DOVE CHEMICALS LIMITED,CHANDIGARH vs. DCIT, CIRCLE 1(1), CHANDIGARH

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ITA 93/CHANDI/2022Status: DisposedITAT Chandigarh12 April 2022AY 2019-205 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the amendments made by the Finance Act, 2021 to Sections 43B and 36(1)(va) are prospective and not retrospective. Therefore, the disallowance made based on these amendments for the impugned assessment year is not sustainable.

What were the facts?

The assessees made delayed payments of employees' contribution to ESI and PF for Assessment Year 2019-20. The Assessing Officer disallowed these payments, relying on amendments made by the Finance Act, 2021 to Sections 43B and 36(1)(va) of the Income Tax Act.

What were the issues?

Whether the disallowance of delayed payments of employees' contribution to ESI and PF is valid in light of the amendments made by the Finance Act, 2021, and whether these amendments are retrospective.

Which sections of the Income-tax Act were involved?

Section 36(1)(va),Section 43B,Section 143(1),Section 139(1)

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Cases cited in this judgment(2)Show list

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Heard together (2 matters)

ITA No.92/CHD/2022
ITA No.93/CHD/2022

Read from the judgment's own cause title. This page is filed under one of them.

आदेश/Order

1.

The present appeals have been filed by different assessees against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, (in short referred to as CIT(A) dated 21.12.2021 and 22.12.2021 & 93/Chd-2022 A.Y. 2019-20 Page 2 of 5 respectively relating to A.Y. 2019-2020, passed u/s 250 of the Income Tax Act,1961(hereinafter referred to as “Act”).

2.

Since the facts and circumstances in both the appeals are similar, therefore, these were heard together and are being decided by a common order for the sake of convenience.

3.

The solitary issue in the present appeals relate to the addition made to the income of the assessee in the intimation made u/s 143(1) of the Act, by disallowing delayed payments of employees contribution to ESI and PF amounting to Rs. 29,733/- and Rs.6,24,423/- in ITA 92/CHD/2022 and in ITA 93/CHD/2022) respectively by invoking the provisions of section 36(l)(va) of the Act.

6.

The Ld. Commissioner of I.Tax (A) upheld the additions on the basis of the amendment effected by the Finance Act, 2021, to section 43B of the Act by insertion of Explanation-5 and to section 36(l)(va) of the Act by insertion of Explanation-2, both to the effect that due date for payment of employees' contribution to ESI and PF, for the purpose of claiming deduction of the said amount as per the provisions of section 36(l)(va) of the Act was not governed by section 43B stipulating the due date to be till the filing of return of income u/s 139(1) of the Act, meaning thereby the employees' contribution to ESI and PF was to be paid by due date specified in their respective & 93/Chd-2022 A.Y. 2019-20 Page 3 of 5 Acts for the purpose of claiming deduction thereof. The Ld.CIT(A) held that the said amendment to be clarificatory and hence retrospective in application. Accordingly, the contention of the Ld. Counsel for the assessee that the issue already stood decided in its favour by the Hon'ble Jurisdictional High Court in the case of CIT vs. M/s Lakhani Rubber Udyog (P) Ltd of 2010 dt 22.09.2015 & CIT vs Nuchem Ltd (2015) 371 ITR 164(P&H), was brushed aside and the additions upheld.

7.

This issue has been dealt with and adjudicated by the ITAT in a number of cases, consistently ruling in favour of the assessee, holding that the amendment to section 43B of the Act by insertion of Explanation-5 and to section 36(l)(va) of the Act by insertion of Explanation-2,by the Finance Act 2021 is prospective and the issue otherwise stands decided by the jurisdictional high court in favour of the assessee. In the case of Ajay Piplani Vs Assistant Director of Income Tax, CPC, Bengaluru in order dated 04.10.2021the issue has been adjudicated at para 5 to 7 of the order as under :

“5. We have heard both the parties. It is not denied that the employees contribution to ESI and PF was allowable and claimed as deduction by the assessee on the strength of various decisions of the jurisdictional High Court holding contributions deposited by the due date of filing of return of income u/s 139(1) of the Act as allowable. The Revenue has disallowed the same in the impugned year by applying the amendment made by Finance Act 2021 to section 36(l)(va) and 43B of the Act allowing the claim of such deduction only when paid by due dates specified in their respective Acts, holding the amendment to be applicable on all pending cases post the amendment.

& 93/Chd-2022 A.Y. 2019-20 Page 4 of 5

6. We have gone through the orders of the coordinate Benches of the ITAT cited by the Ld.Counsel for the assessee before us and have noted that it has been consistently held that the amendment to section 36(l)(va) and u/s 43B of the Act effected by the Finance Act 2021 is applicable prospectively ,reading from the Notes on Clauses at the time of introduction of the Finance Act, 2021, specifically stating the amendment being applicable in relation to assessment year 2021-22 and subsequent years. Therefore the addition, we hold, cannot be made on the strength of the amendment effected by Finance Act 2021 to section 36(l)(va)/43B of the Act. Moreover it is an admitted position that the jurisdictional High Court has in various decisions held that employees contribution to ESI & PF is allowable if paid by the due date of filing return of income u/s 139(1) of the Act. The jurisdictional High Court has held so in the following cases: 1) CIT Vs. Nuchem Limited, of 2009 2) CIT Vs. Hemla Embroidery Mills Pvt. Ltd.(2014), 366 ITR167 7. In view of the above, we hold that the claim of employees contribution to ESI and PF as per section 36(l)(va) of the Act cannot be denied in the impugned year, i.e. 2019-20 on the basis of amendment made to the section by Finance Act 2021. The order of the Ld.CIT(A) upholding the said disallowance to the tune of Rs. 18,21,088/- is therefore set aside and the AO is directed to allow the claim of the assessee.” On similar lines the issue has been adjudicated in favour of the assessee in the case of M/s.Jupiter Aqua Lines Pvt. Ltd vs DCIT,Circle 6(1) Mohali in dated 27th August 2021.

8.

In view of the aforestated decisions of the ITAT, therefore the contention of the Ld.DR before me that the amendment to section 36(1)(va) of the Act is retrospective is dismissed. Also since no facts distinguishing the present cases from those decided by the ITAT have been pointed out by the Ld.DR before me and admittedly the amounts of employees’ contribution to ESI and PF stood paid before the due date of filing of return of income, the issue of disallowance on account of delayed & 93/Chd-2022 A.Y. 2019-20 Page 5 of 5 payments of employees’ contribution to ESI and PF is squarely covered by the aforesaid decisions, following which the disallowance made of ESI/PF employees’ contribution u/s 36(1)(va) amounting to Rs. 29,733/- in and Rs. 6,24,423/- in ITA 93/CHD/2022 is ordered to be deleted.

9.

In the result, the appeals of the assessees are allowed.

Order pronounced in the Open Court on 12t h April, 2022.

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