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Income Tax Appellate Tribunal, ‘A’ BENCH, PUNE
Before: SHRI R.S. SYAL & SHRI PARTHA SARATHI CHAUDHURY
Consolidated Appeals (2)
ORDER PER SHRI PARTHA SARATHI CHAUDHURY These appeals preferred by the above-mentioned assessees as per the captioned matter emanates from the respective orders of the ld. CIT(A)/(NFAC) for the respective assessment years as appearing hereinabove, as per the following grounds of appeal.
2 ITA 435, 463, 467 & 464 of 2021 Group cases for A.Y. 2018-19 – Gallaghar Service Center LLP :
On the facts and in the circumstances of the case and in law: 1. Ground 1 : Disallowance of expenditure in respect of employees’ contribution to Provident Fund and Employee State Insurance ((ESI) The ld. CIT(A) has erred in upholding the action of the ld. DCIT, CPC in disallowing expenditure of Rs. 97,18,285/- in relation to employees’ contribution to provident fund and ESI u/s 36(1)(va) of the Act even though the same has been paid before the due date of filing return of income and is thereby allowable u/s 43B of the Act. In doing so, the ld. CIT(A) has erred in : (a) Not following the principle of judicial discipline by ignoring the favourable decisions of the Hon'ble Jurisdictional Bombay High Court (‘HC’) and the Hon'ble Jurisdictional Pune Tribunal. (b) Not appreciating that the decision of the Hon'ble Gujrat High Court in the case of CIT Vs. Gujarat State Road Transport Corpn. (2014) 366 ITR 170(Guj() has been distinguished by Hon'ble Karnataka High Court in case of Essae Teraoka (P) Ltd. (ITA No. 480/2013) and (c) Not appreciating that the amendment introduced in sec. 43B and 36(1)(va) of the Act by the Finance Act, 2021 is prospective in nature applicable from AY 2021-22 and not applicable for the year under consideration. The appellant craves leave to add, alter, vary, omit, substitute, amend or delete one or more of the above grounds of appeal on or before or at the time of hearing of the appeal, so as to enable the Hon’ble ITAT to dispose of the appeal according to law.
A.Y. 2018-19 – GTT Communications (I) Pvt. Ltd. The ld. CIT(A) has dismissed the appeal filed, the following are the grounds of objections raised by the Appellant. On the facts and circumstances of the case and in law, CIT(A) (vide assessment order u/s 250 of the Act) was not justified in :
1. 1. The ld. CIT)A) made an adjustment of Rs. 10,63,283/- being delayed payment of PF which was paid before due date of filing of return of income.
2. The legislative amendments incorporated in section 36(1)(va) and 43B as per Finance Act, 2021 are prospective in application i.e. w.e.f. April 1, 2021 (as per CBDT Memorandum Explaining the provisions in the Finance Bill 2021).
3. The appellant craves its right to add to or alter the Grounds of appeal at any time before or during the course of hearing of the case.” for A.Y. 2018-19 – Apidor Abrasive Products Pvt. Ltd. u/s 36(1)(va) - Rs. 5,12,625/- for A.Y. 2019-20 – M/s. Goldys Precision Stamping P. Ltd. 1. In the facts and circumstances of the case and in law, them ld. CIT(A) has erred in sustaining the addition of Rs. 9,14,357/- u/s 36(1)(va) of the Act ignoring the factual and legal position that appellant had made the contribution towards EPF and ESI before the due date specified u/s 139(1) of the Act.
3 ITA 435, 463, 467 & 464 of 2021 Group cases Without considering the judgment of Jurisdictional High Court in the case of CIT Vs. Ghatge Patil Transports Ltd. Without considering the judgment of co-ordinate benches in the case of Mahadev Cold Storage Vs. AO and Vijai Electricals Vs. DCIT wherein it is held that the amendment made tosecitonm43B by the Finance Act, 2021 is prospective in nature and cannot be applied for the period prior to 01-04- 2021.
2. The appellant craves leave to add, alter, delete or modify all or any of the above grounds of appeal. All the above grounds are without prejudice to each other.
At the very outset, we find that appeal in for A.Y. 2019-20 in the case of Goldys Precision Stampings Pvt. Ltd. is time-barred by 6 days. Following the judgment of the Hon’ble Supreme Court in Cognizance for Extension of Limitation, In re 438 ITR 296 (SC) read with judgment in cognizance for Extension of Limitation, In re 432 ITR 206 (SC) dated 08-03-2021 since the delay was covering pandemic outbreak period, we condone the same and the case is heard on merits.
The facts and circumstances and the issues involved in all these appeals are absolutely identical and similar. Therefore, these cases were heard together and are disposed of by this consolidated order.
The only issue involved in all these appeals is the disallowance of employees’ contribution to Provident Fund as well as ESIC. It is the case of the assessees 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 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 all the present cases before us, the payment of impugned employee’s’ contribution to provident fund was before the due date of filing of return of income u/s 139(1) of the Act.
4 ITA 435, 463, 467 & 464 of 2021 Group cases
5. 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 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), the ld. CIT(A) confirmed the said disallowance. The Tribunal held as follows:
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 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 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 ITA 435, 463, 467 & 464 of 2021 Group cases
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 for A.Y. 2019-20 stands allowed.” 6. In the aforestated decision, the Tribunal has relied on Hon'ble jurisdiction 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
6 ITA 435, 463, 467 & 464 of 2021 Group cases 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, 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(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, in the assessment year is 2018-19, in 2018-19, in ITA no. 467/PUN/2021 the assessment year is 2018-19 and in ITA No. 464/PUN/2021 the assessment year is 2019-20. Since the assessment years under consideration are 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 jurisdictional 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 cases thereby not warranting any disallowance since the amounts in question were admittedly deposited before the due date u/s 139(1) of the Act. We direct the A.O to delete the additions made u/s 36(1)(va) of the Act from the hands of the above mentioned assessee as appearing in the aforesaid captioned matters.
7 ITA 435, 463, 467 & 464 of 2021 Group cases
In the result, all appeals filed by the assessees in No. 435/PUN/2021 for A.Y. 2018-19 in the case of Gallaghar Service Center LLP., A.Y. 2018-19 in the case of GTT Communications India Pvt. Ltd. , in ITA No. 467/PUN/2021 for 2018-19 in the case of Apidor Abrasive Products Pvt. Ltd. and ITA No. 464/PUN/2021 for A.Y. 2019-20 in the case of M/s. Goldy Precision Stampings Pvt. Ltd. stands allowed.
Order pronounced in the open Court on this 20th September 2022. 56