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Income Tax Appellate Tribunal, CHANDIGARH BENCH ‘A’, CHANDIGARH
Before: SMT.DIVA SINGH & SHRI VIKRAM SINGH YADAV
Per Bench:
These are three appeals filed by the aforesaid assessees against the respective orders of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre Delhi [in short the ‘Ld. CIT(A), NFAC’] Delhi, passed u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) dated 08.10.2021, 18.08.2021 and 31.03.2021 relating to assessment years 2017-18, 2018-19 and assessment year 2019-20 respectively.
Since common issues are involved in all the three appeals, these were heard together and are being disposed off by this consolidated order. For the purpose of present discussion, the case of the assessee in ITA No.392/Chd/2021 is taken as the lead case.
3 ITA Nos.392,393 & 116/Chd/2021 A.Ys.2017-18 to 2019-20
ITA No.392/Chd/2021(A.Y.2017-18)
Briefly, the facts of the case are that the assessee filed
its return of income on 27.11.2017 declaring total income of
Rs.70,44,062/- which was processed u/s 143(1) of the Act
and in terms of intimation u/s 143(1) dated 27.12.2018
issued by CPC, it made disallowance of Rs.7,49,608/-
towards employees’ contribution towards ESI and PF.
On appeal, the Ld.CIT(A), NFAC has confirmed the
disallowance made u/s 143(1) of the Act on account of
assessee’s failure to pay the employees’ contribution of ESI
& PF within the prescribed due date under the relevant
Statute as per section 36(1)(va) of the Act. Against the said
order, the assessee has now come in appeal before us.
During the course of hearing, the Ld. AR submitted
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
4 ITA Nos.392,393 & 116/Chd/2021 A.Ys.2017-18 to 2019-20
decision of the Hon'ble Rajasthan High Court in the case of
CIT Vs. Rajasthan State Beverages Corporation Ltd. (2017)
392 ITR 2, against which SLP filed by the Revenue has been
dismissed by the Hon'ble Supreme Court, as reported in
PCIT Vs. Rajasthan State Beverages Corporation Ltd. (2017)
250 Taxman 16. It was further submitted that similar view
has been taken by the Hon'ble Punjab & Haryana High Court
in the case of CIT Vs. Rai Agro Industries Ltd. (2011), 334
ITR 122. It was submitted that in the case of CIT Vs. M/s
Nipso Polyfabriks Ltd. (2008), ITA No.73 of 2008, the
Hon'ble Himachal Pradesh High Court has also taken a
similar view. It was further submitted that the Jaipur
Benches of the Tribunal has also taken a similar view in the
case of M/s Pee Tee Turners Vs. Assistant Director of CPC,
ITA No.105/JP/2021, dated 28.10.2021 wherein the relevant
findings read as under:
“5. We have heard the rival contentions and purused the material available on record. In case of Mohangarh Engineers and Construction Company vs DCIT, CPC (Supra), speaking through one of us, we have extensively dealt with the identical matter relating to employee's contribution towards ESI/PF and our findings therein read as under: "13. We have heard the rival contentions and perused the material available on record. On perusal of the details submitted by the assessee as part of its return of income, it is noted that the assessee has deposited the employees's contribution towards ESI and PF well before the due date of filing of return of income u/s 139(1) and the last of such deposits were made on 16.04,2019
5 ITA Nos.392,393 & 116/Chd/2021 A.Ys.2017-18 to 2019-20
whereas due date of filing the return for the impugned assessment year 2019-20 was 31.10.2019 and the return of income was also filed on the said date. Admittedly and undisputed//, the employees's contribution to ESI and PF which have been collected by the assessee from its employees have thus been deposited well before the due date of filing of return of income u/s 139(1) of the Act. 14. The issue is no more res Integra in light of series of decisions rendered by the Hon'ble Rajasthan High Court starting from CIT vs. State Bank of Bikaner & Jaipur (supra) and subsequent decisions. 15. In this regard, we may refer to the initial decision of Hon'ble Rajasthan High Court in case of CIT vs. State Bank of Bikaner & Jaipur wherein the Hon'ble High Court after extensively examining the matter and considering the various decisions of the Hon'ble Supreme Court and various other High Courts has decided the matter in favour of the assessee. In the said decision, the Hon'ble High Court was pleased to held as under: "20. On perusal of Sec.36(l)(va) and Sec.43(B)(b) and analyzing the judgments rendered, in our view as well, it is clear that the legislature brought in the statute Section 43(B)(b) to curb the activities of such tax payers who did not discharge their statutory liability of payment of dues, as aforesaid; and rightly so as on the one hand claim was being made under Sect/on 36 for allowing the deduction of GPF, CPF, ESI etc. as per the system followed by the assessees in claiming the deduct/on i.e. accrual basis and the same was being allowed, as the liability did exist but the said amount though claimed as a deduction was not being deposited even after lapse of several years. Therefore, to put a check on the said claims/deductions having been made, the said provision was brought in to curb the said activities and which was approved by the Hon'ble Apex Court in the case of Allied Motors (P) Ltd. (supra). 21. A conjoint reading of the proviso to Section 43-B which was inserted by the Finance Act, 1987 made effective from 01/04/1988, the words numbered as clause (a), (c), (d), (e) and (f), are omitted from the
6 ITA Nos.392,393 & 116/Chd/2021 A.Ys.2017-18 to 2019-20
