M/S DEEP NURSING HOME & CHILDREN HOSPITAL,LUDHIANA vs. THE DCIT, LUDHIANA

Per Vikram Singh Yadav, Accountant Member:

This is an appeal filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short the ‘Ld. CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) dated 27.09.2021 for assessment year 2018-19.

2 ITA No.353/Chd/2021 A.Y.2018-19

Rs.2,79,82,130/-, which was processed u/s 143(1) of the

Act and in terms of intimation u/s 143(1) dated 05.11.2019

issued by CPC, had made disallowance of Rs.9,63,594/-

towards late deposit of employees’ contribution to ESI & PF.

disallowance and against the said order, the assessee has

now come up in appeal before us.

that the assessee has deposited employees’ contribution

towards ESI and PF though with the delay of few days from

the due date mentioned in the respective Statutes, however,

the same was deposited well before the due date of filing of

return of income u/s 139(1) of the Act. It was submitted

that the said fact is not under dispute and where such

contribution has been deposited before the due date of filing

of the return of income, no disallowance u/s 36(1)(va) of the

Act can be made. In support, reliance was placed on

decision of the Hon'ble Punjab & Haryana High Court in the

case of CIT Vs. Hemla Embroidery Mills (P) Ltd., 366 ITR

117 and the decision of the Hon'ble Supreme Court in the

case of CIT Vs. Alom Extrusion Ltd., 319 ITR 306. It was

further submitted that the aforesaid decisions have since

been followed by the Hon'ble Punjab & Haryana High Court

3 ITA No.353/Chd/2021 A.Y.2018-19

in the case of CIT Vs. Mark Auto Industries Ltd., 358 ITR

43, CIT Vs. Kamal Family Trust (2013), 219 Taxman 81 and

CIT Vs. Nuchem Limited, 59 Taxmann.com 455. It was

submitted that the Ld.CIT(A) has relied upon the

amendment brought in by the Finance Act, 2021 wherein

Explanation-5 has been inserted. It was submitted that the

said amendment has been inserted w.e.f. assessment year

2021-22 onwards and have to be read prospectively and not

retrospectively and various Benches of the Tribunal has

been taking a consistent view in this regard and our

reference was drawn to the decision of the Chandigarh

Benches of the Tribunal in the case of M/s Czars Faucets

Limited Vs. CPC in ITA No.255/Chd/2021 dated 02.11.2021

wherein the relevant findings read as under:

“4. We have heard the submissions and perused the material available on record. It is seen that in the present appeal, the assessee has only assailed the disallowance sustained by the CIT(A) vide his order passed u/s 250(6) of the Act amounting to Rs. 4,52,231/- on the grounds that the ESI & PF payments were not made within time as per the relevant Statute. The claim of the assessee that the payments were made before the due date of filing of the return u/s 139(1) was held to be not relevant. 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 namely; the order dated 03.08.2021 of the Delhi Benches in the case of Insta Exhibition Pvt. Ltd. Vs ACIT in ITA 6941/Del/2017; order dated 01.07.2021 of the Hyderabad Bench in the case of Crescent

4 ITA No.353/Chd/2021 A.Y.2018-19

Roadways Pvt. Ltd. Vs DCIT in ITA No. 1952/Hyd/2018 but also consistent orders of the Chandigarh Bench. 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 is applicable prospectively and not retrospectively. While coming to the said conclusion, the Benches have relied upon and read from 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 vie w of this legal position as considered by the Co- ordinate Benches and taking note of the decisions 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 additions 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, as set out hereinabove, we find that the claim of the assessee is to be allowed in the year under consideration which is 2018-19 assessment year. The impugned order, accordingly, is set aside and the AO is directed to delete the disallowance. The appeal of the assessee is allowed. Said order was pronounced in the presence of the parties via Webex.” 5. Per contra, the Ld. DR relied upon the amendment

brought in by the Finance Act, 2021 wherein Explanation to

section 36(1)(va) of the Act has been introduced. It was

submitted that from the reading of the said amendment it is

evident that the law is and has always been very clear that

employees’ contribution to specified fund will not be allowed

as deduction u/s 36(1)(va) of the Act if there is delay in

5 ITA No.353/Chd/2021 A.Y.2018-19

deposit even by a single day as per the due dates specified

in the respective Statutes. It was further submitted that the

said amendment is only declaratory/clarificatory in nature

and, is, therefore, applicable with retrospective effect by

necessary intendment of deeming nature expressly stated

therein. The Ld. DR accordingly submitted that in view of

the unambiguous wording of the now amendment provisions

of sections 36(1)(va) and 43B, it is clear that the employees’

contribution can be allowed as a deduction only if it had

been paid within the prescribed due dates under the

relevant Statutes and this position has been clarified by the

aforesaid amendment. It was accordingly submitted that

there is no infirmity in the order passed by the Ld.CIT(A)

wherein he has sustained the disallowance made u/s 143(1)

of the Act, by the CPC on account of assessee’s failure to

pay the employees’ contribution towards ESI and PF within

the prescribed due dates as per section 36(1)(va) of the Act.

He accordingly supported the order of the lower authorities.

material available on record. In the instant case, it is not in

dispute that employees’ contribution to ESI and PF had

been deposited well before the due date of filing of return of

income u/s 139(1) of the Act. We further note that though

the ld. CIT(A) has not disputed the various decisions of

6 ITA No.353/Chd/2021 A.Y.2018-19

Hon'ble Punjab & Haryana High Court but has decided to

follow the decision rendered by the Hon'ble Gujarat High

Court. Given the divergent views taken by the various High

Courts and in the instant case, the fact that the jurisdiction

over the Assessing officer lies with the Hon'ble Punjab &

Haryana High Court, in our considered view, the Id

CIT(A) ought to have considered and followed the decision of

the jurisdictional Punjab & Haryana High Court, as evident

from series of decisions referred supra, as the same is

binding on all the appellate authorities as well as the

Assessing officer under its jurisdiction in the State of

Punjab & Haryana. We further note that the ld CIT(A) has

referred to the amendment brought in by the Finance Act,

2021 wherein an explanation has been introduced to

Sections 36(1)(va) and u/s 43B of the Income Tax Act. It is

a consistent position across various Benches of the Tribunal

including Chandigarh Benches that the amendment which

has been brought in by the Finance Act, 2021 shall apply

w.e.f. assessment year 2021-22 and subsequent assessment

years and the impugned assessment year being assessment

year 2018-19, the said amendment cannot be applied in the

instant case. Therefore, considering the entirety of facts and

circumstances of the case and following the decisions of

various High Courts as well as Coordinate Benches of the

7 ITA No.353/Chd/2021 A.Y.2018-19

Tribunal referred above, the addition made by way of adjustment while processing the return of income u/s 143(1) of the Act, amounting to Rs.9,63,594/- so made by the CPC towards the deposit of employees’ contribution towards ESI and PF paid before the due date of filing of the return of income u/s 139(1) of the Act, is hereby directed to be deleted.

Order pronounced on 02.03.2022.

Sd/- Sd/- (VIKRAM SINGH YADAV) (DIVA SINGH) �याय�क सद�य/Judicial Member लेखा सद�य/Accountant Member

Dated: 02.03.2022 *रती* आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar