SARASWATI AGRO CHEMICALS (INDIA) PVT.LTD,MOHALI vs. DCIT,CPC/ DCIT CIRCLE -6(1), CHANDIGARH

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,च�डीगढ़ �यायपीठ च�डीगढ़ �यायपीठ ‘बी बी.’, च�डीगढ़ च�डीगढ़ आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण च�डीगढ़ �यायपीठ च�डीगढ़ �यायपीठ च�डीगढ़ च�डीगढ़ बी बी IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘B’ CHANDIGARH BEFORE: SMT. DIVA SINGH, JUDICIAL MEMBER & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील अपील संसंसंसं./ ITA No. 158&159/CHD/2021 आयकर आयकर आयकर अपील अपील िनधा�रण वष� िनधा�रण वष� / A.Y : 2018-19 & 2019-20 िनधा�रण वष� िनधा�रण वष� Saraswati Agro Chemicals (India) The DCIT, बनाम Pvt.Ltd., Village Dao Majra, CPC, VS Tehsil Kharar, Distt. Mohali. Bangalore. �थायी लेखा सं./PAN /TAN No: AAFCS2290A अपीलाथ�/Appellant ��यथ�/Respondent िनधा�रती क� ओर से/Assessee by : Shri Akshun Gupta,CA राज�व क� ओर से/ Revenue by : Shri Ashok Khanna, Addl. CIT तारीख/Date of Hearing : 14.12.2021 उदघोषणा क� तारीख/Date of Pronouncement : 12.01.2022 VIRTUAL HEARING आदेश आदेश/ORDER आदेश आदेश PER BENCH

Both these appeals pertaining to 2018-19 and 2019- 20 Assessment Years have been filed by the assessee wherein the correctness of the separate orders dated 25.05.2021 of ld. CIT(A) (NFAC i.e. National Faceless Appeal Centre) Delhi passed u/s 250(6) of the Income Tax Act,1961 is assailed on identical grounds.

ITA 158&159 /CHD/2021 A.Y. 2018-19 & 2019-20 Page 2 of 10 “1. That the worthy CIT, NFAC is not justified in confirming the addition in intimation order u/s 143(1) by CPC of Rs.3,17,275/-,(in ITA 159/CHD/2021=Rs.12,68,698/-) for deposit of employee's contribution towards Provident Fund and ESI after the due date specified under the respective Acts of PF and ESI. The amount of contribution has been deposited well before the filing of return of income.” 3. The ld. AR inviting attention to the impugned order

submitted that the point at issue is fully covered in

assessee's favour by virtue of various orders of the

Chandigarh Bench of the ITAT.

impugned order, however, did not refer to any contrary view

in support thereof.

material available on record. In the facts of the present

case, admittedly the employees’ contribution towards the PF

and ESI was deposited after the due date specified under the

respective Acts of PF and ESI. Cognizance of this fact has

been taken of by the CIT(A) in para 7.1 of his order in both

the appeals. As per the submissions advanced on behalf of

the assessee before the CIT(A) which has been extracted in

para 7.2 in both the appeals, the consistent claim of the

assessee has remained that the Employee's deposit was with

a marginal delay but it has been deposited well before the

due date of filing of the Return of Income. However, the First

Appellate Authority considering the legal position that the

ITA 158&159 /CHD/2021 A.Y. 2018-19 & 2019-20 Page 3 of 10

Amendments carried out by the Finance Act, 2021 were

clarificatory and hence, retrospective in nature, rejected the

claim. The First Appellate Authority took note of the fact

that there were decisions of various High Courts in favour of

the claim namely; Essae Teraoka Pvt. Ltd. (2014) 366 ITR

408 (Kar); Peerless General Finance & Investment Co.

(Calcutta High Court); Ghatge Patil Transports Ltd. (2014)

368 ITR 749 (Bom); AIMIL Limited (2010) 321 ITR 508

(Delhi), Jaipur Vidyut Vitran Nigam Ltd. & Rajasthan Rajya

Vidyut Utpadan Nigam Ltd. (2014) 363 ITR 307 (Rajasthan);

TA TE Bank of Bikaner & Jaipur 363 ITR 70 (Rajasthan);

Lakhani Rubber Udyog (2009) 312 ITR 0014 (154 order) (

Punjab & Haryana), Bihar State Warehousing Corporation

ltd. (2017) 393 ITR 386 (Patna); Sagun Foundry Private

Limited (2017) 145 DTR 265 (All) and George Williamson

(Assam) Limited (2006) 284 ITR 619 (Gauhati). Howeve r, the

disallowance made was sustained by Addl. Commissioner on

account of the fact that the Amendments carrie d out by

Finance Act 2021 in Sections 36(1)(va) and Sec. 43B were

considered to be clarificatory, hence retrospective in nature.

