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Income Tax Appellate Tribunal, A BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI SHRI PRAMOD KUMAR, VICE PRESIDENT SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER (ASSESSMENT YEAR: 2017-18) Atlas Castalloy Limited, 7-C Udyog Mandir Compound, Bhagoji Keer Marg, Mahim, Mumbai - 400016 [PAN: AABCA0742K] ……………… Appellant Vs Assistant Commissioner of Income Tax, Circle 6(1)(2), Mumbai, 5th Floor, Aayakar Bhavan, M.K. Road, Mumbai - 400020 …………….… Respondent Appearances For the Appellant/ Assessee : Shri Sanjeev V. Joshi For the Respondent/Department : Shri Mehul Jain Date of conclusion of hearing : 28.02.2022 Date of pronouncement of order : 25.05.2022
O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Appellant/Assessee has challenged the order, dated 29.07.2021, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) [hereinafter referred to as „the CIT(A)‟] in appeal [CIT(A)12, Mumbai/10077/2019-20] for the Assessment Year 2017- 18, whereby the CIT(A) (NFAC) had dismissed the appeal filed by the Appellant against the intimation/order, dated 14.05.2019, issued/passed by Deputy Commissioner of Income Tax, CPC under Section 143(1) of the Income Tax Act, 1961 [hereinafter referred to as „the Act‟].
Appellant has raised the following grounds of appeal:
“1. The Learned Commissioner (Appeals) National Faceless Appeal Centre erred in confirming the order u/s 154 dated 14.05.2019 passed by CPC, Bangluru.
2. The Learned CIT(A) erred in confirming the disallowance of Rs. 2,35,060/- u/s 36(1)(va) representing delay in payment of employee‟s contribution towards Provident Fund, which though paid beyond the time specified under the PF Act, were paid much before the due date for filing return of income.
2.1 The Learned CIT(A) erred in not following the decision of the Hon‟ble Bombay High Court in CIT vs. Hindustan Organic & Chemicals Ltd. 366 ITR 1 & many other High Courts.
2.2 The Learned CIT(A) erred in holding that the amendments made to Sec. 36(1)(va) and 43B by the Finance Act, 2021 are retrospective in nature being only clarificatory or declaratory in nature and therefore, in not following decision of the Bombay High Court in favour of the appellant.
The Learned CIT(A) erred in confirming the disallowance of Rs. 1,05,000/- u/s. 40a(ia) towards disallowance against audit fee (30% of audit fee) ignoring the fact that the disallowance was already made in the return of income filed by the appellant.” 3. The brief facts of the case are that the Appellant-company filed return of income for the Assessment Year 2017-18 on 30.10.2017 declaring total income of INR 1,73,54,730/- which was processed under Section 143(1) of the Act by the Deputy Commissioner of Income Tax, CPC. A disallowance of INR 1,05,000/- was made under Section 40(a)(ia) of the Act in respect of failure to deduct tax at source on audit fee. Since, according to the Appellant, disallowance of INR 1,05,000/- was offered by the Appellant in the return of income [ Part A OI – „Other Information‟ – Clause 8A], the Appellant filed a rectification application under Section 154 of the Act. The aforesaid rectification application was disposed of vide 2
order dated 14.05.2019 by Deputy Commissioner of Income Tax, CPC by making further addition/disallowance of INR 2,35,060/- under Section 36(1)(va)/43B of the Act being employees‟ contribution to Employees‟ State Insurance Corporation (ESI) and Provident Fund (PF) made after the due date specified in the applicable statute but before the due date of filing income tax return prescribed under Section 139(1) of the Act. The aforesaid addition/disallowance was in addition to the disallowance of INR 1,05,000/- under Section 40(a)(ia) of the Act made earlier.
Being aggrieved, the Appellant filed appeal before the CIT(A). Before the CIT(A), the Appellant made following submissions:
“ 2.2 The reply of the Appellant is submitted before the CIT(AU) is as under:-
“Return of income for Assessment Year 2017-18 was filed on 30.10.2017 declaring total income at Rs. 1,73,54,730/-.
Intimation under Section 143(1) was issued on 10.01.2019 by the Ld. CPC, Bangalroe assessing Total income at Rs. 1,74,59,730/- . A disallowance of Rs. 1,05,000/-was made probably u/s. 40a(ia) on account of non deduction of tax at source on audit fees, ignoring the fact was already made in the computation of income.
On 07.02.2019, the assessee applied for rectification of the above mistake. An order u/s. 154 was passed by the CPC, Banglore on 14.0./2019 assessing total income at Rs. 1,76,94,790/-. A further disallowance of Rs. 2,35.060/- was made u/s. 36(1) (va) on account delay in payment of employee's contribution to provident fund ignoring Bombay High Court decision.
