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Income Tax Appellate Tribunal, DELHI “C” BENCH: NEW DELHI
Before: SHRI G.S.PANNU & SHRI KUL BHARAT
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “C” BENCH: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE SHRI G.S.PANNU, PRESIDENT & SHRI KUL BHARAT, JUDICIAL MEMBER & 1296/Del/2021 [Assessment Years : 2017-18 & 2018-19] Gurudev Sharma, vs DCIT, A-83, Naya Bazar, Najaf Garh, CPC, Delhi-110043. Bengalore. PAN-BJEPS5420E APPELLANT RESPONDENT Appellant by Shri Vivek Bansal, Adv. Respondent by Shri Umesh Takyar, Sr.DR Date of Hearing 01.04.2022 Date of Pronouncement 29.04.2022 ORDER PER KUL BHARAT, JM :
Both appeals filed by the assessee for the assessment years 2017-18 & 2018-19 are directed against the order of Ld. CIT(A), National Faceless Appeal Centre “NFAC”, both dated 31.07.2021. Since identical grounds have been raised, both appeals were taken up together for hearing and are being disposed off by way of consolidated order for the sake of brevity.
2. First, we take up assessee’s appeal in Assessment Year 2017-18. The assessee has raised following grounds of appeal:-
1. “That under the facts and circumstances of the case the Ld.CIT(A) has erred in law as much as in fact in upholding the addition of Rs.22,11,593/- made on account of disallowance of belated payment of employee's contribution towards ESI/PF. While & 1296/Del/2021 [Assessment Years :2017-18 & 2018-19] upholding the disallowance Ld. CIT(A) has failed to appreciate that the disallowance could not be made: a. As the payment towards employee's contribution of ESI and PF have been made either during the financial year under consideration or before the due date of filing of return as described in section 139(1) of Income Tax Act, 1961. As per the landmark judgment passed by the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. [(2009) 185 Taxman 416 (SC)] wherein it was held that the 'due date' means the due date of return of income as per section 139(1) not as per respective fund due date. Further, the Hon'ble Delhi HC also stated that in the case of CIT vs. Aimil Ltd. [(2010) 188 Taxman 265(Delhi)) 'due date' means the due date of return of income as per section 139(1) not as per respective fund due date. b. Ld. CIT(A) while upholding the disallowance has relied upon the decision of Hon'ble High Courts which are non- jurisdictional in the case of the assessee and as per binding principles of precedents, if the decision of jurisdictional High Court is available on any issue then the law laid down by the jurisdictional High Court will prevail upon the decisions of non-jurisdictional High Courts. The decision of Jurisdictional High Court in the case of CIT vs. Aimil Ltd. [supra] is applicable to the assessee's case and this decision has again been followed by the Hon'ble Delhi High Court In the case of PCIT vs Pro Interactive Services (India) Pvt. Ltd. decision dated September 10, 2018 in ITA No. 938/2018. Therefore, the decisions of non-jurisdiction High Courts referred to by the Ld. CIT, NFAC cannot be relied upon to hold the issue against the assessee. Page | 2 & 1296/Del/2021 [Assessment Years :2017-18 & 2018-19] c. That Ld. CIT, NFAC has failed to appreciate that the amendment brought by the statute in section 36(1)(va) of the Act and insertion of Explanation 5 to section 43B of the Act by the Finance Act, 2021 is not clarificatory in nature and being casting a new obligation or interpretation of law against the existing decision of jurisdictional High Court, retrospectivity cannot be attached particularly when statute itself has made these amendments applicable only from April 1, 2021 and it has been specifically been stated that these will apply to AY 2021-22 and subsequent assessment years as per clause 8 and 9 of the Memorandum to the relevant Finance Act.
2. That under the facts and in the circumstances of the case, keeping in view the above position of law, the disallowance of Rs. 22,11,593/- confirmed by the CIT(A), NFAC is liable to be deleted.
3. Without prejudice to the above, if the disallowance Rs. 22,11,593/- is to be upheld in its entirety then the same may be directed to be allowed in the A.Y. 2018-19.
4. That each, of the above grounds is independent and is without prejudice to each other.
5. That appellant craves to add, alter, delete or modify any or all of the grounds of appeal on or before the hearing of the appeal.”
2. The only effective ground in this appeal is against the sustaining of addition of Rs.22,11,593/- on account of belated payment of employee’s contribution towards ESI/PF.
Facts giving rise to the present appeal are that the assessee filed its return of income. The income was processed u/s 143(1) of the Income Tax Act, & 1296/Del/2021 [Assessment Years :2017-18 & 2018-19] 1961 (“the Act”) by assessing the total income of Rs16,60,390/-. The Assessing Officer (“AO”) while processing the return of income, made addition of Rs.24,09,960/- on account of late deposit of payment of employee’s contribution towards ESI and PF.
Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, dismissed the appeal.
Now, the assessee is in appeal before this Tribunal.
Ld. Counsel for the assessee submitted that the issues raised in this appeal are squarely covered in favour of the assessee. He placed reliance on the decisions of Hon’ble Delhi High Court rendered in the case of PCIT vs Pro Interactive Service (India) Pvt.Ltd. in [Del.] order dated 10.09.2018 and in the case of CIT vs AIMIL Ltd. 321 ITR 508 and stated that that these binding precedents have been followed by the various Benches of the Tribunal.
Per contra, Ld. Sr. DR vehemently opposed these submissions and submitted that law is clear in this respect and he relied upon the decision of Ld.CIT(A). He further relied upon the decision of Hon’ble Delhi High Court in the case of CIT vs Bharat Hotels Ltd. [2019] 103 Taxmann.com 295 (Delhi) wherein the Hon’ble High Court has decided the issue in favour of the Revenue by observing as under:-
8. “Having regard to the specific provisions of the Employees‟ Provident Funds Act and ESI Act as well as the concerned notifications which granted a grace period of 5 days (which appears to have been late Page | 4 & 1296/Del/2021 [Assessment Years :2017-18 & 2018-19] withdrawn recently on 08.01.2016), we are of the opinion that the ITAT‟s decision in this case was not correct. The assessee undoubtedly was entitled to claim the benefit and properly treat such amounts as having been duly deposited, which were in fact deposited within the period prescribed (i.e. 15 + 5 days in the case of EPF and 21 days + any other grace period in terms of the extent notification). As far as the amounts constituting deductions from employees‟ salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns.”
We have heard the rival submissions and perused the material available on record and gone through the orders of the authorities below. Ld.CIT(A) has decided the issue by observing as under:-
“5.16. From above observations of the Apex Court, it is clear that if a statute is curative in nature or merely declaratory of the previous law, retrospective operation is generally intended. If the objective of the amendment is to clear the meaning of the principal [act, which was already implicit, such amendment will necessarily have retrospective effect because it would be without object unless construed retrospectively. If the amendments in Section 36(1)(va) are viewed from this perspective, there will not be any room for doubt about its nature being clarificatory. This matter has been clarified in the amendment i.e. the true import of 'due date 'was very much implicit in the existing explanation 1 of Sec 36(1)(va) even prior to the amendment. More clarity has been brought about and the existing interpretation has indeed been reconfirmed through this amendment by way of insertion of explanation.
A harmonious construction will not emerge if these amendments were to be construed as prospective. Therefore, relying on the principles of interpretation of statutes as has been adumbrated by Hon'ble Apex Court supra, it is & 1296/Del/2021 [Assessment Years :2017-18 & 2018-19] to be held that the clarification brought out by explanation 2 to Sec. 36(1)(va) will equally hold good for the AYs prior to 2021-22.
6. In view of detailed discussions made at paragraph 5.2 to 5.16 above, I am of the considered view that the disallowance made u/s 36(1)(va) of the Act and consequent addition and adjustment made u/s 143(1)(a) by the Ld.A.O. does not require any interference. Accordingly, grounds of appeal No.1 to 3 are rejected.”
We find merit in the contention of Ld. Counsel for the assessee that the issue is covered by the judgement of Hon’ble Delhi High Court rendered in the case of AIMIL Ltd. (supra) wherein it has been held:-
“We may only add that if the employees’ contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income Tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Supreme Court in Vinay Cement (supra).” 10. Further, Ld. Counsel for the assessee placed reliance on the judgement of Hon’ble Delhi High Court rendered in the case of PCIT vs Pro Interactive Service (India) Pvt.Ltd. in [Del.] order dated 10.09.2018 held as under:-
“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. Page | 6 & 1296/Del/2021 [Assessment Years :2017-18 & 2018-19] 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.”
Therefore, respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court in the above-mentioned binding precedents, we hereby direct the Assessing Officer to delete the disallowance. Thus, grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Now, we take up assessee’s appeal in pertaining to Assessment Year 2018-19. The assessee has raised following grounds of appeal:-
1. “That under the facts and circumstances of the case the Ld. CIT(A) has erred in law as much as in fact in upholding the addition of Rs. 24,09,960/- made on account of disallowance of belated payment of employee's contribution towards ESI/PF. While upholding the disallowance Ld. CIT(A) has failed to appreciate that the disallowance could not be made: a. As the payment towards employee's contribution of ESI and PF have been made either during the financial year under consideration or before the due date of filing of return as described in section 139(1) of the Income Tax Act, 1961. As per the landmark judgment passed by the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. [(2009) 185 Taxman 416 (SC)] wherein it Page | 7 & 1296/Del/2021 [Assessment Years :2017-18 & 2018-19] was held that the 'due date' means the due date of return of income as per section 139(1) not as per respective fund due date. Further, the Hon'ble Delhi HC also stated that in the case of CIT vs. Aimil Ltd. [(2010) 188 Taxman 265(Delhi)] 'due date' means the due date of return of income as per section 139(1) not as per respective fund due date. b. Ld. CIT(A) while upholding the disallowance has relied upon the decision of Hon'ble High Courts which are non- jurisdictional in the case of the assessee and as per binding principles of precedents, if the decision of jurisdictional High Court is available on any issue then the law laid down by the jurisdictional High Court will prevail upon the decisions of non-jurisdictional High Courts. The decision of Jurisdictional High Court in the case of CIT vs. Aimil Ltd. [supra] is applicable to the assessee's case and this decision has again been followed by the Hon'ble Delhi High Court In the case of PC IT vs Pro Interactive Services (India) Pvt. Ltd. decision dated September 10, 2018 in ITA No. 938/2018. Therefore, the decisions of non-jurisdiction High Courts referred to by the Ld. CIT, NFAC cannot be relied upon to hold the issue against the assessee. c. That Ld. CIT, NFAC has failed to appreciate that the amendment brought by the statute in section 36(1)(va) of the Act and insertion of Explanation 5 to section 43B of the Act by the Finance Act, 2021 is not c1arificatory in nature and being casting a new obligation or interpretation of law against the existing decision of jurisdictional High Court, retrospectivity cannot be attached particularly when statute itself has made these amendments applicable only from April 1, 2021 Page | 8 & 1296/Del/2021 [Assessment Years :2017-18 & 2018-19] and it has been specifically been stated that these will apply to AY 2021-22 and subsequent assessment years as per clause 8 and 9 of the Memorandum to the relevant Finance Act.
2. That under the facts and in the circumstances of the case, keeping in view the above position of law, the disallowance of Rs. 24,09,960/- confirmed by the CIT(A), NFAC is liable to be deleted.
3. Without prejudice to the above, if the disallowance Rs. 24,09,960/- is to be upheld in its entirety then the same may be directed to be allowed in the A.Y. 2018-19.
4. That each of the above grounds is independent and is without prejudice to each other.
5. That appellant craves to add, alter, delete or modify any or all of the grounds of appeal on or before the hearing of the appeal.”
The facts and grounds are identical as were in Assessment Year 2017-18. The Ld. Representatives of the parties have adopted the same arguments as were in [Assessment Year 2017-18]. We, therefore taking the consistent view, direct the AO to delete the disallowance. Thus, grounds raised by the assessee in this appeal are also allowed as well in ITA No.1295/Del/2021.
In the result, both appeals filed by the assessee are allowed.