above proviso and, further more second proviso was removed by Finance Act, 2003 therefore, the deduction towards the employer's contribution, if paid, prior to due date of filing of return can be claimed by the assessee. In our view, the explanation appended to Section 36(1 )(va) of the Act further envisage that the amount actually paid by the assessee on or before the due date admissible at the time of submitting return of the income under Section 139 of the Act in respect of the previous year can be claimed by the assessee for deduction out of their gross total income. It is also clear that Sec. 43B starts with a notwithstanding clause & would thus override Sec. 36(1) (va) and if read in isolation Sec. 43B would become obsolete. Accordingly, contention of counsel for the revenue is not tenable for the reason aforesaid that deductions out of the gross income for payment of tax at the time of submission of return under Section 139 is permissible only if the statutory liability of payment of PF or other contribution referred to in Clause (b) are paid within the due date under the respective enactments by the assessees and not under the due date of filing of return. 22. We have already observed that till this provision was brought in as the due amounts on one pretext or the other were not being deposited by the assessees though substantial benefits had been obtained by them in the shape of the amount having been claimed as a deduct/on but the said amounts were not deposited. It is pertinent to note that the respective Act such as PF etc. also provides that the amounts can be paid later on subject to payment of interest and other consequences and to get benefit under the Income Tax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or before the return of income under sub-section (1) of Section 139 of the IT Act. 23. Thus, we are of the view that where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(l)(va) of the IT Act."
7 ITA Nos.392,393 & 116/Chd/2021 A.Ys.2017-18 to 2019-20
The said decision has subsequently been followed in CIT vs. Jaipur Vidyut Vitran Nigam Ltd, (supra), CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (supra), and CIT vs Rajasthan State Beverages Corporation Limited (supra). In all these decisions, it has been consistently held that where the PF and ESI dues are paid after the due date under the respective statues but before filing of the return of income under section 139(1), the same cannot be disallowed under section 43B read with section 36(l)(va) of the Act. 17. We further note that though the Id.CIT(A) has not disputed the various decisions of Hon'ble Rajasthan High Court but has decided to follow the decisions rendered by the Hon'ble Delhi, Madras, Gujarat and Kerala High Courts. 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 Rajasthan High Court, in our considered view, the Id CIT(A) ought to have considered and followed the decision of the jurisdictional Rajasthan 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 Rajasthan. 18. In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the addition by way of adjustment while processing the return of income u/s 143(1) amounting to Rs 4,38,530/- so made by the CPC towards the delayed deposit of the employees's contribution towards ESI and PF though paid well before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted as the same cannot be disallowed under section 43B read with section 36(l)(va) of the Act in view of the binding decisions of the Hon'ble Rajasthan High Court." 6. In the instant case, admittedly and undisputedly, the employees' contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act. Further, the Id D/R has referred to the explanation to section 36(l)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says "these amendments will take effect
8 ITA Nos.392,393 & 116/Chd/2021 A.Ys.2017-18 to 2019-20
from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years". In the instant case, the impugned assessment year is assessment year 2019-20 and therefore, the said amended provisions cannot be applied in the instant case. Similar view has been taken by the Coordinate Bangalore Benches in case of Shri Gopalkrishna Aswini Kumar vs. ACIT (supra) wherein it has held as under:- "7. The Hon'ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd., (supra) has taken the view that employee's contribution under section 36(1 )(va) of the Act would also be covered under section 43B of the Act and therefore if the share of the employee's share of contribution is made on or before due date for furnishing the return of income under section 139(1) of the Act, then the assessee would be entitled to claim deduction. Therefore, the issue is covered by the decision of the Hon'ble Karnataka High Court. The next aspect to be considered is whether the amendment to the provisions to sect/on 43B and 36(l)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04,2021 also. On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(l)(va) as well as section 43B is applicable only from 01,04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1,4.2021. We are therefore of the view that the impugned additions made under section 36(l)(va) of the Act in both the Assessment Years deserves to be deleted. " 7. In light of the aforesaid discussions and in the entirety of facts and circumstances of the case and following the consistent decisions taken by the various Benches of the Tribunal, the addition by way of adjustment while processing the return of income u/s 143(1) amounting to Rs 6,28,972/- so made by the CPC towards the deposit of the employees's contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted.”
