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Income Tax Appellate Tribunal, ‘A’ BENCH, PUNE
Before: SHRI INTURI RAMA ROAO & SHRI PARTHA SARATHI CHAUDHURY
IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, PUNE BEFORE SHRI INTURI RAMA ROAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER I.T.A. No. 555/PUN/2021 – A.Y. 2018-19 Dar Al Handasah Consultants (Shair and Partners) India Pvt. Ltd. Tower 11, Wing A & B, Level 2, Cybercity, Hadapsar, Magarpatta City, Pune-411 013 PAN: AACCD 6524 H : Appellant Vs. The Dy. C.I.T CPC, Bangaluru : Respondent
Appellant by : Shri Rajendra Agiwal Respondent by : Shri Ramnath P. Murkunde Date of Hearing : 27-09-2022 Date of Pronouncement : 27-09-2022
ORDER PER SHRI PARTHA SARATHI CHAUDHURY, JM This appeal preferred by the assessee emanates from the order National Faceless Appeal Centre (NFAC), Delhi, dated 27-08-2021 for the assessment year 2018-19, as per the following grounds of appeal.
“Based on the facts and circumstances of the case and in the law, Dar Al Handasah Consultants (Shair And Partners) India Private Limited (hereinafter referred to as the 'Appellant') respectfully submits that the Hon'ble Commissioner of Income Tax Appeals ('CIT(A)') erred in disposing of appeal of the Appellant, on the following grounds, which are independent of and without prejudice to each other: 1. Disallowance of expenditure in respect of employees' contribution to Provident Fund and Employee State Insurance (ESI) On the facts and in the circumstances of the case and in law, the Deputy Commissioner of Income Tax, CPC ('learned AO') and CIT(A) have erred in making disallowance of INR. 3,12,931 to the total income of the Appellant with respect to expenditure regarding employees' contribution to Provident Fund and Employee state insurance. While doing so, the learned AO/CIT(A) have erred in the following: 1.1 Disallowing expenditure of INR. 3, 12,931 in relation to employees' contribution to provident fund and ESI, under section 36(1)(va) of the Act even though the same has been paid before the due date of filing return of income. 1.2. Non-consideration of judgements on the deduction from the Hon'ble Supreme Court in the case of CIT vs Alom Extrusions Limited [(2009) 319
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ITR 306)] (SC) and judgements from the jurisdictional authorities i.e. Hon'ble Bombay High Court in the case of CIT-IV vs Hindustan Organics Chemicals Ltd (48 taxmann.com 421) (2014) (Bombay HC) and the Hon'ble Pune Tribunal in the case of DCIT vs Bajaj Finance Limited (ITA No.2128/PN/2014) (Pune Tribunal). 1.3. Making such disallowance without considering the legislative intent for the introduction of said provision introduced by the Finance Act, 1987, in respect of section 36(1)(va) of the Act for such disallowance. 2. Disallowance under section 43B of the Act On the facts and in the circumstances of the case and in law, the learned AO and Hon'ble CIT(A) have erred in making an adjustment of INR. 3,69,50,000 on account of payment of expenses under section 43B of the Act, made post the date of tax audit but paid before the due date of filing return of income. While doing so, the learned AO and the Hon'ble CIT(A) have erred in: 2.1 Holding that the payments for the said amount can't be verified otherwise than the tax audit report, even though the Assessee produced the payment proof (bank records) of such expenditure (Bonus paid to the employees) and submitted the same before the Hon'ble CIT(A). 2.2 Holding that the actions of the learned AO were justified since, the learned AO was liable only to verify the arithmetic accuracy of the income tax return and hence the Hon'ble CIT(A) declined to modify the order passed by learned AO. 2.3 Non-consideration of the arguments place by the assessee in favour of allowance of the said amount. 2.4 Without prejudice to the above grounds, the payment on account of bonus should be allowed in the subsequent year A.Y 2019-20 if the same is disallowed in the year under consideration. 3. Interest under section 234B and 234C of the Act
The learned DCIT, CPC has erred in law in computing the interest of INR. 17,33,959 under the section 234B of the Act and INR. 5,63,801 undersection 234C of the Act.
The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, so as to enable the Hon'ble members to decide this appeal according to law. Each of the above ground of appeal is independent and without prejudice to the other grounds of appeal preferred by the Appellant.”
The first issue involved in this appeal is the disallowance of employees’ contribution to Provident Fund as well as ESI. It is the case of the assessee that as per various decisions of Pune Tribunal it has been held that if the employees’ contribution to provident fund is paid before the due date of filing of return of income, then it is deductible as per provisions of section 43B of the Income-tax
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Act, 1961 (hereinafter referred to as “the Act”) and the amendment made by the Finance Act, 2021 inserting Explanation 2 to section 43B is applicable prospectively i.e. from A.Y. 2021-22. Admittedly, in the present case before us, the payment of employee’s’ contribution to provident fund and ESI was before the due date of filing of return of income u/s 139(1) of the Act and pertains to A.Y. 2018-19.
We find the issue is squarely covered by the decision of Pune Tribunal in the case of Prashant Arun Sangai Vs. ADIT, CPC, Bangaluru in ITA No. 466/PUN/2021 for A.Y. 2019-20, order dated 22-06-2022 as well as in the case of SIP Moulds Pvt. Ltd. Vs. ITO Ward 2(1) Nashik in ITA No. 551/PUN/2021 for A.Y. 2019-20, order dated 28-06-2022. There is a consolidated order passed by the Tribunal in ITA No. 538/PUN/2021 and others in the case of Tilokchand Bhabutmal Shah Vs. ADCIT, CPC Bangaluru, etc., order dated 28-06-2022, where the facts before the Tribunal were that the A.O made disallowance on the ground that the assessee had not deposited the employee’s’ share of EPF and ESI etc. within due date prescribed under respective Statutes, but paid before due date for filing Return of Income under the provisions of section 139(1) of the Act. On appeal before the ld. CIT(A), confirmed the said disallowance. The Tribunal held as follows:
“6. When the matter was called on none appeared on behalf of the appellants listed at Sl. No.2 to 6 of above cause title, despite due service of notice of hearing, except in the case of Tilokchand Bhabutmal Shah (listed at Sl. No.1 of the above cause title). Therefore, we proceed to dispose of all the appeals on merits after hearing the ld. CIT-DR. 7. We heard the ld. CIT-DR and perused the material on record. The only issue raised through various grounds of appeal in this appeal is against the confirmation of disallowance of Rs.1,46,592/- made by the Assessing Officer u/s 36(1)(va) of the Act on account of late deposit of the Employees’ share of EPF and ESI etc. 8. At the outset, ld. AR appearing on behalf of the appellant Tilokchand Bhabutmal Shah listed at Sl. No.1 of above cause title filed a copy of recent decision of Co-ordinate Bench of this Tribunal in the case of Prashant Arun Sangai vs. ADIT in ITA No.466/PUN/2021 for the assessment year 2019-20 order dated 22.06.2022 stating that the identical issue was decided by the Tribunal (supra) in favour of the
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assessee. Referring to this decision of the Tribunal (supra), he submitted that principle of consistency should be applied to the facts of the present case. The ld. CIT-DR has expressed no objection on this submission of the assessee. 9. Considering the submission of the ld. AR and perusing the recent decision of the Tribunal (supra), we find that the identical issue was came up before this Tribunal in the case of Prashant Arun Sangai (supra) wherein the Tribunal decided the similar issue in favour of the assessee relying on the decision of the Hon’ble Himachal Pradesh High Court in the case of CIT vs. Nipso Polyfabriks Ltd. (2013) 350 ITR 327 (HP). The relevant paragraphs of the said decision of the Tribunal (supra) are extracted herein under :- “4. We have heard the ld. DR and gone through the relevant material on record. There is no appearance from the side of the assessee despite notice. We are, therefore, proceeding to dispose of the appeal ex parte qua the assessee on merits. 