DCIT 13(2)(2), MUMBAI vs. M/S SODEXO TECHNICAL SERVICES INDIA PVT LTD, MUMBAI

The assessee filed its return of income for AY 2018-19 on 29.11.2018. The extended due date for filing return of income u/s 139(1) for this year was 30-11-2018. The return of income was processed u/s 143(1) of the Act, wherein the above said disallowance was made u/s 36(1)(va) of the Act on the ground that the employees contribution to PF and ESI has been paid by the assessee beyond the due date prescribed in the respective Acts.

The assessee challenged the above said addition 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 Hon’ble Bombay High Court in the case of Ghatge Patil Transport Ltd. (368 ITR 749) and other case laws in support of its claim. The Ld. CIT(A) accepted the contentions of the assessee and accordingly deleted the disallowance. Aggrieved, the revenue has filed this appeal.

The Ld D.R submitted that the amendment brought in by the Finance Act, 2021 in sections 43B and 36(1)(va) of the Act is clarificatory in nature and hence it shall have retrospective application. Accordingly, she contended that the Learned CIT(A) should have applied the amended provisions and confirmed the disallowance. He submitted that the intention of the legislature has been clarified by way of amendment made in Finance Act, 2001. In this regard, she placed his reliance on the decision rendered by Hon’ble Supreme Court in the case of Zile Singh vs. State of Haryana (Appeal (civil) 6638 of 2004).

The Ld A.R, however, supported the order passed by Learned CIT(A). He submitted that the Ld CIT(A) has rendered his decision by following the decision rendered by him in the assessee’s own case for assessment year 2013-14 and also the decision rendered by the Tribunal in the case of Sodexo Food Solutions India (P) Ltd (2019)(103 taxmann.com 437).

We heard the 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 Bangalore bench of Tribunal in the case of M/s. ShakuntalaAgarbathi Company Vs. DICT in (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.

In the case of M/s. Shakuntala Agarbathi Company Vs. DCIT (supra), the Tribunal 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 Essae Teraoka (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 Hon'ble Gujarat High Court in the case of CIT v. Gujarat State Road Transport Corporation reported in 366 ITR 170 (Guj.). The Hon'ble High Court was considering following substantial question of law:- "Whether in law, the Tribunal was justified in affirming the finding of Assessing Officer in denying the appellant's claim of deductions of the employees contribution to PF/ESI alleging that the payment was not made by the appellant in accordance with the provisions u/s 36[1][va] of the I.T.Act?"

Accordingly, we are of the view that the amendment made by Finance Act, 2021 in the provisions of section 43B as well as 36(1)(va) of the I.T. Act are not applicable for the assessment year under consideration. We notice that the Hon’ble jurisdictional Bombay High Court has also held in the case of Ghatge Patil Transport Ltd (supra) that the employees contributions remitted on or before the due date for filing return of income is allowable as deduction. Accordingly, we hold that the employees’ contribution paid by the assessee on or before the due date for filing of return of income u/s 139(1) of the I.T. Act is an allowable deduction.

The assessee has filed copy of tax audit report before us. In the serial no. 20(b), the tax auditor has given details of dates of payments of employees contribution of PF& ESI. We noticed earlier that the extended due date for filing return of income for the year under consideration was 30-11-2018. We notice from serial no. 20(b) that some of the payments have been made beyond 30-11-2018. Accordingly, we confirm the order passed by Learned CIT(A) only in respect of those payments made on or before 30-11-2018, i.e., the disallowance shall be sustained in respect of payments made after 30-11-2018 and to that extent order passed by Ld CIT(A) is reversed. We order accordingly.

In the result, the appeal of the revenue is partly allowed.