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Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI KUL BHARAT & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M.
This appeal is filed by the assessee against order of the ld CIT(A)-35, New Delhi dated 12.06.2017 for assessment year 2014-15, wherein, ld CIT(A) confirmed the disallowances of payment of Rs. 12,16,260/- on account of payment of employees contribution to Provident Fund and ESI paid before the due date before furnishing of the return of u/s 139 of the Act but not before the respective due date as prescribed under the law. This is the solitary issue in the appeal.
The facts shows that the assessee is a company engaged in developing, designing and manufacturing modular exhibition stands and portable display system for exhibition in India. It filed its return of income on 29.11.2013 declaring income of Rs. 2,41,68,180/-.
During the course of assessment proceedings the ld AO noted that the assessee has deposited ESI employees contribution of Rs. 2,31,992/- and provident fund of employees contribution of Rs. 9,84,268/- beyond the due date prescribed under the respective provident fund and ESI laws and therefore, same is disallowable u/s 36(1)(va) of the Act. The assessee submitted that the issue is covered by the decision of the Hon'ble Supreme Court in case of CIT Vs. Alom Extrusion Limited 185 Taxmann 416 and if the same is paid before the due date of filing of return of income same is allowable as deduction. The ld AO rejected the contentions of the assessee and disallowed a sum of Rs. 12,16,260/- and passed an assessment order on 15.11.2016 determining the total income of the assessee of Rs. 2,53,89,210/-. On appeal also the ld CIT(A) confirmed the same. Therefore, the assessee is in appeal before us.
Despite notice, none appeared on behalf of the assessee and therefore, the issue is decided on the merits of the case.
The ld DR vehemently supported the orders of the lower authorities. The ld DR further relied upon the explanation 2 inserted by Finance Act 2021 w.e.f 01.04.2021 stating that it provides that provision of section 43B shall not apply and shall deemed to have been never applied for the purpose of the due date under this laws. Therefore, the ld DR vehemently submitted that explanation 2 has makes it abundantly clear that section 43B should not be looked into. She therefore, stated that the explanation is inserted for removal of doubt and therefore, the above explanation clearly supports the view of the revenue authorities.
We have carefully considered contentions of the learned departmental representative and perused the orders of the lower authorities. The facts shows that the assessee has collected the sum of Rs. 12,16,260/- being employee’s contribution under the provident fund and with respect to ESI laws. The above contribution was admittedly not deposited by the assessee within the due date prescribed under the respective ESI and PF statue however, same was deposited before the due date of filing of return of income. Therefore, the ld AO as well as the ld CIT(A) disallowed the same holding that such contribution becomes the income of the assessee under the provision of section 2(24)(x) of the Act and thereafter if the same is deposit within the due date prescribed under the respective laws then same is allowable as deduction u/s 36(1)(va) of the Act. Coordinate bench in case of DCIT Vs Dee Development Engineers in ( A.Y 2011-12) has held as Under:-
“7. We have heard both the parties and perused all the relevant material available on record. As regards Ground No. 1, the assessee company has not deposited the employees’ contribution within the due date which is prescribed under the said statute i.e. Provident Fund and ESIC. This issue is dealt by the Hon’ble Delhi High Court in case of CIT vs. M/s Bharat Hotels Ltd. 410 ITR 417 wherein the issue is decided in favour of the revenue, without considering the decision of the Hon’ble Page | 2 Delhi High Court in case of CIT vs. AIMIL Ltd.(2010) 321 ITR 508 (Del.). But the Ld. AR relied upon the decision of the Hon’ble Delhi High Court in case of Pr. CIT vs. Pro Interactive Service (India) Pvt. Ltd. pronounced on 10.09.2018 wherein the Hon’ble High Court decided the issue in favour of the assessee relying upon the judgment of AIMIL Ltd. (supra). The Hon’ble Delhi High Court held that the legislative intent was/is to ensure that the amount paid is allowed as 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. It is settled law that when two judgments are available giving different views then the judgment which is in favour of the assessee shall apply as held in case of Vegetable Products Ltd. 82 ITR 192 by the Hon’ble Supreme Court. Hence, in light of the latest decision in case of Pro Interactive Service (India) Pvt. Ltd., the issue is covered in favour of the assessee. Hence, Ground No. 1 is dismissed.”
Further with respect to the argument of the learned departmental representative that amendment made with finance act 2021 wherein explanation 1 is added u/s 36 (1) (va) of the act with effect from 1 April 2021, is applicable to the present case, we referred to the “Notes on clauses” at the time of introduction of the finance bill 2021 which says as Under:- “Clause 8 of the Bill seeks to amend section 36 of the Income- tax Act, relating toother deductions. Sub-section (1) of the said section provides for allowing of deductions provided for in the clauses thereof for computing the income referred to in section 28 of the said Act. Clause (va) of the said sub-section provides for allowance of deduction for any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation to the said clause provides that for the purposes of this clause, "due date" means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. It is proposed to insert Explanation 2 to clause (va) of sub-section (1) of the said section so as to clarify 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 the said clause. This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021- 2022 and subsequent assessment years.” Page | 3