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Before: Shri Duvvuru RL Reddy & Shri S. Jayaraman
O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
This appeal filed by the Assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-6, Chennai dated 27.09.2019 relevant to the assessment year 2017-18. The only effective ground raised in the appeal of the assessee is that the ld. CIT(A) has erred in confirming the disallowance made in respect of remittance of employee’s contribution made to PF/ESI.
The appeal filed by the assessee is delayed by 29 days, for which, the assessee has filed a petition/affidavit for condonation of the delay, to which; the ld. DR has not raised any serious objection. Consequently, since the assessee was prevented by sufficient cause, the delay of 29 days in filing of the appeal stands condoned and the appeal is admitted for adjudication.
Brief facts of the case are that the assessee filed the return of income for the assessment year 2017-18 on 29.11.2017 admitting a total income of ₹.20,21,38,380/- under normal provisions and ₹.19,37,91,710/- as income under section 115JB of the Income Tax Act, 1961 [“Act” in short]. The return was processed by CPC, Bengaluru and an intimation under section 143(1) of the Act was issued to the assessee dated 29.03.2019 assessing the total income at ₹.20,63,69,890/- by making various additions. Against the addition towards disallowance of ₹.42,31,507/- under section 36(1)(va) of the Act, after considering the submissions of the assessee, the ld. CIT(A) confirmed the disallowance made in respect of belated remittance of employee’s contribution made to PF/ESI.
On being aggrieved, the Assessee is in appeal before Tribunal and filed paper book consisting various decisions including the decision of Hon'ble High Court of Madras in the case of CIT v. Industrial Security & Intelligence India Pvt. Ltd. in TCA Nos. 585 and 586 of 2015 vide order dated 24.07.2015 and prayed for deleting the disallowance. On the other hand, the ld. DR dutifully supported the orders of authorities below.
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In the assessment order, the Assessing Officer has disallowed an amount of ₹. 42,31,507/-, being belated remittance of the employee’s contribution to PF and ESI as the income of the assessee in view of the provisions of section 2(24)(x) of the Act read with section 36(1)(va) of the Act. Before the ld. CIT(A), the assessee has submitted that since the entire amount has been remitted before the due date for filing of return of income, the same should be allowed as deduction under section 43B of the Act. Before us, the ld. DR has submitted that the provisions of section 43B of the Act will be applicable only in respect employer’s contribution to the funds for the welfare of employees and not in respect of the employer’s contribution to the funds. Before the ld. CIT(A), the assessee has submitted that the issue is covered in favour of the assessee by the Hon’ble Jurisdictional High Court in the case of CIT v. Industrial Security & Intelligence India Pvt. Ltd. (supra) besides relying on the decision of the Hon’ble Supreme Court in the case of Alom Extrusions (SC) 319 ITR 306. We have perused the above decisions. In the case of CIT v. Industrial Security & Intelligence India Pvt. Ltd. (supra), the Hon’ble Jurisdictional High Court has observed and held as under: “2. The brief facts of the case are as follows: The respondent/assessee filed its return of income for the assessment years in question. The said returns were processed and were not selected for scrutiny. Subsequently, the Assessing Officer noticed that there was escapement of income and hence reopened the assessments under Section 147 of the Income Tax Act by issuing notice under Section 148 of the Income Tax Act. While completing the re-assessment, the Assessing Officer disallowed the expenses claimed by way of Employee's contribution to PF and ESI holding that the assessee had not paid the employee's contribution of PF and ESI within the due dates specified under the respective Act. Aggrieved by the said order of assessment, the assessee preferred appeals before the Commissioner of Income Tax (Appeals) challenging the reopening as well as the disallowance. The Commissioner of Income Tax (Appeals) sustained the order of the assessment, thereby dismissed the appeals. Aggrieved by the same, the assessee preferred further appeals before the Tribunal. The Tribunal relied upon the decision of the Supreme Court in the case of CIT V. Alom Extrusions Ltd. reported in 319 ITR 306, decision of the Delhi High Court in the case of CIT V. Aimil Ltd. reported in 321 ITR 508 and that of the Co-ordinate Bench of the Tribunal in the case of M/s. Venkateswara Electrical Industries P. Ltd. V. DCIT in 1345 and 1636/Mds/ 2014 dated 28.8.2014 held as follows: “5. Heard both sides. Perused orders of lower authorities and the decisions relied on before us. It is not in dispute that all these payments of provident fund Rs.16,20,571/- and ESI Rs.17,51,490/- were made beyond the grace period/due date allowed under Provident Fund & ESI Acts but before due date for filing of income-tax return. This issue has been decided in favour of the assessee by various High Courts following the decision of the Hon'ble Supreme Court in the case of CIT Vs. Alom Extrusions Ltd. (319 ITR 306), wherein the Hon'ble Supreme Court held that omission of second proviso to section 43B and amendment of first proviso by Finance Act, 2003 are curative in nature and are effective retrospectively and thus with effect from 1.4.1988 i.e. the date of insertion of first proviso. The co- ordinate Bench of this Tribunal considering a similar issue in the case of M/s.Venkateswara Electrical Industries P. Ltd. Vs. DCIT (supra) following the decision of Hon'ble Delhi High Court in the case of CIT Vs. Aimil Ltd. (321 ITR 508) held that even the employees contribution to provident fund is to be allowed as deduction if it is paid within due date for filing of return. While holding so, the Tribunal observed as under:- “6. We have heard the submissions made by the representatives of both the sides and have perused the orders of the authorities below, as well as the judgments/decisions relied on by the ld. Counsel for the assessee. It is an un- disputed fact that there has been delay in remittance of employees contribution of ESI and Provident Fund in both the AYs i.e., 2008-09 & 2009-10. It is equally un-disputed that the assessee has deposited the amount towards employees contribution of ESI and Provident Fund before the due date of filing of return. The Hon'ble Delhi High Court in the case of Cit Vs. Aimil Ltd., reported as 321 ITR 508 has held that if the assessee had deposited employees contribution towards Provident Fund and ESI after due date as prescribed under the relevant Act but before the due date of filing of return under the Income Tax Act, no disallowance could be made in view of the provisions of section 43B as amended by the Finance Act, 2003. The decision of the Hon'ble Delhi High Court has been followed by the co-ordinate bench of the Tribunal in the case of JCIT Vs. M/s. S.M. Apparels (P) Ltd. (supra). The Tribunal has been consistently following the view taken by the Hon'ble Delhi High Court. Accordingly, we hold that the assessee is entitled to claim expenditure on employee's contribution towards ESI and Provident Fund for both the AYs. Accordingly, both the appeals of the assessee are allowed.”
6. Respectfully following the above, decision, we direct the Assessing Officer to delete disallowances made under section 43B of the Act for both these assessment years. The grounds of appeal
raised by the assessee are allowed."
3. Aggrieved by the said order of the Tribunal, the Revenue is before this Court.
4. Heard learned Standing Counsel appearing for the Revenue and perused the materials placed before this Court.
5. We find that the Tribunal has rightly relied on the decision of the Supreme Court in the case of CIT V. Alom Extrusions Ltd. reported in 319 ITR 306, whereby, the Supreme Court held that omission of second proviso to Section 43B and amendment to first proviso by Finance Act, 2003 are curative in nature and are effective retrospectively, i.e., with effect from 1.4.1988 i.e., the date of insertion of first proviso. The Delhi High Court in the case of CIT V. Aimil Ltd. reported in 321 ITR 508 held that if the assessee had deposited employee's contribution towards Provident Fund and ESI after due date as prescribed under the relevant Act, but before the due date of filing of return under the Income Tax Act, no disallowance could be made in view of the provisions of Section 43B as amended by Finance Act, 2003.
6. In the present case, the assessee had remitted the employees contribution beyond the due date for payment, but within the due date for filing the return of income. Hence, following the above-said decisions, we find no reason to differ with the findings of the Tribunal. Accordingly, we find no question of law much less any substantial question of law arises for consideration in these appeals. Accordingly, both the Tax Case (Appeals) stand dismissed. No costs. Consequently, M.P.No.1 of 2015 is also dismissed.”
The ld. DR could not controvert the above findings of the Hon’ble Jurisdictional High Court. Moreover, in this case, on perusal of the details of break-up of the PF/ESI contribution remitted on the actual dates as reproduced in the appellate order, we find that the assessee has remitted the belated remittance of the employee’s contribution to PF and ESI much before filing the return of income under section 139(1) of the Act on 29.11.2017 for the assessment year 2017-18. In view of the above and respectfully following the above decision of the Hon’ble Jurisdictional High Court, we direct the Assessing Officer to delete the disallowance made on this account and accordingly, the ground raised by the assessee is allowed.
In the result, the appeal filed by the assessee is allowed. Order pronounced on the 9th October, 2020 at Chennai.