M/S. AASHIA PRODUCTS ,MUMBAI vs. ADIT , CPC, , BENGALURU

This appeal is filed by the assessee against order of Learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter for short "Ld. CIT(A)] dated 29.09.2021 for the A.Y.2019-20.

Assessee has raised following grounds in its appeal: -

Considered the rival submissions and material placed on record, we observed that the assessee for the various reasons could not deposit the employees contribution to provident fund within the time allowed under prescribed Act. Whereas, the assessee has deposited the amount before filing of the return of income u/s. 139(1) of the Act and there is a delay in depositing the employees contribution to provident fund. The assessee has complied with the provisions of Law and deposited the contributions before the due date of filling the Return of income u/s.139(1) of the Act which cannot be disputed. The Ld.DR submitted that the amendment is retrospective applicable but the assessee submissions are that the amendment has come w.e.f 01.04.2021 and the same is applicable prospectively. The fact remains that the provisions/explanation was introduced in the Finance Act, 2021 which is effective from 01.04.2021.

Considering the rival submissions and overall facts, circumstances, the judicial precedents filed on the similar issue, the Bangalore Bench in the case of M/s. BI Worldwide India Pvt Ltd. v. DCIT in dated 04.01.2022, A.Y.2018-19 has considered the facts

The submission of Mr.Aravind, learned counsel for the revenue that if the employer fails to deduct the employees' contribution on or before the due date, contemplated under the provisions of the PF Act and the PF Scheme, that would have to be treated as income within the meaning of Section 2(24)(x) of the IT Act and in which case, the assessee is liable to pay tax on the said amount treating that as his income, deserves to be rejected.

With respect, we find it difficult to endorse the view taken by the Gujarat High Court. WE agree with the view taken by this Court in W.A.No.4077/2013.

In the result, the appeal is allowed and the substantial question of law framed by us is answered in favour of the appellant-assessee and against the respondent-revenue. There shall be no order as to costs." 7.2 The further question is whether the amendment to section 36(1)(va) and 43B of the I.T.Act by Finance Act, 2021 is clarificatory and declaratory in nature. The Hon'ble Supreme Court in the recent judgment in the case of M.M.Aqua Technologies Limited v. CIT reported in (2021) 436 ITR 582 (SC) had held that retrospective provision in a taxing Act which is "for the removal of doubts" cannot be presumed to be retrospective, if it alters or changes the law as it earlier stood (page 597). In this case, in view of the judgment of the Hon'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. v. DCIT (supra) the assessee would have been entitled to deduction of employees' contribution of PF and ESI if the payment was made prior to due date of filing of the return of income u/s 139(1) of the I.T.Act. Therefore, the amendment brought about by the Finance Act, 2021 to section 36(1)(va) and 43B of the I.T.Act, alters the position of law adversely to the assessee. Therefore, such amendment cannot be held to be retrospective in nature. Even otherwise, the amendment has been mentioned to be effective from 01.04.2021 and will apply for and from assessment year 2021- 2022 onwards. The following orders of the Tribunal had categorically held that the amendment to section 36(1)(va) and 43B of the I.T.Act by Finance Act, 2021 is only prospective in nature and not retrospective. (i) Dhabriya Polywood Limited v. ACIT reported in (2021) 63 CCH 0030 Jaipur Trib.

In the result, the appeal filed by the assessee is allowed."

In view of the judicial pronouncements cited supra, we hold that the amendment to section 36(1)(va) and 43B of the Act will not have application for the relevant assessment year, namely assessment year 2018-2019. Accordingly, we direct the A.O. to grant deduction in respect of employees' contribution to PF and ESI since the assessee made the payment before the due date of filing of return u/s 139(1) on 30.11.2018 of the Act. Accordingly, grounds raised by assessee stands allowed.

