VIDHI CLOTHING COMPANY,BENGALURU vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CPC, BANGALORE

O R D E R Per Chandra Poojari, Accountant Member

This appeal by the assessee is directed against the order of the NFAC dated 27/5/2020 for the asst. year 2019-20.

2. The assessee has raised following grounds of appeal:-

“I. The learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre has erred in passing the appellate order in the manner passed. The appellate order as passed is void-ab-initio and bad in law and is liable to be quashed.

2. The learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre has erred in dismissing the appeal filed by the appellant without following the binding decision of jurisdictional High Court and honourable Apex court. The order passed without following the legal precedence is bad in law and therefore liable to be quashed.

4. In any case and without prejudice, the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre has erred in confirming the adjustment u/s. 143(I)(a) as done by CPC. The adjustment done by CPC in the intimation being beyond the purview of section 143(1)(a) and the adjustment being not prima facie adjustment should have been deleted by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre. Instead, the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre has erred in holding the adjustment to be in order.

5. In any case, the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre has erred in; a) holding that the employee's contribution for PF and ESI are allowable as deduction only when deposited by the employer within the due dates prescribed under relevant Act or funds. b) holding that for the relevant year, the provisions of section 43B of the Act were not applicable to the employees share of contribution of the ESI & PF c) Not appreciating that the decision of the honourable supreme court is in favour of the appellant. d) holding that Section 43B applies only to employer's contribution. e) Relying on various judgments of non jurisdictional High Court to confirm the disallowance despite there being contrary judgments of the jurisdictional High Court. f) Holding that, the amendments to Section 36(1)(va) and Section 43B brought in by Finance Act, 2021 are retrospective, clarificatory and declaratory in nature.

And erred in thus confirming the disallowance of Rs.12,27,957/- as made to the returned income of the appellant. The disallowance as made being bad in law and on facts should have been deleted.

6. The learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre has erred in levying interest u/s. 234A, 234B & 234C of the Act. The appellant denies his liability to pay interest as levied. The interest levied being erroneous are to be deleted.

7. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that the Intimation made/order passed u/s 250 of the Act be quashed or at least the disallowance made to the income be deleted, Income returned be accepted and Interest levied be also deleted.

3. The issue in grounds are with regard to disallowance of sum of Rs.12,27,957/- being employees’ contribution to PF and ESI which has been deposited beyond the due date prescribed under relevant Act and deposited within due date by filing the return on u/s 139(1) of the Act.

the return of income under sub-section(1) of section 139 of the IT Act in respect of the previous year in which the liability to pay such sum was incurred and the evidence of such payment is furnished by the assessee along with such return. In short, this provision states, notwithstanding anything contained in any other provision contained in this Act, a deduction otherwise allowable in this Act in respect of any sum payable by the assessee as an employer by way of contribution to any fund such as provident fund shall be allowed if it is paid on or before the due date as contemplated under Section 139(1) of the IT Act. This provision has nothing to do with the consequences, provided for under the PF Act/PF Scheme/ESI Act, for not depositing the "contribution" on or before the due dates therein.

“This clause is inserted by the Finance Act with effect from April 1, 1988. The Explanation to this clause is read very carefully. "Due date" has been explained stating that: means the date by which the assessee is required as an employer to credit contribution to the employees' account in the relevant fund under any Act, rule or order or notification issued thereunder or under any standing order, award, contract of service or otherwise." Prior to the above clause was inserted to section 36 giving statutory deductions of payment of tax under the provisions of the Act, section 43B(b) was inserted by the Finance Act, 1983, which came into force with effect from April 1, 1984. Therefore, again the provision of section 43B(b) clearly provides that notwithstanding anything contained in the other provisions of the Act including section 36(l) clause (Va) of the Act, even prior to the insertion of that clause the assessee is entitled to get statutory benefit of deduction of payment of tax from the Revenue. If that provision is read along with the first proviso of the said section which was inserted by the Finance Act, 1987, which came into effect from April 1, 1988, the letters numbered as clause (a), or clause (c) or clause (d) or clause (e) or clause (f) are omitted from the above proviso and therefore deduction towards the employees contribution paid can be claimed by the assessee. The Explanation to clause (va) of section 36(1) of the Income-tax Act further makes it very clear that the amount actually paid by the assessee on or before the due date applicable in this case at the time of submitting returns of income under section 139 of the Act to the Revenue in respect of the previous year can be claimed by the assessees for deduction out of their gross income. The above said statutory provisions of the Income-tax Act abundantly makes it clear that, the contention urged on behalf of the Revenue that deduction from out of gross income for payment of tax at the time of submission of returns under section 139 is permissible only if the statutory liability of payment of provident fund or other contribution funds referred to in clause (b) are paid within the due date under the respective statutory enactments by the assessees as contended by learned counsel for the Revenue is not tenable in law and therefore the same cannot be accepted by us.”