CENTRAL INVESTIGATION AND SECURITY SERVICES LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, CPC, BANGALORE

This appeal by the assessee against the order dated 15/11/2021 passed by the Ld Commissioner of Income-tax (Appeals)- National Faceless Appeal Centre, Delhi [ in short the ‘ld CIT(A)’] was heard and pronounced by the Income-tax Appellate Tribunal (in short ‘the Tribunal’) on 28.07.2022. But, subsequently recalled by way of order of the Tribunal dated 26.07.2023 passed in Miscellaneous Application No. 158/Mum/2023, which was filed by the Income-tax Department.

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The Ld. CIT (Appeals), NFAC has erred in upholding the decision of The Ld. CIT (Appeals), NFAC has erred in upholding the decision of The Ld. CIT (Appeals), NFAC has erred in upholding the decision of addition of Rs. 54,10,915/ addition of Rs. 54,10,915/- being the amount of employee's being the amount of employee's contribution to PF and ESIC paid belatedly. contribution to PF and ESIC paid belatedly. Taking view of the law Taking view of the law as explained by the insertion of Explanation to Section 36(1)(va) as explained by the insertion of Explanation to Section 36(1)(va) as explained by the insertion of Explanation to Section 36(1)(va) and Section 43B of the Income Tax Act, 1961 inserted by the and Section 43B of the Income Tax Act, 1961 inserted by the and Section 43B of the Income Tax Act, 1961 inserted by the Finance Act 2021, considering the applicability of the explanation Finance Act 2021, considering the applicability of the explanation Finance Act 2021, considering the applicability of the explanation retrospectively. As per the recent judge retrospectively. As per the recent judgement of Hble ITAT ment of Hble ITAT Hyderabad on 15th June, 2021 in the case of Salzgitter Hydraulics Hyderabad on 15th June, 2021 in the case of Salzgitter Hydraulics Hyderabad on 15th June, 2021 in the case of Salzgitter Hydraulics (P.) Ltd Vs. Income Tax Officer and Hble ITAT on 13th October, (P.) Ltd Vs. Income Tax Officer and Hble ITAT on 13th October, (P.) Ltd Vs. Income Tax Officer and Hble ITAT on 13th October, 2021 in the case of Bangalore in case of Gopalakrishna Aswini 2021 in the case of Bangalore in case of Gopalakrishna Aswini 2021 in the case of Bangalore in case of Gopalakrishna Aswini Kumar Vs Assistant Director of Income Tax has a Kumar Vs Assistant Director of Income Tax has allowed the appeal llowed the appeal of the assessee. Also to this effect the Memorandum of Explanation of the assessee. Also to this effect the Memorandum of Explanation of the assessee. Also to this effect the Memorandum of Explanation to the Budget issued by the CBDT for the amendments in section to the Budget issued by the CBDT for the amendments in section to the Budget issued by the CBDT for the amendments in section 36(va) as well as 43B vide Finance Act, 2021, specifies that the 36(va) as well as 43B vide Finance Act, 2021, specifies that the 36(va) as well as 43B vide Finance Act, 2021, specifies that the amendments will be applicable w.e.f. 01 amendments will be applicable w.e.f. 01-04-2021 and will be 2021 and will be prospective. prospective.

the Act from the date when same have been introduced in the Act the Act from the date when same have been introduced in the Act the Act from the date when same have been introduced in the Act therefore the decision of the Ho decision of the Hon’ble Supreme Court is effective from n’ble Supreme Court is effective from the date of the inception of the relevant section in the Act. The the date of the inception of the relevant section in the Act the date of the inception of the relevant section in the Act decision of Hon’ble Supreme Court is always effective retrospectively decision of Hon’ble Supreme Court is always effective retrospectively decision of Hon’ble Supreme Court is always effective retrospectively unless it is specifically mentioned by the Hon’ble Supreme Court unless it is specifically mentioned by the Hon’ble Supreme Court unless it is specifically mentioned by the Hon’ble Supreme Court that said decision will act prospectively. In the case of Checkmate n will act prospectively. In the case of Checkmate n will act prospectively. In the case of Checkmate Services Pvt. Ltd. (supra) Services Pvt. Ltd. (supra), Hon’ble Supreme Court has not specified Hon’ble Supreme Court has not specified that said decision shall be that said decision shall be effective prospectively and therefore, it is prospectively and therefore, it is undisputedly effective retrospectively from the date on which undisputedly effective retrospectively from the date on which undisputedly effective retrospectively from the date on which introduced in the Act i.e. 1 troduced in the Act i.e. 1-4-1988.

Before us, the Ld. Counsel of the assessee firstly firstly, submitted 4. Before us, the Ld. Counsel of the assessee that ruling of the Hon’ble Supreme Court in the case of Checkmate that ruling of the Hon’ble Supreme Court in the case of Checkmate that ruling of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra) shall not Services Pvt. Ltd. (supra) shall not be operative in view of the amendment brought by the amendment brought by the Parliament to section 36(1)(va) and Parliament to section 36(1)(va) and section 43B of the Act section 43B of the Act, which would take effect from 01.04.2021 which would take effect from 01.04.2021 i.e for assessment year 2021 assessment year 2021-22 and subsequent assessment years. 22 and subsequent assessment years. The relevant memorandum of amendment is reproduced as under: The relevant memorandum of amendment is reproduced as under: The relevant memorandum of amendment is reproduced as under:

“Accordingly, in order to Accordingly, in order to provide certainty, it is proposed to provide certainty, it is proposed to - (i) amend clause (va) of sub amend clause (va) of sub-section (1) of section 36 of the Act section (1) of section 36 of the Act by inserting another explanation to the said clause to clarify by inserting another explanation to the said clause to clarify by inserting another explanation to the said clause to clarify that the provision of section 43B does not apply and that the provision of section 43B does not apply and that the provision of section 43B does not apply and deemed to never have been applied for t deemed to never have been applied for the purposes of he purposes of determining the "due date" under this clause; and determining the "due date" under this clause; and determining the "due date" under this clause; and (ii) (ii) amend section 43B of the Act by inserting Explanation 5 (ii) amend section 43B of the Act by inserting Explanation 5 (ii) amend section 43B of the Act by inserting Explanation 5 to the said section to clarify that the provisions of the said to the said section to clarify that the provisions of the said to the said section to clarify that the provisions of the said section do not apply and deemed to never have been section do not apply and deemed to never have been section do not apply and deemed to never have been applied to a sum applied to a sum received by the assessee from any of his received by the assessee from any of his employees to which provisions of sub employees to which provisions of sub-clause (x) of clause clause (x) of clause (24) of section 2 applies. (24) of section 2 applies.

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These amendments will take effect from 1st April, 2021 and will These amendments will take effect from 1st April, 2021 and will These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021 accordingly apply to the assessment year 2021 accordingly apply to the assessment year 2021-22 and subsequent assessment years. subsequent assessment years.” 4.1 This argument of the Ld. Counsel of the assessee is not This argument of the Ld. Counsel of the assessee is not This argument of the Ld. Counsel of the assessee is not acceptable as the Hon’ble Supreme Court has explained the law acceptable as the Hon’ble Supreme Court has explained the law acceptable as the Hon’ble Supreme Court has explained the law which came into existence at the time of the inception of the existence at the time of the inception of the existence at the time of the inception of the relevant section 36(1)(va) of the Act and accordingly any payment relevant section 36(1)(va) of the Act and accordingly any relevant section 36(1)(va) of the Act and accordingly any made for employees contribution to PF/ESI beyond due date made for employees contribution to PF/ESI beyond due date made for employees contribution to PF/ESI beyond due date prescribed under the relevant act is not allowable as deduction u/s prescribed under the relevant act is not allowable as deduction u/s prescribed under the relevant act is not allowable as deduction u/s 36(1)(va) of the Act for the year under consideration for the year under consideration for the year under consideration . In the case of the assessee, the assessment assessee, the assessment year involved is AY 2018 018-19, which is prior to AY 2021-22 i.e the AY for which amendment is effective. 22 i.e the AY for which amendment is effective. 22 i.e the AY for which amendment is effective. There is no conflict in the law declared by the Hon’ble Supreme There is no conflict in the law declared by the Hon’ble Supreme There is no conflict in the law declared by the Hon’ble Supreme Court and the amendment introduced Court and the amendment introduced by the Hon’ble Parliament. by the Hon’ble Parliament.