5. It is seen as an admitted position from the impugned order as well as the statement of facts before the ld. first appellate authority that the assessee did deduct employees’ share of EPF and ESI and paid the same after the due date under the respective legislations but before the time stipulated for filing return u/s 139(1) of the Act for the year under consideration. In our opinion, this issue is no more res integra in view of several judgments allowing deduction u/s 36(1)(va) of employees’ share of contribution deposited after due date under the respective Acts but before the date prescribed u/s 139 of the Act. The Hon’ble Himachal Pradesh High Court in CIT vs. Nipso Polyfabriks Ltd. (2013) 350 ITR 327 (HP) has held that there exists no difference between employees or employer’s contribution and both are to be allowed as deduction if deposited before the due date. 6. At this juncture, it is relevant to mention that the Finance Act, 2021 has inserted Explanation 2 below section 36(1)(va) providing that 5 the provisions of section 43B shall not apply for the purpose of determining the due date under this clause w.e.f. 01.04.2021. The effect of this amendment is that if the amount of employees’ contribution towards EPF, ESI, etc is delayed by an employer beyond the due date under the respective Acts, the disallowance will be called for notwithstanding the fact that it was deposited before the due date u/s 139 of the Act. The Memorandum explaining the provisions of the Finance Bill, 2021, provides that this amendment will take effect from 1st April, 2021 and will, accordingly apply in relation to assessment year 2021- 2022 and subsequent assessment years. Since the assessment year under consideration is 2019-20, which is anterior to the amendment carried out with effect from A.Y. 2021-22, we hold that the position of law as set out by various Hon’ble High Courts including the one in CIT vs. Nipso Polyfabriks Ltd. (supra) squarely applies to the facts and circumstances of the instant case, thereby not warranting any disallowance since the amount in question was admittedly deposited before due date u/s 139(1) of the Act. The addition is therefore, directed to be deleted.” 10. Similarly, the Hon’ble Jurisdictional High Court in the case of CIT vs. Ghatge Patil Transports Ltd. 368 ITR 749 (Bom.) has taken identical view as taken by the Hon’ble Himachal Pradesh High Court in the case of Nipso Polyfabriks Ltd. (supra) and decided the issue in favour of the assessee. 11. Respectfully following the above judicial precedents, we hold that the ratio laid down by the Hon’ble High Courts cited above is squarely applicable to the facts of the present case. Therefore, following the principle of consistency, we direct the Assessing Officer to delete the addition of Rs.1,46,592/- made u/s 36(1)(va) of the Act. 12. In the result, the appeal filed by the assessee in ITA No.538/PUN/2021 for A.Y. 2019-20 stands allowed.”
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In the aforestated decision, the Tribunal has relied on Hon'ble jurisdictional High Court decision in the case of CIT Vs. Ghatge Patil Transports Ltd. 368 ITR 749 (Bom) which followed the decision of Hon'ble Himachal Pradesh High Court in the case of CIT Vs. Nipso Polyfabrics Ltd. (2013) 350 ITR 327 (HP). Therefore, we are of the considered view that this issue is no more res integra in view of several judgments allowing deduction u/s 36(1)(va) of employees’ share of contribution deposited after the due date under the respective Statutes but before the date prescribed u/s 139(1) of the Act. In fact, it was held by Hon'ble Himachal Pradesh High Court that there exists no difference between the employees’ or employers’ contribution and both are to be allowed as deduction if deposited before the due date. The relevant observations we need to mention at this juncture that the Finance Act, 2021 has inserted Explanation 2 below section 36(1)(va) providing that the provisions of section 43B shall not apply for the purpose of determining the due date under this clause w.e.f. 01-04-2021. The effect of this amendment is that if the amount of employees’ contribution towards EPF, ESIC, etc. is delayed by an employer beyond the due date under the respective Acts, the disallowance will be called for notwithstanding the fact that it was deposited before the due date u/s 139(1) of the Act. The Memorandum explaining the provisions of the Finance Bill 2021, provides that this amendment will take effect from 1st April 2021 and will accordingly apply in relation to assessment year 2021-22 and subsequent assessment years. Before us, the assessment year involved is 2018-19. Since the assessment year under consideration is earlier to the amendment carried out with effect from A.Y. 2021- 22, we hold that the position of law as set out by various High Courts’ decisions including Hon'ble Bombay High Court in the case of Ghatge Patil Transports Ltd (supra) and Hon'ble Himachal Pradesh High Court in Nipso Polyfabrics Ltd (supra) squarely applies to the facts and circumstances of the instant case
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thereby not warranting any disallowance since the amount in question was admittedly deposited before the due date u/s 139(1) of the Act. We direct the A.O to delete the addition made u/s 36(1)(va) of the Act from the hands of the assessee. Ground No. 1 of assessee’s appeal is allowed.