The Ld. CPC, Banglore overlooked the fact that the issue regarding allow-ability of contribution to PF & ESIC, paid beyond due date under the respective Acts but before due date of filing of return of income, is covered in favour of the appellant by the decision of the Hon'ble Bombay High Court in the case of CIT vs. 3
Hindustan Organics & Chemicals Ltd. 366 ITR 1. it was held by the Hon'ble Court that where assessee deposited employee's contribution towards EPF & ESIC belatedly but before due date of filing return u/s. 139(1) the amount so deposited could not be disallowed by invoking provisions of sec. 43B.
This view being decision of the Jurisdictional High Court is binding on us and the addition made ought to be deleted.
Same view has been taken / followed in the following decisions: i) SR. Batliboi & Co. vs. ACIT (2018) 100 Taxman.Com 328- Cal. ii) Pr. CIT vs Rajasthan State Beverages Corp. Ltd. (2017) 84 Taxman. Com - 177 (Raj.) iii) SLP dismissed by Hon'ble Supreme Court in 250 Taxmann 16(SC) Tubes vs. ITO (2017) 85 Taxman.Com 299 (J&K) / 300 CTR 541 iv) Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT (2019) 105 Taxman.Com.100 (Pune - Trib) / (2019) 55 CCH 231 v) Dy.CIT vs. Tecnotree Convergence Ltd. (2019) 107 TFaxman.Com 90 / 205 TTJ 561 The Learned AO further erred in making a disallowance of Rs. 1,05,000/- U/s. 40a(ia) account of non-deduction of tax at source on audit fees, ignoring the fact that the disallowance was already made in the return of income filed for A.Y. 2017-18, relevant details of which are in schedule „other information‟ - clause 8A(b)
It may be noted that an identical disallowance was made in A.Y. 2016-17 - Rs. 1,05,000/- the same was claimed as an allowable deduction in AY. 2017-18,- relevant details of which are in. schedule „other information‟ - clause 8(B). in view of the above facts & legal position, we request you to delete both the additions (Rs. 2,35 060- / & Rs. 1,05 000/-) and for that favour, we shall be extremely grateful.”
The CIT(A), not finding merit with the submissions made by the Appellant, dismissed the appeal holding as under:
“5.44 From the above judicial decisions and also the unambiguous wording of the now amended provisions of section 36(1) and 43B, it is clear that the employee‟s contribution can be allowed as a deduction only if it had been paid within the prescribed due dates under the relevant welfare funds and this position of law is and has always been the case and the clarifications brought about by the amendment clearly apply retrospectively. The case laws relied on by the appellant which were rendered prior to the clarificatory amendments, therefore are not applicable to the present case.
It is therefore, held that the disallowance made u/s. 36(1)(va) by CPC on account of appellant‟s failure to pay the employee‟s contribution of PF/ESI within the prescribed due dates as per section 36(1)(va) is strictly in accordance with law and clearly comes under the prima facie adjustments as envisages u/s. 143(1)(a)(iv). The order u/s. 154 issued by CPC is therefore, confirmed fully. Appellant‟s Ground on the issue fails.
In the result, appeal is dismissed.” 6. Now the Appellant is before us challenging the order, dated 29.07.2021, passed by the CIT(A).
Ground No. 2 to 2.2 7. Ground No. 2 to 2.2 pertain to additional disallowance of INR 2,35,060/- under Section 36(1)(va)/43B of the Act relating to employee‟s contribution to ESI and PF made after the due date prescribed by the applicable statute but before the due date filing return specified under Section 139(1) of the Act.
In this regard, the Ld. Authorised Representative for the Appellant appearing before us reiterated the submissions made before CIT(A) reproduced in para 4 above. He submitted that for the Assessment Year 2017-18 employees' contributions to ESI and PF is allowable as a deduction even if it is same are deposited beyond the due date specified under the applicable statute but before the due date of filing of Income Tax return. There was no change in the applicable law as applicable to Assessment Year 2017-18. The Explanatory Memorandum to Finance Act, 2021 specifically provided that the proposed amendments to Section 36(1)(va) and Section 43B of the Act shall apply from Assessment Year 2021-22. He placed reliance of judgment of the Hon‟ble Bomaby High Court in the case of CIT vs. Hindustan Organic Chemical Ltd. 366 ITR 1 and the decisions of the Tribunal in the case of (i) Cresent Roadways Pvt. Ltd. vs. Dy. CIT, Circle 1(2) Hyderabad (ITA No. 1952/HYD/2018) (ii) Aroon Facilitation Management Services Pvt. Ltd. vs. Dy. CIT (2021) 63 CCH 0114- (ITA No. 1824/Del/2020) (iii) Skava Electric Pvt. Ltd. vs. ACIT (2021) 63 CCH 0324 (ITA No. 565/Bang/2021) (iv) Genesis Intellectuals Pvt. Ltd. (2022) 64 CCH 0103 (ITA No. 26/Kol/2022).