This issue has been considered consistently by Co-ordinate

Benches of the ITAT. The view formed in favour of the

assessee is based on the bare reading of the Notes on

Clauses appended to the Finance Bill which has categorically

ITA 158&159 /CHD/2021 A.Y. 2018-19 & 2019-20 Page 4 of 10

and clearly spelle d out that the Amendment will take effect

from the First April 2021. Thus, the legal position thereon

is well settled. The Co-ordinate Benches have consistently

right from order dated03.08.2021 of the Delhi Benches in

Insta Exhibitions Pvt. Ltd. Vs Addl. CIT, New Delhi in ITA No.

6941/Del/2017 and Hyderabad Benches vide order dated

01.07.2021 in M/s Crescent Roadways Pv t. Ltd. V Dy. CIT,

Hyderabad in ITA No. 1952/Hyd./2018 have held that the

amendments are prospective and not retrospective in nature.

The reasoning has been addressed at length in the order

dated 02.11.2021 in the case of Shri Sukhdev Singh,

Mohali Vs ITO, Chandigarh in ITA 250/CHD/2021 wherein

it was held:

“4. We have heard the submissions and perused the material available on record. It is seen that the issue is no longer res-integra as the decision of the jurisdictional High Court amongst others has been followed by the ITAT Chandigarh Benches vide its order dated 01.07.2021 in the case of M/s Jupiter Aqua Lines Pvt. Ltd. Vs DCIT ITA 83/CHD/2021 and order dated 04.10.2021 in the case of Ajay Piplani Vs Assistant Director of Income Tax, CPC, Bengaluru in ITA No. 114/CHD/2021. Similar view has been expressed by the Delhi Benches vide order dated 03.08.2021 in Insta Exhibitions Pvt. Ltd. Vs Addl. CIT, New Delhi in ITA No. 6941/Del/2017, Hyderabad Benches vide order dated 01.07.2021 in M/s Crescent Roadways Pvt. Ltd. V Dy. CIT, Hyderabad in ITA No. 1952/Hyd./2018. We find that the issue has been elaborately discussed by the Co-ordinate Benches for example in Insta Exhibitions Pvt. Ltd. (supra) as under : 6. We have carefully considered contentions of the learned departmental representative and perused the orders of the lower authorities. The facts shows that the assessee has collected the sum of Rs. 12,16,260/- being employee's contribution under the provident fund and with respect to ESI laws. The above contribution was admittedly not

ITA 158&159 /CHD/2021 A.Y. 2018-19 & 2019-20 Page 5 of 10

deposited by the assessee within the due date prescribed under the respective ESI and PF statue however, same was deposited before the due date of filing of return of income. Therefore, the Id AO as well as the Id CIT(A) disallowed the same holding that such contribution becomes the income of the assessee under the provision of section 2(24)(x) of the Act and thereafter if the same is deposit within the due date prescribed under the respective laws then same is allowable as deduction u/s 36(l)(va) of the Act. Coordinate bench in case of DOT Vs Dee Development Engineers in ITA No. 4959/DEL/2016 ( A.Y 2011-12) has held as Under:- 7. We have heard both the parties and perused all the relevant material available on record. As regards Ground No. 1, the assessee company has not deposited the employees' contribution within the due date which is prescribed under the said statute i.e. Provident Fund and ESIC. This issue is dealt by the Hon'ble Delhi High Court in case of CIT vs. M/s Bharat Hotels Ltd. 410 ITR 417 wherein the issue is decided in favour of the revenue, without considering the decision of the Hon'ble Delhi High Court in case of CIT vs. AIMIL Ltd.(2010) 321 ITR 508 (Del.). But the Ld. AR relied upon the decision of the Hon'ble Delhi High Court In case of Pr, CU vs. Pro Interactive Service (India) Pvt. Ltd. ITA No. 983/2018 pronounced on 10.09.2018 wherein the Hon'ble High Court decided the issue in favour of the assessee relying upon the judgment of AIMIL Ltd. (supra). The Hon'ble Delhi High Court held that the legislative intent was/is to ensure that the amount paid is allowed as expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee's Provident Fund (EPD) and Employee's State Insurance Scheme (ESI) as deemed income of the employer under Section 2(24)(x) of the Act. It is settled law that when two judgments are available giving different views then the judgment which is in favour of the assessee shall apply as held in case of Vegetable Products Ltd. 82 ITR 192 by the Hon'ble Supreme Court. Hence, in light of the latest decision in case of Pro Interactive Service (India) Pvt. Ltd., the issue is covered in favour of the assessee. Hence, Ground No. 1 is dismissed." 7. Further with respect to the argument of the learned departmental representative that amendment made with finance act 2021 wherein explanation 1 is added u/s 36 (1) (va) of the act with effect from 1 April 2021, is applicable to the present case, we referred to the "Notes on clauses" at