9 ITA Nos.392,393 & 116/Chd/2021 A.Ys.2017-18 to 2019-20
It was further submitted that similar view has been
taken by the Chandigarh Benches of the Tribunal in number
of cases and our reference was drawn to the decision 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 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
10 ITA Nos.392,393 & 116/Chd/2021 A.Ys.2017-18 to 2019-20
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.” 7. It was further submitted that similar view has been taken
by the Calcutta Benches of the Tribunal in case of AKS
Power Equipments (P) Ltd & others vs DCIT (CPC) in ITA No.
244/kol/2021& others dated 1.09.2021 and Delhi Benches
of the Tribunal in case of M/s Adama Solutions (P) Ltd vs
ADIT, CPC in ITA No. 1800/Del/2020 dated 13.10.2021. It
was accordingly submitted that disallowance so made may
be directed to be deleted.
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
11 ITA Nos.392,393 & 116/Chd/2021 A.Ys.2017-18 to 2019-20
as deduction u/s 36(1)(va) of the Act if there is delay in
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.
We have heard the rival contentions and perused the
material available on record. In the instant case, it is not in
dispute that employees’ contribution to ESI and PF collected
by the assessee from its employees had been deposited well
before the due date of filing of return of income u/s 139(1)
12 ITA Nos.392,393 & 116/Chd/2021 A.Ys.2017-18 to 2019-20
of the Act. We find that the issue is squarely covered by the
decisions of the Hon'ble Rajasthan High Court, Hon’ble
Himachal Pradesh High Court as well as Hon'ble Punjab &
Haryana High Court. We further note that though the Id.
CIT(A) has not disputed the various decisions of Hon'ble
High Courts including the decision of the jurisdictional
Himachal Pradesh High Court but has referred to the
amendment brought in by the Finance Act, 2021. 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 2017-18, 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
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.7,49,608/- 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.
13 ITA Nos.392,393 & 116/Chd/2021 A.Ys.2017-18 to 2019-20
The appeal of the assessee is accordingly allowed.
ITA No.393/Chd/2021(A.Y.2018-19) 11. In this appeal, both the parties fairly submitted that
the facts and circumstances of these cases are exactly
identical and similar contentions as raised in ITA
No.392/Chd/2021 may be considered. Therefore, our
findings and directions contained in ITA No.392/Chd/2021
shall apply mutatis mutandis in the instant case and the
appeal of the assessee is allowed.
ITA No.116/Chd/2021(A.Y.2019-20) 12. In this appeal, we have gone through records as well as
written submissions filed by the ld AR Shri B. K Khanna on
behalf of the assessee and heard the ld DR and find that the
facts and circumstances of this case are exactly identical
and similar contentions as raised in ITA No.392/Chd/2021,
has been raised. Therefore, our findings and directions
contained in ITA No.392/Chd/2021 shall apply mutatis
mutandis in the instant case and the appeal of the assessee
is allowed.
In the result, all the three appeals filed by the
respective assessees are allowed.
Order pronounced on 11.02.2022.
14 ITA Nos.392,393 & 116/Chd/2021 A.Ys.2017-18 to 2019-20
Sd/- Sd/- (VIKRAM SINGH YADAV) (DIVA SINGH) �याय�क सद�य/Judicial Member लेखा सद�य/Accountant Member Dated: 11.02.2022 *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