SRI GAJANANA ENTERPRISES,SHIVAMOGGA vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CPC, BANGALORE

The assessee filed its return of income for AY 2018-19 on 03.10.2018. The return of income was processed u/s 143(1) of the Ac, wherein the disallowance of Rs.20,74,749/- u/s 36(1)(va) of the

The assessee challenged the addition of Rs.20,74,749/-, being employees contribution to PF & ESI by filing appeal before Ld. CIT(A) contending that the disallowance should not be made, since the above said payments have been made prior to the due date for filing return of income prescribed u/s 139(1) of the Act. In this regard, the assessee relied on the decision rendered by jurisdictional Karnataka High Court in the case of Sabari Enterprises ( 298 ITR 141) and also Essea Teraoka P Ltd (366 ITR 408)(Kar). However, the Ld. CIT(A) rejected the contentions of the assessee by following the amendment brought in by the Finance Act, 2021 in sections 43B and 36(1)(va) of the Act. Aggrieved, the assessee has filed this appeal before us.

The learned AR submitted that the assessee has remitted the employees contribution of PF & ESI before the due date prescribed u/s 139(1) of the Act, even though the contributions were paid in few instances beyond the due date prescribed in the respective Statutes. He invited our attention to page 2 of his written submissions, wherein the details of remittance of PF are given in support of his submission that the impugned contribution has been paid before the due date prescribed u/s 139(1) of the Act during the year under consideration.

The Ld Standing Counsel Mr Ganesh R Ghale, however, submitted that the amendment made in Finance Act 2021 is a clarificatory amendment and hence it should apply retrospectively to the year under consideration also. He submitted that the intention of the legislature has been clarified by way of amendment made in

I heard both parties and perused the record. The question whether the payment made beyond the due date prescribed under respective statutes, but before the due date prescribed u/s 139(1) of the Income tax Act was considered and decided in favour of the assessee by the Tribunal in the case of M/s. Shakuntala Agarbathi Company Vs. DICT in ITA No.385/Bang/2021 (order dated 21.10.2021). The question as to whether the amendment made by Finance Act, 2021 shall have retrospective effect or not was also answered in this order.

I notice that the Bangalore Bench of the Tribunal, in the case of M/s. Shakuntala Agarbathi Company Vs. DCIT (supra), has followed the decision rendered by the Hon’ble jurisdictional Karnataka High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT ((2014)(43 taxmann.com 33)(Kar), wherein the Ho’ble High Court has held that the assessee would be entitled to deduction of employees’ contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) of the I.T.Act. It was further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory. The relevant finding of the ITAT in the case of M/s. Shakuntala Agarbathi Company Vs. DCIT (supra), reads as follows: “7. We have heard rival submissions and perused the material on record. Admittedly, the assessee has remitted the employees' contribution to ESI before the due date for filing of return u/s 139(1) of the I.T.Act. The Hon'ble jurisdictional High Court in the case of EssaeTeraoka (P.) Ltd. v. DCIT reported in 366 ITR 408 (Kar.) has categorically held that the assessee would be entitled to deduction of employees' contribution to ESI provided the payment was made prior to the due date of filing of return of income u/s 139(1) of the I.T.Act. The Hon'ble jurisdictional High Court differed with the judgment of the

Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T. Act are not applicable for the assessment year under consideration. By following the binding decision of the Hon’ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees’ contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T. Act is an allowable deduction. Accordingly, we decide this issue in favour

The Ld D.R submitted that the Hon’ble Gujarat High Court has taken a contrary view on this issue in the case of CIT vs. Gujarat Road Transport Corpn. (2014)(41 taxmann.com 100) and the matter is pending before Hon’ble Supreme Court. Accordingly, he prayed that in the event of Hon’ble Apex Court taking a view in favour of the revenue on this issue confirming the view taken by Hon’ble Gujarat High Court, then the Revenue should be given liberty to seek rectification of the present order. The prayer of the Ld D.R so made is accepted, subject to the statutory limitations, if any.

The next issue relates to the contention that the AO has granted credit for TDS at lower amount. The Ld A.R submitted that the assessee claimed TDS amount of Rs.5,26,453/-, but the TDS credit has been given only to the extent of Rs.4,61,660/-. He submitted that the above said claim is supported by Form No.26AS. Since the claim of the assessee requires verification, we restore this issue to the file of AO with the direction to examine the claim of the assessee and take appropriate decision in accordance with law.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 23rd May, 2022