ITA 158&159 /CHD/2021 A.Y. 2018-19 & 2019-20 Page 6 of 10

the time of introduction of the finance bill 2021 which says as Under:- "Clause 8 of the Bill seeks to amend section 36 of the Income-tax Act, relating toother deductions. Sub-section (1) of the said section provides for allowing of deductions provided for in the clauses thereof for computing the income referred to in section 28 of the said Act. Clause (va) of the said sub-section provides for allowance of deduction for any sum received by the assessee from any of his employees to which the provisions of sub- clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation to the said clause provides that for the purposes of this clause, "due date" means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. It is proposed to insert Explanation 2 to clause (va) of sub-section (1) of the said section so as to clarify that the provisions of section 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the "due date" under the said clause. This amendment will take effect from 1st April, 2021. And will accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.”

Therefore it is apparent that the above amendment do not apply to the assessment year 2014 - 15 in this appeal. 8. In view of this we allow the solitary ground of appeal raised by the assessee holding that the addition/disallowance made by the learned assessing officer of late deposit of employees contribution to the provident fund and ESI, as it is deposited before the due date of the filing of the return of an income but beyond the due date prescribed Under the respective provident fund and ESI laws is not sustainable in law. 9. In the result, appeal of the assessee is allowed.

ITA 158&159 /CHD/2021 A.Y. 2018-19 & 2019-20 Page 7 of 10

Hemla Embroidery Mills Pvt. Ltd.(2014) 366 ITR 167 have allowed similar claims of the assessee taking note of the fact the various Co- ordinate Benches have 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. Accordingly, considering the factual backdrop of the present case and considering the amendments in Section 36(1)(va) as well as Section 43B carried out by Finance Act, 2021 and Memorandum explaining the provisions in Finance Bill, 2021 we hold that the impugned disallowance is not sustainable and is directed to be deleted. The appeal of the assessee is allowed. Said order was pronounced in the presence of the parties via Webex.” (emphasis supplied) 5. Similar view has also been taken in order dated

02.11.2021 in the case of M/s Czar Faucets Limited

Chandigarh Vs DCIT, Bangalore in ITA 255/CHD/2021; in

order dated 16.11.2021 in the case of Pooja Sarees, Ambala

City in ITA No. 184/CHD/2021 and in order dated

16.11.2021 in the case of M/s A.K. Creative Outsourcing

Services Pvt. Ltd., Baddi in ITA No. 252/CHD/2021. The

specific reasoning summing up the legal position on similar

facts is extracted hereunder from M/s A.K. Creative

Outsourcing Services Pvt. Ltd.:

“5. We have heard the submissions and perused the material available on record. Considering the issue, it is seen that it is no longer res-integra. The controversy whether the Amendments carried out by the Finance Act, 2021 in Section 36(l)(va) and u/s 43B of the Act were prospective in nature or retrospective, hence clarificatory in nature have been put to rest by consistent orders of the different Benches of the ITAT namely order dated 03.08.2021 in Insta Exhibitions Pvt. Ltd. Vs Addl. CIT, New Delhi in ITA No. 6941/Del/2017 of the Delhi Benches; order dated 01.07.2021 of Hyderabad Benches in M/s Crescent Roadways Pvt. Ltd. V Dy. CIT, Hyderabad in ITA No. 1952/Hyd./2018, order dated 27.08.2021 in the case of M/s Jupiter Aqua Lines Pvt. Ltd. Vs DCIT ITA 83/CHD/2021 and order dated