4.2 Secondly, the Ld. Counsel , the Ld. Counsel for the assessee submitted that no ubmitted that no adjustment for said deduction adjustment for said deduction could be made u/s 143(1)(a) of the made u/s 143(1)(a) of the Act as the issue was Act as the issue was of debatable nature. The Ld. Counsel relied on debatable nature. The Ld. Counsel relied on the decision of the Co the decision of the Co-ordinate Bench of the Tribunal in the case of ordinate Bench of the Tribunal in the case of Chintoo Creation v. Dy. CIT, CPC Bang Chintoo Creation v. Dy. CIT, CPC Bangalore in in ITA No. 1772/Del/2021 wherein the Tribunal has relied on the decision of wherein the Tribunal has relied on the decision of wherein the Tribunal has relied on the decision of the Hon’ble Supreme Court in the case of Kvaverner John Brown the Hon’ble Supreme Court in the case of Kvaverner John Brown the Hon’ble Supreme Court in the case of Kvaverner John Brown Enng. (India) Pvt. Ltd. v. Asstt. CIT [2008] 170 Taxman 304/305 Enng. (India) Pvt. Ltd. v. Asstt. CIT [2008] 170 Taxman 304/305 Enng. (India) Pvt. Ltd. v. Asstt. CIT [2008] 170 Taxman 304/305 ITR 103 (SC). The Co ITR 103 (SC). The Co-ordinate Bench in the said decision held that decision held that addition by way of intimation u/s 143(1) of the Act on debatable addition by way of intimation u/s 143(1) of the Act on debatable addition by way of intimation u/s 143(1) of the Act on debatable and controversial issues and on the basis of the retrospective and controversial issues and on the basis of the retrospective and controversial issues and on the basis of the retrospective

Central Investigation and Security Services Ltd. 5 Central Investigation and Security Services Ltd. amendment of the Act is beyond the scope of section 143(1) of the amendment of the Act is beyond the scope of section 143(1) of the amendment of the Act is beyond the scope of section 143(1) of the Act. But we find that in the instant case a Act. But we find that in the instant case after the decision of the fter the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra), the issue is no longer debatable and the claim of the the issue is no longer debatable and the claim of the the issue is no longer debatable and the claim of the deduction is in the nature of incorrect claim and therefore same is deduction is in the nature of incorrect claim and therefore same is deduction is in the nature of incorrect claim and therefore same is liable to be adjusted while proces liable to be adjusted while processing invoking section 143(1)(a)(ii g invoking section 143(1)(a)(ii) of the Act.

4.3 Thirdly, the Ld. Counsel submitted that in view of the , the Ld. Counsel submitted that in view of the , the Ld. Counsel submitted that in view of the decision of the Hon’ble Bombay High Court in the case of Ghadge decision of the Hon’ble Bombay High Court in the case of decision of the Hon’ble Bombay High Court in the case of Patil Transport Limited 368 ITR 749 (Bombay), which being Patil Transport Limited 368 ITR 749 (Bombay) Patil Transport Limited 368 ITR 749 (Bombay) jurisdiction High Court jurisdiction High Court, no adjustment could have been possible for adjustment could have been possible for the cases falling into the jurisdictional of the Hon’ble Bombay High the cases falling into the jurisdictional of the Hon’ble Bombay High the cases falling into the jurisdictional of the Hon’ble Bombay High Court. In our opinion, this argument of the Ld. Counsel of the Court. In our opinion, this argument of the Ld. Counsel of the Court. In our opinion, this argument of the Ld. Counsel of the assessee is also no longer valid, i sessee is also no longer valid, in view of the decision of the n view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. urt in the case of Checkmate Services Pvt. Ltd. urt in the case of Checkmate Services Pvt. Ltd. (supra), wherein any such PF/ESI paid after due date under the wherein any such PF/ESI paid after due date under the wherein any such PF/ESI paid after due date under the relevant Act is not permissible for deduction under the provisions of relevant Act is not permissible for deduction under the provisions of relevant Act is not permissible for deduction under the provisions of the Act.

4.2 In view of the aforesaid discussion, the claim of deduction of In view of the aforesaid discussion, the claim of deduction of In view of the aforesaid discussion, the claim of deduction of Rs.54,10,915/- being amount of employee being amount of employee’s contribution to PF/ESI s contribution to PF/ESI paid beyond the due date prescribed under the relevant Act, which paid beyond the due date prescribed under the relevant Act paid beyond the due date prescribed under the relevant Act has been added by the Ld. Central Processing Centre (CPC), has been added by the Ld. Central Processing Centre (CPC), has been added by the Ld. Central Processing Centre (CPC), Bangalore and sustained by the Ld. CIT(A) Bangalore and sustained by the Ld. CIT(A), is upheld. is upheld. The ground raised by the assessee is accordingly dismissed. raised by the assessee is accordingly dismissed.

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