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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Sri Manish Borad & Sri Sonjoy Sarma
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘SMC’ BENCH, KOLKATA [Virtual Court] (Before Sri Manish Borad, Accountant Member & Sri Sonjoy Sarma, Judicial Member) I.T.A. No.: 598/Kol/2021 Assessment Year: 2018-19 Om Prakash Singh..................................................................Appellant [PAN: ALSPS 1730 Q] Vs. DCIT, CPC.............................................................................Respondent I.T.A. No.: 605/Kol/2021 Assessment Year: 2018-19 T&I Private Limited................................................................Appellant [PAN: AABCT 1826 B] Vs. DCIT, CPC.............................................................................Respondent Appearances by: None appeared on behalf of the Assessee. Sh. Surendra Kumar Mishra, Addl. CIT, appeared on behalf of the Revenue. Date of concluding the hearing : February 16th, 2022 Date of pronouncing the order : February 25th, 2022 ORDER Per Bench: The captioned appeals are directed against the order of the ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC) [in short ld. “CIT(A)”] dated 06.10.2021 & 27.10.2021. 2. There is a delay of 23 days in filing of the appeal in ITA No.605/Kol/2021. This delay was stated to be neither deliberate nor intentional but was due to the pandemic circumstances prevailing at that time. We take note of the pandemic situation where the movement of people were restricted and because of such practical situation, it was always not possible to follow the time of limitation regarding filing of appeal before various forums. This fact was also observed and taken cognizance of by the
2 I.T.A. Nos.: 598 & 605/Kol/2021 Assessment Year: 2018-19 Om Prakash Singh T&I Private Limited. Hon’ble Supreme Court of India, in Civil Original Jurisdiction, Suo Moto Writ Petition (Civil) No. 3 of 2020 dated 8th March, 2021. The ld. D/R agreed for the condonation of delay of 23 days. After hearing the parties and taking guidance from the decision of the Hon’ble Supreme Court (supra), we condone the delay of the assessee and proceed to hear the case on merits.
As the issues raised in both these appeals are common and as the facts are identical, for the sake of convenience and brevity, they are heard together and disposed off by way of this common order. When the cases were called up, none appeared on behalf of the assessee in the mentioned appeals. Appeal heard in the assistance of ld. D/R and the available records.
A perusal of the grounds in both these appeals, we find that the issues raised are common and disallowance of employee’s and employer’s contribution towards PF & ESI being deposited after the due date as prescribed under the governing Act of PF & ESI.
4.1. A perusal of the impugned orders reveals that the ld. CIT(A) has disallowed the said disallowance referring to certain judicial precedence and also holding that the amendment brought in by Finance Act, 2021 Explanation-‘2’ to Clause-‘va’ of Section 36(1) as retrospective in nature.
Ld. D/R vehemently argued in support of the order of the ld. CIT(A).
We have heard the rival contentions and perused the records and carefully gone through the documents filed before us. In the case of the assessee namely Om Prakash Singh the issue under challenge is disallowance of employee’s contribution at Rs.10,97,411/- and employer’s contribution at Rs.6,48,227/- for alleged delay in deposit of PF & ESI. In the case of another assessee namely T&I Private Limited, the assessee has challenged disallowance of employee’s contribution towards PF & ESI at Rs.7,72,746/-.
6.1. One common fact emerging from both the impugned orders and not controverted by ld. D/R is that the alleged amount of contribution towards
3 I.T.A. Nos.: 598 & 605/Kol/2021 Assessment Year: 2018-19 Om Prakash Singh T&I Private Limited. PF & ESI has been deposited with the concerned Department before the due date of filing the return of income u/s 139(1) of the Act. Under these given facts where the alleged sum has been deposited before the due date of filing return of income u/s 139(1) of the Act whether disallow once u/s 36(1)(va) of the Act is called for and secondly whether the amendment brought in by Finance Act, 2021 by way of insertion of Explanation-‘2’ to Clause-‘va’ of Section 36(1) of the Act is whether retrospective or prospective in nature, we find that this Tribunal in the case of Lumino Industries & Ors. In ITA No. 231/Kol/2021 dated 17.11.2021 has elaborately dealt with this issue in light of the settled judicial precedence holding that no disallowance was called for u/s 36(1)(va) of the Act under the given facts and circumstances. Relevant extract of the said order is reproduced hereinabove:
“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.” 18. 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
4 I.T.A. Nos.: 598 & 605/Kol/2021 Assessment Year: 2018-19 Om Prakash Singh T&I Private Limited. 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 lsl 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.” 7. From perusal of the above finding of this Tribunal, we find that the same is squarely appreciable on the issue raised in the captioned appeals and we, therefore, respectfully following the same, decide the issue in favour of the assessee. Thus, the finding of the ld. CIT(A) is set aside and disallowances made by the AO at Rs. 10,97,411/- and Rs. 6,48,227/- in the case of the assessee namely Om Prakash Singh and disallowances of Rs. 7,72,746/- made in the case of the assessee namely T&I Private Limited towards alleged delay in deposit of PF & ESI is deleted. Relevant grounds raised relating to this issue are hereby allowed.
Remaining grounds are either general or consequential in nature and need no adjudication.
5 I.T.A. Nos.: 598 & 605/Kol/2021 Assessment Year: 2018-19 Om Prakash Singh T&I Private Limited. In the result, both the assessee’s appeals are allowed. 9.
Kolkata, the 25th February, 2022.
Sd/- Sd/- [Sonjoy Sarma] [Manish Borad] Judicial Member Accountant Member Dated: 25.02.2022 Bidhan (P.S.) Copy of the order forwarded to: 1. Om Prakash Singh, 55, Ultadanga Main Road, Kolkata-700 067. 2. T&I Private Limited, 19, R.N. Mukherjee Road, Dalhousie, Kolkata-700 001. 3. DCIT, CPC. 4. CIT(A)- National Faceless Appeal Centre (NFAC). 5. CIT- 6. CIT(DR), Kolkata Benches, Kolkata.