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आयकर अपील�य अ�धकरण,च�डीगढ़ �यायपीठ “ए” , च�डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH (VIRTUAL COURT) �ी एन.के. सैनी, उपा�य एवं �ी आर.एल. नेगी, �या#यक सद%य BEFORE: SHRI. N.K. SAINI, VP & SHRI, R.L. NEGI, JM आयकर अपील सं./ �नधा�रण वष� / Assessment Year : 2019-2020 Parasol Laboratories India Pvt. Ltd., Plot No. 45, The ACIT, बनाम New Timber Market, Sector 26, Chandigarh Circle 5(1), Chandigarh �थायी लेखा सं./PAN NO: AABCP9203G अपीलाथ%/Appellant &'यथ%/Respondent �नधा�(रती क* ओर से/Assessee by : Shri T.N. Singla, C.A. राज�व क* ओर से/ Revenue by : Shri Ashok Khanna, Addl. CIT सुनवाई क* तार/ख/Date of Hearing : 02/06/2021 उदघोषणा क* तार/ख/Date of Pronouncement : 25/08/2021 आदेश/Order PER R.L. NEGI, JUDICIAL MEMBER:
The present appeal has been filed by the assessee against the order dated 12/04/2021, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi pertaining to the assessment year 2019- 20, whereby the Ld. CIT(A) has dismissed the appeal filed by the assessee against the assessment order passed u/s 143(1) of the Income Tax Act, 1961 (For short ‘the Act’).
Brief facts of the case are that the assessee filed its return of income for the assessment year under consideration declaring the total income of Rs. 6,71,670/- During the course of assessment proceedings it was noticed from the tax audit report that the assessee had received a sum of Rs. 3,18,265/- from his employees as contribution to Provident fund and ESI which was not remitted to Parasol Laboratories India Pvt. Ltd. 2 the employees account on or before the due date as per the provisions of law.
Accordingly, the AO made disallowance of the said amount on account of delayed deposit of employees’ contribution to the provident fund and ESI u/s 36(1) (va) read with section 2(24) (x) of the Act. The assessee challenged the action of the AO before the ld. CIT(A). The ld. CIT(A) after hearing the assessee confirmed the action of the AO and dismissed the appeal filed by the assessee.
Against the said findings of the ld. CIT(A), the assessee has preferred the present appeal.
The assessee has challenged the impugned order passed by the ld. CIT(A) by raising the following effective grounds: -
That the order of ld CIT(A) is bad and against the facts and law.
2. That the ld CIT(A) has upheld the addition made u/s 143(1) without issue of notice u/s 143(2)of the Act. 3. That the ld CIT(A) has wrongly upheld disallowance of expense on debatable issue u/s 143(1) of the Act. 4. That the ld CIT(A) has erred in upholding the decision of the AO regarding the deduction of Employees contribution to provident fund and ESI amounting to Rs. 3,18,265/- which was deposited before the due date of filing of return.
At the outset, the ld. counsel for the assessee submitted before us that the impugned order passed by the ld. CIT(A) is contrary to the settled position of law on the relevant issue. Since the assessee company had deposited the contribution received from its employees towards provident fund /ESI before the Parasol Laboratories India Pvt. Ltd. 3 date of filing of return of income, the ld. CIT(A) ought to have set aside the action of the AO. The ld. counsel further relied on the following judgements to substantiate the contention of the assessee: -
i) CIT vs M/s Nipso Polyfabriks Ltd. [2013] 350 ITR 327 IT vs Alom Extrusions Ltd., 185 Taxman 416(SC) ii) CIT vs Solar Exports, 27 Taxman.com 289 (SC) iii) CIT vs Lakhani Rubber Works, 188 Taxman 132 (P&H) iv) CIT vs Rai Agro Industries Ltd (2011) 334 ITR 122 (9&H) v) CIT Vs Hemla Embroidery Mills Pvt Ltd (2014) 366 ITR 167 (P&H) vi) CIT vs Mark Auto Industries Ltd. (2013) 358 ITR 43 (P&H) vii) CIT vs Nuchem Ltd. of (2015) 59 taxmann.com 455 (P&H) dated 22.09.2014 viii) H.P. Tourism Dev. Corpn. Ltd 328 ITR 508 (H.P.) 5. The ld. counsel further submitted that since the findings of the Ld. CIT(A) are not in accordance with the ratio laid down by the Hon'ble Supreme Court, Hon'ble jurisdictional High Court and the Hon'ble Himachal Pradesh High Court, the same is liable to be set aside.
