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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SHRI N. K. SAINI & SHRI N. K. CHOUDHRY
Per N. K. Choudhry, JM
The assessee has preferred these appeals against the separate orders dated 25.08.2021, impugned herein, passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi, for the assessment years 2018-2019 & 2019-2020, u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
The issue involved in the instant appeals relates to the deposit of employees’ contributions qua ESI & PF after the due
date as prescribed in the relevant Acts, however, before the due date of filing of return of income u/s.139(1) of the Act,
resulting into making disallowances of Rs. 1,30,623/- and 2,62,233/- along with interests of Rs.4964/- and 17,898/-
charged u/s.234C of the Act for the A.Ys. 2018-2019 and 2019-2020 respectively, by the AO.
Against the above order of AO, the assessee preferred
first appeals before the CIT(A), however, the CIT(A) sustained
the additions made by the AO for the respective assessment
years under consideration while dismissing both the appeals of the assessee.
Further feeling aggrieved, the assessee is in appeals
before us.
Having heard the parties and perused the material
available on record. The assessee raised the arguments
against the impugned orders, whereas the Ld. DR vehemently
supported the same. employees’ contributions qua ESI & PF involved in the present
appeal is squarely covered by the decision of coordinate bench
of the Tribunal passed in the case of Vinko Auto Industries
Limited, Versus DCIT, CPC, Bangalore (ITA Nos.63 &
64/ASR/2021 decided on 08/11/2021) wherein the Tribunal has deleted the disallowances made by the AO on account of delay in depositing the employees’ contribution towards ESI & PF as the same were deposited later than the prescribed time in the relevant acts but prior to the filling of the Return u/s.139(1) of the Act . The concluding part of the Tribunal’s order is as under: - The CIT(A) while upholding the disallowance/addition qua employees contributions towards PF & ESI mainly focused on two aspects/determinations- (i) non-applicability of the provisions of Section 43B of the Act to the employee’s share qua PF & ESI and (ii) applicability of the amended provisions of Section 36(1)(va) and 43B of the Act wherein Explanations have been inserted by Finance Act, 2021. For better clarification and ready reference the Explanations 2 and 5 inserted in sections 36(1)(va) and Section 43B of the Act respectively, are reproduced herein, which reads as under :- Section 36(1)(va)-“Explanation 2.—For the removal of doubts, it is hereby clarified that the provisions of section 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the “due date” under this clause.” Section 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 applies.”
1 We may observe that the ld. CIT(A) in its order at para no. 7.15 itself has observed that the issue has been highly contentious and different High Courts have taken divergent views on the same issue, out of which some are in favour of the assessee and some are against the assessee. The ld. CIT(A) further observed that the judgments and orders relied upon by the assessee have been rendered before the clarificatory amendments made in the Finance Act, 2021 and the Finance Act, 2021 has put an end to this controversy.
2 Admittedly there is plethora of judgments in favour of the Assessee’s contention and of the Revenue. The controversy with regard to divergent views of different High Courts, has been settled by the Hon'ble Apex Court in the case of CIT Vs. M/s. Vegetables Products Ltd. (88 ITR 192) by laying the dictum that if two reasonable constructions of a taxing provision are possible that construction which favours the Assessee must be adopted. The Hon’ble juri ictional High Court in the case of CIT Vs. M/s Hemla Embroidery Mills (P) Ltd. (366 ITR 167) (P&H HC) and in the case of CIT Vs. M/s Mark Auto Industries Ltd. (358 ITR 43) (P&H HC) clearly held that the assessee is entitled to claim deduction of employee’s share of ESI & PF u/s.43B of the Act, if the same has been deposited prior to the filing of return of income u/s.139(1) of the Act. From the above judgments of the Hon’ble juri ictional High Court, it is clear that the Hon’ble Court has not drawn any distinction between the employee’s and employer’s share qua PF & ESI contributions. Admittedly there are no contrary judgements of the juri ictional High Court against the assessee on the aspect under consideration hence, first determination of the Ld. CIT(A) qua non-applicability of the provisions of Section 43B of the Act to the employee’s share qua PF & ESI, is unsustainable.
3 Now, coming to the second aspect/determination made by the CIT(A) to the effect that the amendment made in Section 36(1)(va) and 43B of the Act by Finance Act 2021 has to be considered as clarificatory in nature and having retrospective effects, therefore would be applicable to the previous assessment years as well.
We may observe that various benches of the ITAT including Hyderabad Bench in the case of Value Momentum Software Services Pvt. Ltd. (ITA No.2197/Hyd/2017 decided on 19.05.2021), have taken into consideration the identical issue qua applicability of the amendment to Section 36(1)(va) and Section 43B of the Act, by inserting Explanations by the Finance Act, 2021 and clearly held that the amendment shall be applicable from 1st April, 2021 onwards . It is also relevant to note that the CBDT has also issued Memorandum of Explanation qua applicability of the amended provisions of Section 36(1)(va) & 43B of the Act w.e.f. 1st April, 2021, and Assessment Year 2021-21 onwards, hence there is no doubt qua applicability of the amended provisions referred above, prospectively.
On the aforesaid discussion, the second aspect as considered/determined by the ld. CIT(A) qua retrospective application of the amended provisions of Section 36(1)(va) and 43B of the Act wherein Explanations have been inserted by Finance Act, 2021 qua employees’ share in respect of PF & ESI Act, is also unsustainable .
4
In view of the above discussions, the disallowances of Rs.5,88,203/- for A.Y.2018-2019 and Rs.60,540/- for A.Y.2019-2020 made by the A.O. and confirmed by the CIT(A) are not sustainable and, hence, the same stands deleted.
In the result, both the appeals of the assessee are allowed.
Since the facts involved in the present case are identical to the facts involved in the case stated above, therefore, respectfully
following the aforesaid order of the Coordinate Bench of the Tribunal, the disallowances of Rs.1,30,623/- for A.Y.2018-2019
and Rs. 2,62,233/- for A.Y.2019-2020 qua employees
contribution towards PF and ESI, sustained by the Ld. CIT(A)
stands deleted.
As the substantive additions have been deleted,
therefore interest of Rs. 4964/- and 17,898/- for the AY 2019-
2020 respectively, charged u/s.234 A, B & C of the Act by the AO and confirmed by the CIT(A), do not survive, consequently
the same also stands deleted.
In the result, both the appeals of the assessee are allowed.
Order pronounced in the open court on 11/11/ 2021. (एन. के. सैनी) (एन.के.चौिरी) (N. K. SAINI) (N.K.CHOUDHRY) उपाध्यक्ष / VICE PRESIDENT न्याधयक सदस्य / JUDICIAL MEMBER ददनांक Dated /11/2021 Prakash Kumar Mishra, Sr.PS (on tour) आदेश की प्रधतधलधप अग्रेधर्त/Copy of the Order forwarded to : अपीलार्थी / The Appellant-
Gurvinder Singh Jammu Jammu Hospital, Near Sports College, Kapurthala Road, Jalandhar City-144001 प्रत्यर्थी / The Respondent-
DCIT, CPC, Bangalore, Bengaluru-560500 आयकर आयुक्त(अपील) / The CIT(A), 3. आयकर आयुक्त / CIT 4. धवभागीय प्रधतधनधि, आयकर अपीलीय अधिकरण, अमृतसर / DR, ITAT,
Amritsar गार्ा फाईल / Guard file. 6. सत्याधपत प्रधत ////
आदेशानुसार/ BY ORDER, (