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Income Tax Appellate Tribunal, BENCH “B” KOLKATA
Before: Shri Sanjay Garg & Shri Girish Agrawal
अपीलाथ� क� ओर से/By Appellant Shri Punit Agarwal,, Ld.AR ��यथ� क� ओर से/By Respondent Smt. Ranu Biswas, Addl.CIT, Ld.DR सुनवाई क� तार�ख/Date of Hearing 08-03-2022 घोषणा क� तार�ख/Date 08-03-2022 of Pronouncement आदेश /O R D E R Per Girish Agrawal, AM :
The present appeal has been preferred by the assessee against the order dated 25- 11-2021 passed by the Commissioner of Income-tax (Appeals), [in short, the ld. CIT(A)], Kolkata-21, which in turn arises out of processing of return of income u/s. 143(1) of the Income-tax Act, 1961 ( in short, the ‘Act’) by the Deputy Commissioner of Income Tax, CPC, Bengaluru ( in short the AO ) on 18/10/2019 for the A.Y 2018- 19, whereby a sum of Rs. 22,15,661/- was disallowed/added back on account of delay on the part of the assessee in deposit of employees contribution to Provident Fund/ Employees State Insurance/ Provident Fund( hereinafter PF/ESI.
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The assessee has raised the following grounds of appeal:-
1. That the Ld. CIT(A)-21, was wrong in confirming the addition of Rs. 22,15,661/- u/s 36(1)(va) read with u/s 2(24)(x) on account of delayed payment of PF of Rs. 18,76,1331- and ESI of Rs. 3,39,5281-. The contribution to the PF and ESI were made within the due date of filling of IT return u/s 139 (1) of the Act and hence the same is allowable expenditure u/s 43B. Thus, addition so made by Ld. AO(CPC) and confirmed by Ld. CIT(A) is bad in law and need to be deleted.
2. That the Hon'ble High Court of Calcutta has given the affirmation in the favour of the assessee in the case of the CIT vs. M/s Coal India Ltd. ITA of 12 2015 dated 12.08.2015 wherein in it was held 'that the amount paid for the employee contribution beyond the due date was deductible by invoking the amended provisions of section 43B of the Income Tax Act, 1961. Thus, the addition of PF and ESI is an allowable expenditure as per above judgement.
3. That the amendment provision u/s 36(1)(va) as well as 43B regarding payment of PF and ESI after the legislative dates is not an allowable as per amendment made in Finance Act, 2021. But the said amendment is applicable from the AY. 2021-22 not applicable for the instant AY. 2018-19. Hence, for the AY. 2018-19, the payment made for PF and ESI is allowable as business expenditure. As such, the interpretation of amendment of Finance Act 2021 made by Ld. CIT(A) is totally wrong.
4. That the assessee craves to leave or add, alter, amend or withdraw any or all of the ground(s) of appeal before or at the time of hearing.
3. On perusal of above grounds of appeal, it reveals that before us the assessee has contested mainly on the issue of disallowance of Rs. 22,15,661/- made under the head of PF/ESI for delayed payment under section 36(1)(va) read with section 2(24)(x) and section 43B of the Act.
4. Brief facts of the case are that the assessee filed its e-return of income for the A.Y under consideration, which was processed u/s. 143(1) of the Act by AO, CPC, Bengalaru on 18-10-2019, whereby a sum of Rs. 22,15,661/- was disallowed/added back on account of failure of the assessee to deposit the employees contribution to PF/ESI beyond the due date. Admittedly, it was not paid on or before the prescribed due date u/s. 36(1)(va) r.w.s 2(24)(x) of the Act but paid before the due date of filing income tax return u/s. 139(1) of the Act. Aggrieved by the order of the Ld.AO, DCIT, 2. M/s. Secure Print Solution P.Ltd CPC. Bengalore, the assessee preferred an appeal before the ld. Commissioner of Income-tax (Appeals), Kolkata, The ld. CIT(A) considering the submissions of assessee and various case laws available in his order dismissed the appeal of assessee by confirming the said disallowance (Rs. 22,15,661/-) as made by the ld.AO.
5. Aggrieved by the above order of the ld. CIT(A), now the assessee is in appeal before us by raising the aforementioned grounds of appeal.
At the outset, Shri Punit Agarwal, Ld.Counsel for the assessee submitted before us that the issue raised in the instant appeal regarding disallowance on delayed payment of employees’ contribution towards ESI and Provident Fund without following the provisions of section 2(24)(x) read with section 36(1)(va) of the Act, is squarely covered in favour of the assessee by the judgment of the Hon’ble Jurisdictional High Court, Calcutta in the case of Vijay Shree Ltd, of 2011(G.A No.2607 of 2011) dt. 12.8.2015. He also invited our attention that the issue in hand is covered in favour of assessee by the latest order dt. 17-11-2021 of the Co- ordinate Bench of this Tribunal (ITAT, ‘B ‘Bench, Kolkata) in ITA Nos. 231,365,366,369,367,368 & 371/Kol/2021 for the AYs. 2015-16, ’17-18, ’18-19 & ’19-20 in the case of Lumino Industries & Ors. He also relied on the order of the Hon’ble Jurisdictional Calcutta High Court in the case of CIT vs. Coal India Ltd-ITA of 12 2015 dt. 12-08-2015, available in his grounds of appeal. Thus, he prayed before us that the disallowance so made by the ld.AO and confirmed by the ld. CIT(A) kindly be deleted in view of said order of this Tribunal/Hon’ble Jurisdictional High Court.
7. On the other hand, Smt. Ranu Biswas, Addl. CIT, the Ld. Departmental Representative ( in short, the Ld.DR) has not objected to the factual position of the case relating to the deposit of the contributions before the due date of filing of return for the year u/s 139(1) of the Act. However, she submitted that the ld. AO has rightly disallowed the said disallowance and therefore, the ld. CIT(A) rightly dismissed the appeal of assessee by confirming the said disallowance.
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After hearing the rival submissions and perusing the material available on record, we find that the issue in hand is covered in favour of assessee by the said order of Hon’ble Jurisdictional High Court, Calcutta in the case of Vijay Shree Ltd, of 2011(G.A No.2607 of 2011), dt. 12.8.2015, order dt. 17-11-021 and the decision of the Hon’ble Jurisdictional Calcutta High Court in the case of Cola (I) Ltd (supra) and the order (supra) of this Tribunal in the case of Lumino Industries (supra).of the Co-ordinate Bench Relevant findings of the said order is reproduced herein below for the sake of clarity:-
“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 date under this clause. For ready reference, we produce the Explanation-2 to Section 36(1)(va) as under:
“Section 36(1)(va)
Explnation-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’.
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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 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 favour 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. “
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Considering the uncontroverted factual matrix on record about the deposit of the contributions before the due date of filing of return u/s. 139(1) of the Act and respectfully following the above decision of the Hon’ble Jurisdictional High Court, the disallowance made by the ld.AO and confirmed by the ld. CIT(A) is hereby deleted. Grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.