ITA 158&159 /CHD/2021 A.Y. 2018-19 & 2019-20 Page 8 of 10

04.10.2021 in the case of Ajay Piplani Vs Assistant Director of Income Tax, CPC, Bengaluru in ITA No. 114/CHD/2021 of the ITAT Chandigarh Benches. Reference may also be made to various other orders of the Chandigarh Benches in ITA 250/CHD/2021 in the case of Shri Sukhdev Singh, Mohali and ITA 255/CHD/2021 in the case of M/s CZAR FAUCETS Ltd. Chandigarh wherein consistently following the decisions of the jurisdictional High Court in the case of CIT Vs Nuchem Ltd (ITA No. 323 of 2009) and CIT Vs Hemla Embroidery Mills Pvt. Ltd.(2014) 366 ITR 167, the Tribunal has consistently allowed similar claims of the assessee holding that the Amendments effected by the Finance Act 2021 to section 36(l)(va) and u/s 43B of the income Tax Act are not clarificatory in nature and they do not have retrospective effect and are applicable prospectively. Reading from the Notes on Clauses at the time of introduction of the Finance Act, 2021, it has been held that the amendment being applicable in relation to assessment year 2021-22 and subsequent years. Accordingly, considering the factual backdrop of the present case and considering the amendments in Section 36(1)(va) as well as Section 43B carried out by Finance Act, 2021 and Memorandum explaining the provisions in Finance Bill, 2021 we hold that the impugned disallowance is not sustainable. Hence, the addition is directed to be deleted as the amount stood deposited by the due date as held in Section 139(1) of the Act. Hence, within time. The appeal of the assessee is allowed. Said order was pronounced in the presence of the parties via Webex.” (emphasis supplied) 6. We further find that the said view is supported by the

consistent decisions of the jurisdictional High Court.

Reference may be made to the decision of the jurisdictional

High Court in the case of CIT Vs He mla Embroidery Mills (P)

Ltd. (2014) 366 ITR 167(P&H). The jurisdictional High Court

relying upon its own decision in the case of CIT Vs Rai Agro

Industries 334 ITR 122 and considering the principle laid

down by the Apex Court in the case of CIT Vs Alom

Extrusions Ltd. 319 ITR 306 (S.C) has addressed the legal

position. It need be clarified that the decision rendered was

in the context of amendments carried out by way of Second

ITA 158&159 /CHD/2021 A.Y. 2018-19 & 2019-20 Page 9 of 10

Proviso to Section 43B which was omitted by Finance Act,

2003. This Amendment was held to be clarificatory and

he nce held would operate retrospectively. In the facts of the

present case, Amendment by way of Explanation 2 to Section

36(va) and Explanation 5 to Section 43B by Finance Act,

2021 have been held to be having prospective effect which

fact is clearly spelled out in the Notes to the Clauses

appended to the Finance Bill bringing out the Amendments

by the Finance Act, 2021.

contrary view was cited by the Re venue.

reasoning, we hold that the disallowance of Rs. 5,24,104/-

sustained in the present appeal by the CIT(A) qua the

employees’ contribution despite late payment qua the

specific Act cannot be made. Admitte dly, in the facts of the

present case the payment has been made well within the time

line as set out under the Income Tax Act u/s 139(1) of the

Income Tax Act. Thus, admittedly the return of income was

filed well within time after making the specific payments.

The position of law that the Amendments carried out by the

Finance Act, 2021 are prospective in nature and not

declaratory stand well settled. The disallowance,

ITA 158&159 /CHD/2021 A.Y. 2018-19 & 2019-20 Page 10 of 10

accordingly, cannot be sustained. Said order was pronounced

in the presence of the parties via Webex.

Order pronounced on 12 t h January,2022.

Sd/- Sd/- (VIKRAM SINGH YADAV) (DIVA SINGH) लेखा सद�य सद�य/ Accountant Member �याियक �याियक सद�य सद�य/ Judicial Member लेखा लेखा लेखा सद�य सद�य �याियक �याियक सद�य सद�य “Poonam” आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. .��यथ�/ The Respondent 3. आयकर आयु�/ CIT 4. आयकर आयु� (अपील)/ The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar