CALCUTTA DOCK LABOUR BOARD,KOLKATA vs. ACIT, CIR. -40, KOLKATA

This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2018-19 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short ld. “CIT(A)”] dated 13.12.2021 arising out of the assessment order framed u/s 143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 08.03.2021.

The assessee is in appeal before the Tribunal raising the following grounds:

That the Ld. CIT (Appeals) erred in holding that the CPC was justified in levying Interest u/S 234A and 234B of the Income Tax Act, 1961.

That the Order passed by the Assessing Officer is bad in law.

Ground nos. 1, 5 & 6 are general in nature which need no adjudication and round no. 4 is consequential in nature.

At the outset, ld. Counsel for the assessee submitted that there was an inadvertent mistake in the tax audit report and the amount remained to be entered in Clause 26(1)A(a) in Form-3CB of the tax audit report. As the alleged amount has been paid Page 2 of 8 I.T.A. No.: 98/Kol/2022 Assessment Year: 2018-19 Calcutta Dock Labour Board. regularly and no amount was due to be paid as on the due date of filing return of income, therefore, no disallowance was called for.

Per contra, ld. D/R vehemently argued supporting the orders of both the lower authorities.

We have heard rival contentions and perused the records placed before us. The assessee’s grievance is against the disallowance of Rs. 46,06,60,582/- for not depositing monthly pension. The assessee has claimed that there is a mistake in the tax audit report and the necessary column was not filled. The alleged amount of monthly pension for Financial Year (in short “FY”) 2017-18 has been paid to the provident fund account before the due date of filing return of income and therefore, no disallowance is called for u/s 43B of the Act. We, further find that no details were filed before the first appellate authority even after being granted various opportunities. Therefore, in the interest of justice and being fair to both the parties and looking to the quantum of the addition and the claim being made by the ld. Counsel for the assessee as an officer of Court that the alleged amount has been paid before the due date of filing return of income, we restore this issue to the file of the ld. Assessing Officer (in short ld. “AO”) who shall verify the veracity of the claim of the assessee of having paid the alleged amount duly supported by necessary receipt/challan of having paid the pension amount and if the claim of the assessee is found to correct in light of provision of Section43B of the Act, then the said disallowance may be deleted and if found otherwise then ld. AO can proceed in accordance with law. Page 3 of 8 I.T.A. No.: 98/Kol/2022 Assessment Year: 2018-19 Calcutta Dock Labour Board.

In the result, ground no. 2 raised by the assessee is allowed for statistical purposes. Ground No. 3: 10. This ground relates to the disallowance of Rs. 12,33,470/- towards PF & ESI.

At the outset, ld. Counsel for the assessee placing reliance on the decision of this Tribunal in the case of B.S. Arora & Sons HUF vs. ACIT, Circle-32, Kolkata in order dated 05.04.2022 states that the alleged amount of employees’ contribution towards PF & ESI has been paid before the due date of filing return of income and this fact has been captured in the tax audit report place at page 7 to 15 of the paper book and therefore, the said disallowance may be deleted.

Per contra, ld. D/R vehemently argued supporting the orders of both the lower authorities.

We have heard rival contentions and perused the records placed before us. Through this ground, the assessee has alleged that ld. CIT(A) erred in confirming the disallowance of Rs. 12,33,470/- for employees’ contribution towards PF & ESI. Assessee’s claim is that the same amount pertaining to FY 2017- 18 has been deposited before the due date of filing return of income u/s 139(1) of the Act. We find that this issue is no longer res- integra as held by this Tribunal in the case of Lumino Industries Ltd. vs. ACIT, Circle-5(1), Kolkata in I.T.A. No.365/Kol/2021 for AY 2015-16 order dated 17.11.2021, wherein a view was taken in favour of the assessee by the Tribunal after holding that the Page 4 of 8 I.T.A. No.: 98/Kol/2022 Assessment Year: 2018-19 Calcutta Dock Labour Board. amendment brought in by Finance Act, 2021 w.e.f 01.04.2021, is prospective in operation and so will be in force from AY 2021-22 onwards and not retrospective. The relevant portions of the decision reads as under: “17. Have heard both the parties. We note that the Finance Bill, 2021 has brought in an amendment which disallows the employees’ contribution made in PF and ESI if not made within the due date as prescribed by the respective statutes (PF and ESI Act). So after the amendment has been inserted according to Shri Miraj D Shah takes effect from 1st April, 2021 i.e. AY 2021-22 and subsequent assessment year and if the remittance of PF/ESI Employees’ Contribution is not made within the time prescribed by the PF/ESI Act then the remittance cannot be allowed as a deduction which is prospective in operation. Whereas according to Ld. CIT(A), the amendment brought in is clarificatory in nature so, retrospective in operation. So we have to adjudicate this issue whether the amendment brought in by Finance Act, 2021 is prospective or retrospective in operation. We note that before this amendment has been inserted by Finance Bill, 2021, the Hon’ble Jurisdictional Calcutta High Court in the case of Shri Vijayshree Ltd. Ltd.(supra), M/s Philips Carbon Black Ltd.(supra), M/s Coal India Ltd.(supra), M/s Akzo Nobel India Ltd. (supra) has held that the payment of employees’ contribution if made by an assessee before the due date of filing of return of income u/s 139(1) of the Act, is allowable as a deduction. We note that by Finance Act, 2021, the provision of Section 36(1)(va) as well as Section 43B has been amended to this extend by inserting the Explanation 2 whereby it is clarified that the provision of Section 43B shall not apply and shall be deemed never to have been applied for the purpose of determining the due date under this clause. For ready reference, we reproduce the Explanation-2 to Section 36(1)(va) as under: “Section 36(1)(va) Explanation-2 - For the removal of doubts, it is hereby clarified that the provisions of Section 43B shall not apply and shall be deemed never to have been applied for the purpose of determining the ‘due date* under this clause.”

