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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
ORDER PER DIVA SINGH, J.M: By the present appeal filed by the assessee, the correctness of the order dated 02.03.2021 passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) [hereinafter referred to as ‘the CIT(A)’] pertaining to Assessment Year (AY) 2017-18 is assailed on the following grounds: “
1. The Learned CIT (Appeal) has not allowed late payment of employees contribution and Administration Charges of Provident Fund and ESIC of Rs. 10,83,269/on ground that said amount of contribution to ESIC and PF is not paid within due date u/s. 36. (1) (va)
(A.Y.2017-18) The Learned CIT Appeals has ignore the Jurisdiction Bombay High Court decision in the case of Ghatge Patil Transport Ltd (supra) 368 ITR 749 (2015) in which Hon Court has allowed the deductions of Employee’s contribution to PF and ESIC which was paid before the due date of filing the return of Income as per section 43 B but paid after the due date of the respective Acts and considered the decision of Gujarat High Court”
Sh. Manish Sanghavi appearing on behalf of the assessee submitted that the point at issue is fully covered in favour of the assessee. Attention was invited to the decision of the jurisdictional High Court in the case of CIT Vs. Ghatge Patil Transport Ltd. (2014) 368 ITR 749 (Bombay). Reliance was also placed upon the order dated 25.03.2021 in the case of Salzgitter Hydraulics Pvt. Ltd. Vs. ITO and order dated 27.07.2021 in the case of the DCIT Vs. Maharashtra Tourism Development Corporation in ITA No. 6426/Mum/2017.
Sh. Kishore Dhule, Sr. DR relied upon the impugned order. No contrary decision in support of the impugned order was referred to on behalf of the Revenue.
We have heard the parties and perused the material available on record. In the facts of the present case admittedly the Employee Contribution of PF & ESI of Rs. 10,83,269/- was paid beyond the statutory limits of the specific Act(s), however before the filing of the return of income. The addition made by way of disallowance was sustained in appeal in view of the fact that there was a delayed payment in terms of the specific statutes. The amendments carried out by the Finance Act, 2021 to sections 36(1)(va) and 43B were considered to be clarificatory in nature. We are of the view that the position of law as appreciated by the First Appellate Authority is not correct. Moreover, this issue is no longer res-integra as consistently over a period of time various benches of the ITAT have repeatedly held on considering the Notes on clauses and concluded that the amendments carried out are prospective in nature and not clarificatory.
(A.Y.2017-18) Hence, the decision to consider the same with retrospective effect cannot be upheld. The Notes on Clauses which were appended to the Finance Bill, 2021 at the time of the proposed amendments clearly bring out this position. For the sake of completeness they are extracted here-in-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.”
The year under consideration in the facts of the present case as we have noted is 2017-18 Assessment Year. WE may also refer to order dated 18.11.2021 in ITA No. 194/Chd./2021 in the case of Surya Resorts Pvt. Ltd. wherein it has been held:
“6. A ccordingly, on account of the af orementi oned reasoning, we h ol d that the di sall owance of Rs. 5, 24, 104/- sustained in the presen t appeal by the CI T(A) qua th e empl oyees’ con tribution despi te lat e payment qua the specif ic Act cannot be made. Admittedl y, in the facts of th e pres en t case th e payment has been made well within th e ti me line as set out under t he Inco me Tax Act u/s 139(1) of the Income Tax Act. Th us, admit tedl y the return of income was fil ed well within time af ter makin g the specific paymen ts. Th e po sition of l aw that the Amen dments carried out by the Fin ance Ac t, 2021 are prospec tive in nature and n ot (A.Y.2017-18) declaratory stand well s ettl ed. The dis all owance, accordingl y, cannot be sustained.
7. Bef ore pa rtin g, it is necessary to ref er to the decisi on of the jurisdict ional Hi gh C ourt ref erred t o by the assessee in th e specific ground No. 2 rais ed in the present appeal wh erein th e decision of the Hon'bl e Himachal Pradesh Hi gh Co urt in th e case of CIT vs Nipso Pol yfabr ika Ltd. [2 013] 350 ITR 327 h as been reli ed upon. The said decisi on, it is seen, specificall y deals with th e employees’ c ontri buti on. Th ei r Lordshi ps relyin g upon decisi on of the Apex Court in the case of CI T V s Al om Extrusions Ltd. (20 09) 319 ITR 3 06 (which was in the con text of empl oyers ’ contribution) referring to th e de ci sion of the Hon'bl e Delhi Hi gh Court in th e case of CIT Vs Aimil Ltd. (201 0) 321 I TR 508 took specific cognizance of the fact th at thi s decision pertain ed t o th e empl oyee’s cont ribution wherein again a ref erence had been made to the decisi on of the Apex Court in th e cas e of CI T Vs Vinay Cement 3 13 ITR 1. Considerin g the reasonin g in these decisions, Their Lo rdshi ps in the case of Nipso Polyf abri ks Ltd. (supra) consciousl y followed the view taken by the Hon'bl e Delhi High C ourt in Aimil’s case and concl uded that th e view ex pressed by the Hon 'ble Kerala Hi gh Court in CI T Vs C ommonw eal th Trust Ltd. (2004) 269 ITR 290 was not bein g followed as it was considered to be “no longer good law in vie w of the judge ment of the Apex Court in Al om Extr usi ons Ltd.” Accordingly, reli ance pl aced by the l d. AR on th e decision of the jurisdictional High Court qua the employ ee’s contri buti on stands addressed in fav our of the assessee. However, the s aid decision has not taken int o con si derati on the chan ge propos ed by t he Amendments carri ed out by Fin ance Act, 2021 which we have addres sed at l ength in the earli er part of thi s order. This issue st ands cov ered by vari ous decisi ons of the I TAT which s tand addressed. Acc ordin gl y, the ground of the assess ee is allowed. Said order was pronounced in the presence of the parties via Webex.”
Admittedly, the amount stands paid before the filing of the return before the due date as per the time lines of the Income Tax Act laid down under section 139(1). The disallowance on these facts for the assessment years prior to 2021-22 assessment year cannot be made. The amendment shall have prospective effect. On behalf of the assessee, the decision of the jurisdictional High Court in the case of CIT Vs. Ghatge Patil Transport Ltd. (supra) has also (A.Y.2017-18) been referred to. A perusal of the same shows that their Lordships were seized of the late payment of the employees contribution to P.F. Considering the position of law as settled by the Apex Court in the case of CIT Vs. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC) and CIT Vs. Hindustan Organics Chemicals Ltd. (2014 366 ITR 1 (Bombay), their Lordships qua the employee contribution decided the issue in favour of the assessee. No doubt the said decision did not take into consideration these specific amendments carried out by the Finance Act, 2021, however, the issue of retrospective effect of specific amendments stands well examined. This decision we note fully supports the case of the assessee. Accordingly, the addition made by way of a disallowance is directed to be deleted.
In the result, appeal of the assessee is allowed. The said order was pronounced in the court at the time of hearing itself on 23.11.2021.