OMEGA HOSPITAL AND BLOOD BANK,JABALPUR vs. DEPUTY COMMISSIONER OF INCOME TAX CPC, JABALPUR

This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (‘CIT(A)’ for short) dated 29/07/2021, dismissing the assessee’s appeal contesting the processing of its’ return of income under section 143(1) of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the Assessment Year (AY) 2018-19 vide Intimation dated 22/8/2019. The Arguments 2. At the outset, the ld. counsel for the assessee, Sh. Jain, would submit that the instant appeal, arising out of a processing of the assessee’s return u/s. 143(1) effecting additions in respect of the employee’s contribution to the employee welfare funds u/s. 2(24)(x) r/w s. 36(1)(va), despite being deposited before the 1 2018-19) Omega Hospital & Blood Bank v. Dy. CIT due date of filing the return of income u/s. 139 (1) for the relevant year, is squarely covered in the assessee’s favour by the order by the Jabalpur Bench of the Tribunal in Nikhil Mohine vs. Dy. CIT (ITA Nos. 37 & 38/Jab/2021, dated 18.11.2021). The Tribunal in the said case, he continued, noting the adjustment to the returned income to be u/s. 143(1), as indeed is in the instant case, stated that the said adjustment could therefore only be qua matters which admit of no two views, i.e., that are not contentious, even as stands held by, he would add, the Hon’ble jurisdictional High Court in CIT v. Shikarchand Jain [2003] 263 ITR 221 (MP) and CIT v. GEI Engineering Ltd. [2009] 310 ITR 112 (MP). The said adjustment, the Tribunal opined, could therefore hold only where the newly inserted Explanations to section 36(1)(va) and s.43B, i.e., by Finance Act, 2021, were retrospective in nature. It then proceeded to examine the said Explanations in detail, and concluded the same to have a prospective effect, so that they would apply for AY 2021-22 and subsequent years. No adjustment for AY 2018-19, he concluded, could therefore hold. He, on being inquired by the Bench, stated of there being no decision by the Hon'ble jurisdictional High Court to the contrary. The ld. Sr. DR, Sh. Halder, could not rebut any of the contentions by Sh. Jain and, further, on asking, could not state of any decision by the Hon'ble jurisdictional High Court directly on the point. 3. I have heard the parties, and perused the material on record. The Tribunals’ decision in Nikhil Mohine 3.1 The Revenue has, invoking section 2(24)(x) r/w s. 36(1)(va), added the Employees’ contribution to the Employee Provident Fund (rs. 5,42,651) and Employee State Insurance Fund (rs. 1,24,818) to the assessee’s returned income u/s. 143(1)(a) as the same stood deposited beyond the due date specified u/s. 36(1)(va), even as, admittedly, prior to the due date of filing the return of income u/s. 139(1) for the relevant year. Reliance stands placed by it on the decisions in CIT v. Gujarat State Road Transport Corporation [2014] 366 ITR 2 2018-19) Omega Hospital & Blood Bank v. Dy. CIT 170 (Guj), CIT v. Merchem Ltd. [2015] 378 ITR 443 (Kerala); and Unifac Management Services (India) P. Ltd. v. Asst. CIT [2018] 409 ITR 225 (Mad). The matter stands examined at length by the Tribunal in Nikhil Mohine (supra), relied upon by the appellant, wherein, noticing, inter alia, the cited decisions, it held that in view of the cleavage of judicial opinion in the matter and the limited scope of an adjustment u/s. 143(1)(a), the same could not be decided on merits. The decisions by the Hon’ble High Courts holding the employee’s contribution as being covered by s. 43B(b), implying, in context, u/s. 37(1) r/w s. 43B(b), which were aplenty (see PB pgs. 25-42), it opined, could be validated only by disregarding the clear language of the relevant provisions, upheld constitutionally and not read down. The said decisions must nevertheless be respected, and no adjustment contrary thereto could be made u/s. 143(1); there being no decision by the Hon'ble jurisdictional High Court in the matter. 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 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 provisions, as well as of the recently inserted Explanations thereto, introduced with a view to, as stated therein, remove any doubt in the matter, are unambiguously clear, so that s.36(1)(va) and s. 43B are applicable on different sums. Further, the stated date of the coming into effect (of the Explanations), i.e., 01/4/2021, it was 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 amendments could otherwise have been effected through prospective clause/s to the relevant provisions. Rather, the 3 2018-19) Omega Hospital & Blood Bank v. Dy. CIT 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 the 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. This would be so even if the same was regarded, 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, rendering the 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, itself, with respect, misplaced, if not irrelevant. The view being canvassed was, thus, it opined, 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 with reference to the cited decisions, 4 2018-19) Omega Hospital & Blood Bank v. Dy. CIT 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, which 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. 3.2 The said Explanations, the Tribunal continued, had however been, as clear from a reference to the Notes on the Clauses to, and the Memorandum explaining the Provisions of, the Finance Bill, 2021, reproducing the same, proposed as prospective amendments. The amendments by way of Explanation 5 to s. 43B and Explanation 2 to s. 36(1)(va), it concluded, are to therefore take effect only from AY 2021-22, and which view is unmistakable on a plain reading of the said documents. Decision 4.1 The impugned order is completely silent on, and there is no reference therein either to the said Explanations or if the same are retrospective, concerning itself only with the merits of the impugned additions, impermissible u/s. 143(1) in view of the conflict of judicial opinion and the absence of any decision by the Hon’ble jurisdictional High Court; none being brought to my notice by the parties, or otherwise found. No counter in this regard was also raised by Sh. Halder before me. 4.2 There is, in view of the foregoing, no question of the said Explanations being read as retrospective, so as to apply for the relevant year, sustaining the impugned additions, which therefore fail. This is, however, subject to any 5