DESANA POLY PLASTIC INDUSTRIES,KOLKATA vs. ASSTT DIRECTOR OF INCOME TAX, CPC, BENGALURU

This is an appeal preferred by the assessee against the order of ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi dated 02.08.2021 for AY 2019-20.

None appeared on behalf of the assessee. The sole ground involved in this appeal of assessee is against the action of the Ld. CIT(A) in confirming the disallowance of Rs.2,75,600/- made in respect of PF & ESI in respect employees’ contribution u/s. 36(1)(va) r.w.s. 2(24)(x) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”). According to the authorities below, since the assessee has not remitted the employees’ contribution on the due date as prescribed by the PF & ESI Act, the contribution made belatedly cannot be allowed. 3. We have heard the ld. D/R and perused the records placed before us. We find that the ld. CIT(A) has referred to the Amendment brought in by Finance Act 2021 w.e.f. 01.04.2021 which inserted Explanation-2 to section 36(1)(va) but erred in holding it as clarificatory and so, retrospective in nature. However, we find that any way this issue is no longer res-integra as held by this Tribunal in the case of Lumino Industries Ltd. vs. ACIT, Circle-

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 3 I.T.A. No.: 276/Kol/2021 Assessment Year: 2019-20 Desana Poly Plastic Industries. 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.”

In the impugned order of ld. CIT(A), it is noticed that the ld. CIT(A) has acknowledged that the assessee had made the 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 the appeal of the assessee and direct the A.O. to delete the addition and hold that the Amendment brought in Finance Act 2021 w.e.f. 01.04.2021 by inserting an Explanation to section 36(1)(va) and section 43B of the Act is prospective in nature and would apply from AY 2021-22 onwards and, therefore, the Amendment is not applicable to this assessment years (Assessment Year 2019-20) under consideration. Substantive grounds raised by the assessee on the issue of disallowance of employees’ contribution towards PF & ESI are allowed. In the result, the appeal of the assessee is allowed. 6.