NARESH KUMAR CHAWLA,FARIDABAD vs. CIRCLE-2(1), FARIDABAD

7 Industrial Area, Area Kasna, Gr.Noida, Ghaziabad, U.P. PAN-AACCK1286B Date of hearing: 18.05.2022 Date of Pronouncement: 18.05.2022 ORDER PER BENCH : The present appeals are filed by the above mentioned assessees feeling aggrieved by the orders passed by appellate authority for various assessment years mentioned hereinabove.

1. “Ld. CIT(A) has erred in law and on merits of the case was not justified in confirming the addition of Rs 40504/- & Rs. 236490/- made by A.O (CPC) on account of late deposit of employee contribution towards ESI/PF , even it is paid before due date of filing of ITR in view of Section 43B of the Income Tax Act, 1961 and ignored various judicial pronouncement cited by the assessee like CIT v.

8 Alom Extrusions Ltd. [2009] 319 ITR 306 (SC); CIT v. Vinay Cement Ltd. [2007] 213 CTR 268 (SC); Pr. CIT v. Raj. State Bev. Corpn. Ltd. [2017] 84 taxmann.com 185 (SC); CIT v. AIMIL Limited [2010] 321 ITR 508 (Delhi) In a latest order dated 10.09.2018 the Jurisdictional High Court of Delhi in ITA 983/2018 Pro Interactive Service (India) Pvt. Ltd has held this issue in the favor of assessee and held that: no substantial question of law arises for consideration in this appeal. The legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee's Provident Fund (EPD) and Employee's State Insurance Scheme (ESI) as deemed income of the employer under Section 2(24)(x) of the Act.”

2. CIT(A) has erred in law in confirming the disallowance of employee contribution to ESI in the light of amendment in sections 36(1)(va) as well as in section 43B by inserting corresponding Explanations through Finance Act, 2021. Although the impugned employee PF/ESI now comes under the provision of section 36(1)(va) only, but the memorandum explaining Finance Bill, 2021 says that these amendments will take effect from 01.04.2021 and will accordingly apply to AY 2021-22 and subsequent Assessment Years. Thus the legislature itself has condoned the impugned default before 01.04.2021. Latest Case Laws relied upon After amendment in 3. Finance Act 2021(Covered Matter)

9 Insta Exhibitions Private Limited vs ACIT (and ITA no 4959/DEL/2016) wherein it was held that belated payments of ESI and PF cannot be treated as deemed income u/s 2(24). Further it was held that ‘notes on clauses introducing Finance Bill holds that amendment is effective from A.Y 2021-22’ and thus deleted the addition on this account. Shashi Rajawat u/s ITO (ITAT Jaipur) (Pronounced on 12.10.2021) Employee contribution towards ESI/PF though paid before due date of filing of return of Income Tax u/s 139(1) is hereby directed to be deleted. CIT (A) referred explanation to 36(1)(v)(a) and 43 B by Finance Act 2021 and referred the rationale of amendment as explained in memorandum, However, he has simply failed to consider the express wording as the ITAT memorandum which say “these amendments will take effect from 01.04.2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years. Vansh Jain vs ITO (ITA No.1853/Del/2020) (Pronounced on 13.10.2021) Since in the instant case the assessee admittedly has deposited the employees' contribution to PF & ESI before the due date of filing of the income tax return, therefore, respectfully following the decisions cited (supra), I hold that the Ld. CIT(A) is not justified in sustaining the adjustment made by the A.O-CPC of Rs.3,26,330/- on account of belated payment of employees' contribution to 10 PF & ESI. I, therefore, set aside the order of the Ld. CIT(A) and direct the A.O. to delete the disallowance. The grounds raised by the assessee are accordingly allowed. Adama Solution Pvt. Ltd., New Delhi ITA.No.1800/Del./2020 (Order pronounced on 13.10.2021) The amendment made in section 36(1)va) is effective from 01.04.2021 and will, accordingly apply in relation to A.Y. 2021-2022 and subsequent assessment year. In view of this we allow the solitary ground of appeal raised by the assessee holding that the addition/disallowance made by the learned assessing officer of late deposit of employees contribution to the provident fund and ESI, as it is deposited before the due date of the filing of the return of an income but beyond the due date prescribed Under the respective provident fund and ESI laws is not sustainable in law. In the result, appeal of the assessee is allowed." Since in the instant case the assessee admittedly has deposited the employees' contribution to PF & ESI before the due date of filing of the income tax return, therefore, respectfully following the decisions cited (supra), I hold that the Ld. CIT(A) is not justified in sustaining the adjustment made by the A.O-CPC.”

3. Similar grounds with different amounts and assessment years have been raised in other appeals but however, the sum & substance and the issues involved in all the appeals are identical.

11 4. Before us, at the outset, Learned AR submitted that the sole grievance of the assessee is confirming the additions on account of delay in deposit of employee’s contribution towards provident fund and ESI fund.

12 6. Learned Sr. DR on the other hand supported the order of lower authorities and also placed reliance on the decision of Delhi Tribunal in the case of Vedvan Consultants Pvt. Ltd. vs DCIT in dated 26.08.2021. order He also submitted that the amendment brought out by Finance Act 2021 would be applicable to the present case as by the amendment, it has been clarified that provisions of Section 43B of the Act 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.

“In view of the judgement of the Division Bench of Delhi High Court in Commissioner of Income Tax versus AIMIL Limited, (2010) 321 ITR 508 (Del.) the issue is covered against the Revenue and, therefore, no substantial question of law arises for consideration in this appeal.

13 The legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee’s Provident Fund (EPD) and Employee’s State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x) of the Act.”

15 Acts. However, typographical error occurred in the Tax Audit Report for which the relevant facts were placed before the Ld.CIT(A) as well. The relevant facts have also placed on record before the Tribunal as well.

Order pronounced in the open court on 18.05.2022.