We find that this amendment has been brought in the Act to provide certainty about the applicability of Section 43B in respect of belated payment of employees’ contribution. In order to test whether the amendment brought in later is retrospective or not one has to apply the test as laid by the Hon’ble Supreme Court in the case of M/s Snowtex Investment Ltd. (supra) wherein the Hon’ble Supreme court I.T.A. No.: 98/Kol/2022 Assessment Year: 2018-19 Calcutta Dock Labour Board. took note of the law laid down on this issue by the Constitution Bench in M/s Vatika Township Ltd. and held that the intent of the Parliament/legislature need to be looked into for ascertaining whether the amendment should be retrospective or not. In Vatika Township Ltd. (supra) the Hon’ble Supreme Court held that the notes on clauses appended to the Finance Bill will throw light as to the legislative intent; because it has to be borne in mind that Parliament/legislature is aware of three concepts before an amendment is brought in, which can be discerned from reading of the “Notes on Clauses” to the Bill which are (i) prospective amendment with effect from a fixed date; (ii) retrospective amendment with effect from a fixed anterior date; and (iii) clarificatory amendments which are retrospective in nature. So when we adjudicate whether the view of Ld CIT(A) that the explanation 2 brought in by Finance Act, 2021 is retrospective, let us look at the “Notes on Clauses and the relevant clauses 8 & 9 of the Finance Bill, 2021 (supra) pertaining to the issue in hand which in clear and unambiguous terms spells out the intention of Parliament that the amendment shall take effect from 1st April, 2021 and therefore will accordingly apply to Assessment Year 2021-22 and subsequent years. So since the legislative intent is clear, the amendment brought in by Finance Act, 2021 on this issue as discussed is prospective and Ld. CIT(A) erred in holding otherwise. So till AY 2021-22, the Jurisdictional High Court’s view in favor of assessee will hold good and is binding on us. As discussed the decision of the Hon’ble Delhi High Court in Bharat Hotels Ltd. (supra) which was in favor of revenue has not considered the decision of the Co-ordinate Division Bench decision in M/s Aimil Ltd. (supra) which is in favour of assessee. So we note that later decision of the Delhi/Hyderabad Tribunal have followed the decision favouring assessee in the light of the Hon’ble Supreme Court decision in M/s Vegetable Products (supra). In the light of the aforesaid decision and relying on the ratio of the Hon’ble Supreme Court in the case of Vatika Township Pvt. Ltd. (supra) and M/s Snowtex Investment Ltd. (supra) and also taking note of the binding decision of the Hon’ble Jurisdictional Calcutta High Court on this issue before us in Shri Vijayshree Ltd. Ltd.(supra), M/s Philips Carbon Black Ltd.(supra), M/s Coal India Ltd.(supra), M/s Akzo Nobel India Ltd. (supra), we set aside the impugned order of Ld CIT(A) and direct the AO to allow the claim of deduction in respect of employees contribution shares towards ESI, PF, by the assessee before the due date of filing of return u/s 139(1) of the Act. Therefore the appeal of assessee succeeds and so, it is allowed in favor of assessee.”

The ld. A/R brought to our notice the contents of the impugned order of ld. CIT(A) wherein it is noticed that the ld. CIT(A) has acknowledged that the assessee had made the I.T.A. No.: 98/Kol/2022 Assessment Year: 2018-19 Calcutta Dock Labour Board. remittance/payment of employees’ contribution towards PF & ESI before the due date of filing of return of income. Therefore, in the light of the above judicial precedents (supra), which is squarely applicable on the issue raised before us in the instant appeal, we are inclined to allow ground no. 3 of the assessee and direct the A.O. to delete the disallowance. Thus, finding of ld. CIT(A) is reversed and ground no. 3 raised by the assessee on the issue of disallowance of employees’ contribution towards PF & ESI is allowed.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Kolkata, the 28th June, 2022. Sd/- Sd/- [Sonjoy Sarma] [Manish Borad] Judicial Member Accountant Member Dated: 28.06.2022 Bidhan (P.S.)