Similarly, in the case of Shri Satish Kumar Sinha v. ITO in A.Y 2019-20 order dated 23.08.2021, the Hyderabad Bench has observed at Para 3.5 as under: - “3.5. We have heard both the parties through video conference and gone through the material placed on record. In the instant case, there is no dispute that the amounts-in-question with regard to EPF and ESI were remitted to the concerned accounts before the due date of filing the return of income u/sn139(1). This, the Tribunal has consistently taken a view that if the PF and ESI are remitted to the respective accounts, the same are required to be allowed as 7 ITA.NO. 2007/MUM/2021 (A.Y: 2019-20) M/s. Aashis Products deduction. In the case of KLR Industries Ltd., Vs. DCIT (2017) [83 taxmann.com 322] (Hyd), the Tribunal held as under: "34. The A.O. disallowed the expenditure claimed by observing that the assessee has not remitted the employees contribution to PF and ESI within the prescribed date as mentioned in section 36(1)(va). Though, the assessee did not challenge the disallowance before learned CIT(A) but he raised an additional ground before us challenging the said disallowance. It is the contention of the assessee that the employees contribution to ESI and PF though, was not paid within the due date as prescribed under section 36(1)(va) but such dues having been paid before the due date of filing of return of the income as prescribed under section 139(1), the amount is allowable as a deduction as per the provisions of section 43B. We find merit in the aforesaid submissions of the assessee. There are a number of judicial precedents on this issue wherein it is held that if the employees contribution to PF and ESI is paid within the due date of filing of return of income under section 139(1), then, the amount is allowable as a deduction in view of the provision of section 43B. In view of the afore said, we delete the addition of Rs.2,07,209". 3.5.1. Similarly, Hon'ble Punjab & Haryana High Court in the case of Pr.CIT Vs. Rajastan Beverages Corporation Ltd., (2017) [84 taxmann.com 173] held that no disallowance can be made in respect of PF and ESI u/s.36(1)(va) of the Act, if the same are deposited on or before the due date of filing the return of income. For the sake clarity and convenience we extract relevant part of the order of the Hon'ble Rajasthan High as under: "5. So far as the question relating to privilege fees amounting to Rs.26.00 Crores in the instant year as well as the deduction of claim of Rs.17,80,765/- on account of Provident Fund (PF) and ESI is concerned, this Court has extensively considered the aforesaid two questions in assessee's own case vide judgment and order dt.26.05.2016 referred to (supra) and has held that the privilege fees being a revenue expenditure, is required to be allowed as a revenue expenditure. This court in the aforesaid case has also allowed the claim of the assessee, in so far as payment of PF & ESI etc. is concerned, on the finding of fact that the amounts in question were 8 ITA.NO. 2007/MUM/2021 (A.Y: 2019-20) M/s. Aashis Products deposited on or before the due date of furnishing of the return of income and taking in consideration judgment of this Court in CIT v. State Bank of Bikaner & Jaipur [2014] 363 ITR 70/43 taxmann.com 411/225 Taxman 6 (Mag.) (Raj.) and CIT v. Jaipur Vidhut Vitaran Nigam Ltd. [2014] 363 ITR 307/49 taxmann.com 540/[2015] 228 Taxman 214 (Mag.) (Raj.) and accordingly both the questions are covered by the aforesaid judgment and against the revenue". Against which the revenue has filed SLP before the Hon'ble Supreme Court, which was dismissed by the Hon'ble Apex Court in (2017) [85 taxmann.com 185].Therefore, taking the consistent view and respectfully following the view taken by the Co-ordinate Bench of the ITAT in the case of KLR Industries Ltd., Vs. DCIT (supra), we hold that no disallowance could be made in respect of employees contribution of PF and ESI if the same are deposited before the due date of filing the return of income. Accordingly, we set aside the order of Ld.CIT(A) and delete the addition made by the AO. The appeal of the assessee on this ground is allowed”. Respectfully following the same, I set aside the order of the CIT (A) and delete the addition made by the Assessing Officer on this issue”.

In the result, assessee’s appeal is allowed.

In the result, appeal filed by the assessee is allowed.