On the other hand, the ld. Departmental Representative (DR) supporting the order passed by the ld. CIT(A) submitted that since the assessee had not deposited the amount of employees’ contribution to the Provident fund and ESI etc. on the due date, the ld. CIT(A) has rightly confirmed the disallowance made u/s 36(1)(va) of the Act.
Parasol Laboratories India Pvt. Ltd. 4
We have heard the rival submissions of the parties and perused the material on record including the cases relied upon by the ld. counsel for the assessee. As pointed out by the ld. counsel, in the present case the assessee has deposited the amount in question before the date of filing of the assessment. The revenue has not disputed this fact. The Hon'ble jurisdictional High Court in the case of CIT vs M/s Nipso Polyfabriks Ltd. [2013] 350 ITR 327 has held that the employees’ contribution to the provident fund paid before the due date of filing of return of income cannot be disallowed. The relevant para of the judgement read as under: -
“The deletion of the second proviso to section 43B which specifically made a reference to section 36(l)(va) was curative in nature and, hence, would apply with retrospective effect from April 1, 1988. The second proviso to section 43B(b) specifically referred to the due date under section 36(l)(va) of the Act and as such, it cannot be urged that the provisions of section 43B and section 36(1) (va) should not be read together. The law was enacted to ensure that the payment of the contributions towards the provident funds, the ESI funds or other such welfare schemes must be made before furnishing the return of income under sub-section (1) of section 139. On a conjoint reading of section 36(l)(va) and section 43B it is obvious that earlier section 43B made reference to the due date as prescribed under section 36(1)(va). There was a conflict between the first and the second provisos and the second proviso was deleted. The benefit of this amendment must be extended to the employees' contribution also.”
Similarly, the Coordinate Bench of the Tribunal has decided the identical issue in favour of the assessee in the case of M/s New Time Contractors and Builder (P) Ltd. Vs. DCIT for the A.Y. 2013-14 holding as under:
Parasol Laboratories India Pvt. Ltd. 5
“(10) We have considered the submissions of both the parties and perused the material available on record. In the present case, it is an admitted fact that there was delay in depositing the employees’ contribution of provident fund and ESIC. However, it is accepted by the AO that the deposit was made before filing of the return of income on 27.09.2013. (11) On a similar issue the Hon’ble Jurisdictional High Court in the case of CIT vs. Hemla Embroydery Mills (p.) Ltd.(supra) held as under: “The second proviso to section 43B of the Income-tax Act, 1961, omitted by the Finance Act, 2003, with effect from April 1, 2004, was clarificatory in nature and was to operate retrospectively. Thus, the assessee, for the assessment year 2003-04, was entitled to deduction in respect of the employer’s and employees’ contributions to the employees’ State Insurance and provident fund as the 4 contributions had been deposited prior to the filing of the return under section 139(1).”
Since the issue involved in the present appeal is identical to the issue involved in the cases discussed above and since the Hon'ble Jurisdictional High Court and the co-ordinate Bench of the Tribunal have decided the identical issue in favour of the assessee and the findings of the ld. CIT(A) are not in accordance with the ratio laid by the Hon'ble jurisdictional High Court, we find merit in the contention of the ld. counsel that the issue involved in the present case is covered in favour of the assessee by the judgments of the Hon'ble Supreme Court and the Hon'ble High Courts referred above. In the case of CIT vs. M/s Nipso Polyfabriks Ltd. (supra), the Hon'ble jurisdictional High Court has held that if the employer does not deposit such contributions within the time prescribed by the respective Acts, the employer may face criminal case and become liable to pay fine or penalty, but that cannot be the reason to deny the benefit of section 43B of the Act, which contemplates that the assessee can take the benefit of such contributions if the same are paid before furnishing the Parasol Laboratories India Pvt. Ltd. 6 return of income. Hence, in our considered view, the findings of the ld. CIT(A))
are contrary to the ratio laid down by the Hon’ble Supreme Court and High Courts including the Hon'ble jurisdictional High Court. We therefore, allow the appeal of the assessee and set aside the order passed by the ld. CIT(A).
Accordingly, we direct the AO to delete the addition made u/s 36(1)(va) of the Act.
In the Result, the appeal filed by the assessee is allowed.
Order pronounced 25th Aug, 2021.