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Income Tax Appellate Tribunal, Hyderabad ‘SMC’ Bench, Hyderabad
Before: Shri Rama Kanta Panda
Per Shri Rama Kanta Panda, A.M. The above two appeals filed by the assessee are directed against the separate orders dated 19.05.2022 & 23.05.2022 of the Commissioner of Income tax (Appeals)/ National Faceless Appeal Centre (NFAC), Delhi relating to the AY 2018-19 & 2020-21 respectively. Since, identical grounds have been raised by the assessee in both these appeals, therefore, for the sake of convenience these two appeals were heard together and are being disposed-of by this common order.
Although, a number of grounds have been raised by the assessee however, these all relate to the order of the CIT(A)/NFAC in sustaining the disallowances made by the CPC/AO of Rs. 2,28,187/- on account of delayed payment towards PF and ESI.
2 Shivakumar Bhumayya 3. Facts of the case, in brief, are that the assessee is an individual and filed his return of income declaring total income of Rs. 32,24,490/-. The return was processed by the CPC, Bangalore, wherein an amount of Rs. 2,28,187/- was disallowed on account of delay in deposit of the employees’ contribution to PF and ESIC. The assessee filed a rectification application u/s 154 of the I.T.Act requesting to delete the adjustment so made. However, the CPC, Bangalore vide order dated 27.06.2019 dismissed the same. The assessee filed an appeal before the CIT(A)/NFAC and the CIT(A)/NFAC vide impugned order dismissed the appeal filed by the assessee on the ground that although assessee has paid the employees’ contribution to PF & ESI, however the same was paid after the statutory due dates mentioned in the respective Act. The CIT(A)/NFAC further held that the amendment through the Finance Act to provisions of section 36(1)(va) and 43B are retrospective in nature.
4. Aggrieved with such order of the CIT(A)/NFAC, the assessee is in appeal before the Tribunal by raising the following grounds of appeal.
1. The order of the learned CIT(A) dismissing the appeal is erroneous both on facts and in law.
2. The learned CIT(A) erred in confirming the addition made by the CPC/ AO in disallowing the deduction claimed of Rs.2,28,187 towards PF and ESI which were otherwise allowable under the provisions of section 438 of the Act.
3. The learned CIT(A) erred in relying on the judgements of the Hon'ble High Court of Kerala, Hon'ble High Court of Gujarat and Hon'ble High Court of Madras for confirming the addition made by the CPC/ AO. The learned CIT(A) erred in ignoring the jurisdictional tribunal decisions based on other high court decisions and the amendments brought in by Finance Act, 2021 to Section 36(va) as well as 43B coupled with the explanatory notes of CBDT to the effect that the amendments made are effective from 01.04.2021.
The learned CIT(A) failed to appreciate the law laid down by Hon'ble Supreme Court in the case of Vegetable Products wherein it has been held that where there are two conflicting views, the decision which is in favour of assessee has to be followed.
3 Shivakumar Bhumayya
The learned CIT(A) failed to appreciate that the amendments brought in by Finance Act, 2021 to Section 36(va) and 43B are prospective in nature which are applicable from 01.04.2021.
For these and other grounds that may be urged, it is prayed that the Hon'ble Tribunal may be pleased to allow the appeal.
5. The ld. Counsel for the assessee referring to various decisions submitted that the co-ordinate benches of the Tribunal are taking the consistent view that if the employees’ contribution to PF and ESIC are paid before the due date of filing of the return, no disallowance u/s. 36(1)(va) r.w.s. 2(24)(x) shall be made. He accordingly submitted that this being a covered matter in favour of the assessee, the order of the CIT(A)/NFAC be set aside and the addition made by the AO and upheld by the CIT(A)/NFAC should be deleted.
6. The ld.DR on the other hand heavily relied on the order of the CIT(A)/NFAC. He submitted that the Finance Act, 2021 has amended the provision of section 43B, as well as section 36(1)(va) by insertion of explanation to those sections. He drew the attention of the bench to the explanatory notes to the Finance Bill, 2021 and submitted that the legislature never intended that section 43B would apply to employees’ contribution. He submitted that the language of explanation 5 to section 43B, explanation 2 to section 36(1)(va) and that of the Memorandum explaining the Finance Act, 2021 make it abundantly clear that employees’ contribution is out of the ambit of section 43B. Relying on various decisions, he submitted that the CIT(A)/NFAC was fully justified in upholding the addition made by the AO on account of delayed payment of PF and ESIC amounting to Rs. 2,28,187/-
I have heard the rival arguments made by both the sides, perused the orders of the AO and CIT(A)/NFAC and the paper
4 Shivakumar Bhumayya book filed on behalf of the assessee. I have also considered the various decisions cited before me by both sides. I find the AO in the instant case made addition of Rs. 2,28,187/- on account of delay in deposit of employees’ contribution to PF and ESIC on the ground that the same were deposited beyond the due date prescribed in the said Act. I find the CIT(A)/NFAC rejected the contention of the assessee that such payments though made after the stipulated dates prescribed in the said Acts, however the payments were made before the due date of filing of the return and accordingly sustained addition to the tune of Rs. 2,28,187/-. The CIT(A)/NFAC accordingly, upheld the action of the AO. I find the co-ordinate benches of the Tribunal are now consistently taking the view that no disallowances u/s. 36(1)(va) r.w.s. 2(24)(x) can be made on account of delayed payment of PF and ESIC, if such payments are made before the due date of filing of the return. It has further been held in these decisions that the amendment to section 43B as well as section 36(1)(va) r.w.s. 2(24)(x) by the Finance Act, 2021 are prospective and not retrospective in nature. Since, the assessee in the instant case has admittedly paid the employees’ contribution to PF and ESIC before the due date of filing of the return, therefore, I set aside the order of the CIT(A)/NFAC and direct the AO to delete the addition. The grounds raised by the assessee are accordingly allowed.
In the result, the appeal filed by the assessee is allowed.
ITA No.254/Hyd/2022 (AY 2020-2021)
Although a number of grounds have been raised by the assessee, however, the same relate to the order of the CIT(A)/NFAC in sustaining the disallowances of Rs. 1,38,488/- towards PF & ESIC.
5 Shivakumar Bhumayya 10. After hearing both sides, I find the grounds raised by the assessee in the above appeal are identical to grounds raised in . I have already decided the grounds and the appeal has been allowed. Following similar reasonings, the grounds raised by the assessee are allowed.
In the result, both the appeals filed by the assessee are allowed.
Order pronounced in the Open Court on 19th July, 2022.