Per contra, Ld. Departmental Representative relied upon the order passed by the CIT(A) to support the intimation/order, dated 10.01.2019, issued under Section 143(1) of the Act and the order, dated 14.05.02019, passed under Section 154 of the Act. He also relied on the amendments made to Section 36(1)(va) and Section 43B of the Act by the Finance Act, 2021.
We have considered the rival submission and perused the material on record. It is admitted position that employees‟ contribution towards ESI and PF amounting to INR 2,35,060/- was deposited by the Appellant before the due date of filing the return prescribed under Section 139(1) of the Act.
The CIT(A) has sought to justify the order, dated 14.05.02019, passed under Section 154 of the Act rectifying intimation/order issued by CPC under Section 143(1) of the Act, by placing reliance upon the amendments introduced by the Finance Act, 2021 passed much later on 28.03.2021 by contending that the amendments are to be interpreted and applied retrospectively. Such an approach adopted by the CIT(A) cannot be countenanced. The date on which order under Section 154 of the Act was passed the issue stood decided in the favour of the Appellant by virtue of the decisions of the jurisdictional High Court in the case of Hindustan Organics Chemicals Ltd.: 366 ITR 1 (Bom). Even assuming arguendo that the stand of the CIT(A)/Revenue is acceptable, the issue was not free from doubt falling in the category of „debatable issue‟ and thus, not falling within the ambit of provisions contained in Section 154 and/or Section 143(1) of the Act. The Memorandum Explaining the provisions of the Finance Bill, 2021 clearly provides that “These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years”. Further, even after the introduction of amendments to Section 36(1)(va)/43B of the Act by way of Finance Act, 2021, the Tribunal had, in the decisions relied upon by the Appellant, held that the aforesaid amendments are applicable from Assessment Year 2021-2022. Accordingly, the adjustments/additions/rectification made by the Deputy Commissioner of Income Tax, CPC in respect of employees‟ contribution to ESI and PF fell outside the scope of Section 154 and/or 143(1) of the Act. Further, we note that this issue is squarely covered in favour of the assessee by the decision of co–ordinate bench in case of Kalpesh Synthetics (P.) Ltd. Vs. Deputy Commissioner of Income-tax, CPC Bangaluru [2022] 137 taxmann.com 475 (Mumbai - Trib.).
The addition/disallowance of INR 2,35,060/- under Section 36(1)(va)/43B of the Act vide order, dated 14.05.2019, passed under Section 154 of the Act is deleted. Accordingly, Ground No. 2 and 2.1 are allowed. In view of the aforesaid, Ground No. 2.2 is disposed off as being infructuous.
Ground No. 3
Ground No. 3 pertains to disallowance/addition of INR 1,05,000/- made under Section 40(a)(ia) of the Act vide intimation/order dated 10.01.2019 against which rectification application filed by Appellant was rejected vide order dated 14.05.2019. We note that this issue was raised in appeal before CIT(A). However, the CIT(A) has not adjudicated upon the same. The Ld. Authorised Representative for the Appellant submitted that the Appellant had offered INR 1,05,000/- to tax in the return of income and therefore the aforesaid addition/disallowance is not warranted. We note that in submissions date 02.02.2021, filed before CIT(A), it was submitted on behalf of the Appellant as under:
“The Learned AO further erred in making a disallowance of Rs. 1,05,000/- U/s. 40(a)(ia) account of non-deduction of tax at source on audit fees, ignoring the fact that the disallowance was already made in the return of income filed for A.Y. 2017- 18, relevant details of which are in schedule „other information‟ - clause 8A(b)
It may be noted that an identical disallowance was made in A.Y. 2016-17 - Rs. 1,05,000/- the same was claimed as an allowable deduction in AY. 2017-18,- relevant details of which are in. schedule „other information‟ - clause 8(B).” (Emphasis Supplied)
On perusal of above, it is seen that while the Appellant has offered a disallowance of INR 1,05,000/- in the return of income for the Assessment Year 2017-18, the Appellant has also claimed
deduction of INR 1,05,000/- in the return for the Assessment Year 2017-18 pertaining to expenditure incurred in Assessment Year 2016-17. In our view, the issue requires verification. Accordingly, we remand the matter to the file of Assessing Officer for fresh adjudication after giving Appellant a reasonable opportunity of being heard. Ground No. 3 is disposed of with the aforesaid directions.
Ground No. 1 is disposed of as being general in nature.
In result, the present appeal is allowed for statistical purposes.
Order pronounced on 25.05.2022.