The second issue is with regard to the disallowance u/s 43B of the Act on account of non-payment of bonus and leave encashment.
The brief facts are that during the year under consideration, the assessee has disallowed Rs.1,09,88,946/- u/s 43B of the Act on account of non-payment of bonus and leave encashment. However, in the tax audit report, an amount of Rs. 4,79,38,946/- has been recorded as per clause 26(i)(B)(b) by the tax auditor. The CPC in the computerized processing made disallowance u/s 143(1)(a)(iv) of the Act on the basis of facts furnished by the assessee for audit. On this issue, the ld. CIT(A) held as follows:
“9.3 The indication of disallowance u/s.43B is thus embedded in the details given in Tax Audit Report in clause 26(i)(B)(b) of Form No.3CD, i.e., due dates as prescribed u/s.43B and the actual dates of payment reported, thus clearly indicating the deviations if any which attract such disallowance, on the books of accounts and other evidences furnished by the appellant before the Audit. Since the disallowance u/s.43B clearly falls within the ambit of prima facie adjustments to be carried out u/s.143(1 )(a)(iv), the disallowance of Rs. 3,69,50,000 made by CPC under section 143(1) on this issue is on the basis of audit report and is within the provisions of Section 143(1) of the Act. The contention of the appellant that the auditor has mentioned wrong amount in the audit report is not verifiable under the purview of section 143(1) of the Act. AO has only processed the return on the basis of details and audit report submitted while filing of return. Hence, the action on part of AO u/s 143(1) is upheld and the appeal on this ground is dismissed.” 7. At the time of hearing, the ld. A.R of the assessee reiterated the submissions made before the revenue authorities stating that during the year under consideration, the tax auditor has recorded disallowance of Rs. 4,79,38,946/-. However, after signing of tax audit report but before filing of income-tax return, the assessee has made payment of Rs. 3,69,50,000/- and therefore, has disallowed Rs. 1,09,88,946/- i.e. (Rs. 4,79,38,946/- (-) Rs. 3,69,50,000/-). The copy of the details reflecting the payment of bonus has been
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placed before the Department in paper book vide pages 44 to 76. In this regard, it was submitted by the ld. A.R that all the documents were before the Department and the amount of Rs. 3,69,50,000/- was included in the total amount paid. Therefore, the assessee has complied with the provisions of section 43B of the Act as relating to the claim of deduction of bonus.
While adjudicating this issue, the ld. CIT(A) in his order has not brought out the various evidences as submitted by the assessee regarding payment of Rs. 3,69,50,000/- and whether the said amount is included in the total amount paid, nothing is evident from the findings of the ld. CIT(A). On the other hand, the ld. A.R claims that these documents were placed before the Department, however, they were not considered. In this backdrop, we are of the considered view in the interest of justice this issue should be remanded back to the file of NFAC to re-adjudicate as per law considering the various evidences placed on record and come out with a speaking order. In view thereof, we set aside the order of the NFAC and remand the issue back to its file to comply with the directions as given hereinabove.
In the result, ground No. 2 of appeal of the assessee is allowed for statistical purposes.
Ground No. 3 is in respect to interest u/s 234B and 234C of the Act, which is consequential.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on this 27th September 2022.
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Sd/- sd/-
(INTURI RAMA RAO) (PARTHA SARATHI CHAUDHURY) ACCOUNTANT MEMBER JUDICIAL MEMBER Pune; Dated, this 27th day of September 2022 Ankam
Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The Pr. CIT- 1, Pune 4. The NFAC, Delhi 5. The D.R. ITAT ‘A’ Bench Pune. 6. Guard File BY ORDER, Sr. Private Secretary ITAT, Pune /// TRUE COPY ///
9 ITA 555/PUN/2021 Dar Al Handasah Consultants A.Y. 2018-19 Date 1 Draft dictated on 27-09-2022 Sr.PS 2 Draft placed before author 27-09-2022 Sr.PS 3 Draft proposed and placed before the JM/AM second Member 4 Draft discussed/approved by second AM/JM Member 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order