue to effect an adjustment u/s. 143(1)/154 is where the Explanations to section 36(1)(va) and s. 43B(b) inserted by Finance Act, 2021, which attempt to resolve the issue of the employee’s contribution to the employee welfare funds as being governed by section 43B(b), i.e., to the exclusion of s. 36(1)(va), are held as retrospective. Legislative intent being the cornerstone and the sole determinant of any interpretative exercise, both the language of the relevant provisions, as well as of the recently inserted Explanations thereto, introduced 3 | P a g e 2018-19) & ITA No. 62/Jab/2021(A.Y. 2019-20) Gujral Hotels Pvt. Ltd. & Jasuja Enterprises Pvt. Ltd. with a view to, as stated therein, remove any doubt in the matter, it opined, are unambiguously clear, so that s. 36(1)(va) and s. 43B operate in different fields and are applicable on different sums. Further, the stated date of the coming into effect (of the Explanations), i.e., 01/4/2021, it explained, would though be of no moment in view of the express language deeming the stated position as applicable since inception; that being the reason for bringing the Explanations on the statute, as the said amendments could otherwise have been effected through prospective clause/s to the relevant provisions. Rather, the tenor of the language employed, clearly giving the stated position a retrospective effect, necessarily requires the Explanations to be read as inserted from a later date. That is, the fact of insertion of the said Explanations w.e.f. a later date is consistent with the language giving it a retrospective effect and, thus, does not impinge adversely on it being regarded as so. Further still, noticing the settled legal position qua the test for determining retrospectivity, i.e., if a provision could be construed without the aid of the subsequent amendment thereto to take within its ambit the said amendment, the issue was also examined by the Tribunal on merits, i.e., for the said limited purpose, to find that the view canvassed by or on the assessee’s behalf could be sustained only by ignoring the existence of s. 36(1)(va) – which governs the deductibility of the employees’ contribution to the employee welfare funds, on the statute-book; clearly, an impermissibility. Another fundamental infirmity in the assessee’s argument is in regarding the employee’s contribution, deemed by the legal fiction of s. 2(24)(x) as the assessee-employer’s income, as an expense deductible u/s. 37(1), which could be so only where it is not recoverable – an impossibility, as the said deeming applied only on receipt thereof, again bringing s. 36(1)(va) into play for its deduction, and which would therefore have to be given effect to. That is, even regarding the same, for the sake of argument, as covered by s. 43B, a non-obstante provision, inasmuch as s. 43B applied only qua deductions ‘otherwise allowable’, i.e., under any provision of the Act, it rendered the 4 | P a g e 2018-19) & ITA No. 62/Jab/2021(A.Y. 2019-20) Gujral Hotels Pvt. Ltd. & Jasuja Enterprises Pvt. Ltd. question of law posed before the Hon’ble Courts, i.e., if the employee’s contribution to the employee welfare funds is exclusively covered u/s. 43B, as itself, with respect, misplaced, if not irrelevant. The view being canvassed was, thus, it held, viewed from any angle, wholly untenable. The view expressed by the Tribunal is in fact in agreement with that projected by the Board per its Circular (No. 22/2015, dtd. 17/12/2015), as also that canvassed per the impugned order/s with reference to several decisions, both explaining, as did the Explanatory Notes on the insertion of s. 36(1)(va) on the statute, the object of the said provision. It is this view, which in fact, as also noticed by the Tribunal, represented the uniform view across all the Hon’ble Courts prior to the deletion of the second proviso to s. 43B by Finance Act, 2003, w.e.f. 01/4/2004, and which (view) the Explanations to ss. 36(1)(va) and 43B by Finance Act, 2021 seek to statutorily clarify in view of the conflict of judicial opinion, passing thus the test of retrospectivity, even as unequivocally expressed per the unambiguous language thereof. The Explanations under reference were therefore clarificatory and, thus, retrospective.