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आदेश/Order
Per Sudhanshu Srivastava, Judicial Member:
This appeal is preferred by the assessee against the order dated 27.12.2021 passed by the Ld. Commissioner of Income Tax (Appeals)- 3, Gurgaon [hereinafter referred to as ‘CIT(A)’] for assessment year 2018-19.
The assessee has raised the following ground of appeal:-
The order passed u/s 250(6) of the Income Tax Act, 1961 by the Ld. CIT(A)-3, Gurgaon is against law and facts on the file in as much as he was not justified to arbitrarily uphold the action of the Centralized Processing Centre, Benglura in making a disallowance of Rs.1,48,70, 980/- paid on account of employees contribution of PF and ESI which was clearly allowance u/s 43B in as much as the same had been deposited the same before the due date of filing of the return.
The Ld. Authorised Representative (AR) appearing on behalf of the assessee submitted that it is settled law by now that employees’ contribution to ESI and PF, though not paid within the due dates prescribed under the respective Act, but paid well before the due date of filing of the return of income u/s 139(1) of the Act, was an allowable expense. It was the contention of the Ld. AR that in the captioned appeal the assessee had deposited the employees contribution towards ESI and PF well before the due date of filing of the return of income u/s 139(1) of the Act and that this fact of filing of return before the due date prescribed u/s 139(1) of the Act was not in dispute. The Ld. AR placed reliance on a plethora of orders of the various Benches of the Tribunal across the country as well as of jurisdictional High Court namely Hon'ble Punjab & Haryana High Court. It was submitted that the Hon'ble Karnataka High Court, Hon'ble Delhi High Court, Hon'ble Rajasthan High Court, Hon'ble Patna High Court, Hon'ble Allahabad High Court and Hon'ble Gauhati High Court had ruled in favour of the assessee on the issue.
4 Per contra, the Ld. Sr. Departmental Representative (Sr. DR) relied on the order of the Ld. CIT(A) and vehemently argued that no deduction was allowable in respect of late deposit of employees’ contribution towards PF and ESI and that the Amendments to sections 36(1)(va) and 43B of the Income Tax Act, 1961 effected by Finance Act, 2021 were clarificatory in nature and would apply retrospectively.
We have heard the rival submissions and have also perused the material on record. The fact that in the present appeal the employees’ contribution of ESI and PF had been deposited before the due date of filing of return u/s 139(1) of the Act is not in dispute. It is seen that the said issue, as far as the present Forum is concerned, stands fully covered in favour of the assessee not only by the consistent orders of the various Benches of the ITAT across the country but also by the consistent orders of the Chandigarh Bench of the ITAT. It is seen that all along, the Co-ordinate Benches have held that the amendments to Sections 36(1)(va) and u/s 43B of the Income Tax Act effected by the Finance Act, 2021 are applicable prospectively and not retrospectively.
While coming to the said conclusion, the Benches have relied upon the Notes on Clauses at the time of introduction of the Finance Act, 2021 and have held that the amendment is applicable in relation to the assessment year 2021-22 and subsequent years and not retrospectively.
Thus, in view of this legal position, as considered by the Co-ordinate Benches and duly taking note of the judgements of the jurisdictional High Court in the case of CIT Vs Nuchem Limited (ITA 323 of 2009) and CIT Vs Hemla Embroidery Mills Pvt. Ltd. (2014) 366 ITR 167, we are of the view that the addition cannot be made or sustained on the strength of the amendment effected by Finance Act, 2021 to Sections 36(1)(va)/43B of the Act as the legal position thereon is very clear. The departmental stand that it is clarificatory in nature has consistently been rejected. Thus, in the face of the clear legal position, we find that the claim of the assessee is to be allowed. Although, the Ld. DR has argued at length and has forwarded many reasons in support of her contention, we are unable to subscribe to the same as they are contrary to the law laid down by the Jurisdictional High Court i.e. the Hon’ble Punjab & Haryana High Court and we are bound to apply the law as laid down by the Jurisdictional High Court. We also note that only four Hon'ble High Courts i.e. Gujarat High Court, Madras High Court, MP High Court and Kerela High Court have given dissenting view as of now on the said issue. However, we are bound by the law laid down by the Hon'ble Punjab and Haryana High Court in the case of CIT Vs. Hemla Embroidery Mills (P) Ltd (supra) wherein it was categorically held that the respondent – assessee was entitled to deduction in respect of employer and employee’s contribution to ESI and Provident Fund as the same had been deposited prior to the filing of the return u/s 139(1) of the Act. The judgment of the Hon'ble Gujarat High Court has been distinguished by Chandigarh Bench of the ITAT in the case of Gilco Exports Ltd. Vs. ACIT, Circle 2(1) reported in (2019) 178 ITD 865 (Chd. Trib.) and it has been held that any sum received from employees towards EPF & ESI contribution deposited late but before the due date of filing of return would be entitled to deduction. It is also to be noted that in terms of Article 227 of the Constitution of India, when decision of Jurisdictional High Court is available on the issue, non-Jurisdictional High Court cannot be followed. It is trite that when there is judgment of Jurisdictional High Court for any authority within its territorial jurisdiction subjected to its superintendence decision recorded by High Court is a binding precedent to be followed. It is also to be noted that even the Memorandum explaining the amendments has laid down that the amendments shall be effective from assessment year 2020-21 and, therefore, considering the entirety of facts and respectfully following the judgement of the Jurisdictional High Court as well as the Coordinate Benches of the Tribunal, we are of the considered view that the claim of the assessee with respect to the deposit of employees’ contribution towards ESI and PF paid before the due date of filing of return of income u/s 139(1) of the Act deserves to succeed.
In the final result, the appeal of the assessee stands allowed.
Order pronounced on 21.04.2022.