JYOTI AUTOMOBILES PRIVATE LIMITED,RAJASTHAN vs. COMMISSIONER OF INCOME-TAX (APPEALS), RAJASTHAN

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oaJh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 354/JP/2022 fu/kZkj.k o"kZ@Assessment Year : 2020-21 cuke M/s. Jyoti Automobiles Private Ltd. The Asstt. Director of A-97, (A to D), RIICO Industrial Area Vs. Income Tax, CPC Bhiwadi, Near BB Mall, Main Road, Neelam Bangalore Chowk, Bhiwadi, Alwar LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCJ 8110A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Writtten Submission jktLo dh vksj ls@Revenue by: Smt. Monish Choudhary, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing : 29/11/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 21 /12/2022 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 25-07-2022, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2020-21 wherein the assessee has raised the following ground of appeal. ‘’1 In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the assessment of total loss of the appellant at INR 66,06,775 computed by the Central Processing Centre (‘’CPC’’) in the intimation passed u/s 143(1) of the Act as 2 M/s. Jyoti Automobiles (P) Ltd. vs Asstt. Director of Income Tax,Bangalore against the returned loss of Rs.75,15,180 as computed and claimed in the appeal before the ld. CIT(A).

2. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in sustaining the disallowance of INR 9,08,405 u/s 36(1)(va) of the Act where the employee contribution was paid after the due date referred u/s 36(1)(va) but will before filing of return of income u/s 139(1). The ld. CIT(A) has completely disregarded the judicial precedents which have held that the amendment introduced in Finance Act, 2021 wherein it is provided that the late deposit of employees contribution by the employer shall never be allowed as a deduction to the employer, is prospective in nature and shall apply from Assessment Year 2021-22. 2.1 The crux of the issue in this appeal is that adjustment made to the return income in the intimation u/s 143(1) by way of disallowance of delayed remittance of employees contribution to ESI and PF for the period 01-04-2019 to 31-03-2020 to the tune of Rs.9,08,405/- which resulted into enhancement of income of the assessee to that extent and this amount was disallowed by the AO u/s 36(1)(va) on the ground that payments of contribution to the respective funds had not been made on or before the due date as per the respective Acts. 2.2 In first appeal, the ld. CIT(A) has confirmed the action of the AO by observing as under:- ‘’4.4 In the light of the above discussion, from the words "Provisions of section 438 shall not apply and shall be deemed never to have been applied" used in Explanations brought in sections 36(1)(va) and 43B by way of amendments through Finance Act, 2021, it has to be understood that these amendments are retrospective in operation. It is now made clear that the employees contribution to 3 M/s. Jyoti Automobiles (P) Ltd. vs Asstt. Director of Income Tax,Bangalore PF/ESI funds will not be allowed as deduction u/s 36(1)(va) if these contributions are not deposited within the due dates mentioned in the respective legislations. Moreover, in recent orders, the ITAT, Hyderabad bench and Delhi bench in the cases of Sundar Taj Mahal Hotels Vs DCIT, Cir-3(2), Hyd in ITA No. 605/Hyd/2020 dt. 16-06-2021 and DCIT, CPC vs Vedvan Consultants (P) Ltd in ITA NO. 1312/Del/2020, AY 2018-19 dated 26-08-2021 respectively decided the issue in favour of the department. In the case of Vedvan consultants, the ITAT, Delhi bench clearly held in Paras 12 and 14 of this order that the amendments brought out through Finance Act, 2021 in section 36(1)(va) and section 43B by way of inserting Explanations are prospective in nature and therefore employees contribution to specific fund will not be allowed as deduction if there is delay in deposits as per the due dates mentioned in the respective legislation. On the other hand, the Delhi ITAT has clarified in their decision in the case of Chintoo Creations that they were not expressing any view on whether these amendments were prospective or retrospective. Further, it is relevant to point out that in the case of Vedvan consultants, the ITAT relied on the decision of jurisdictional Hon'ble HC of Delhi in the case of CIT vs Bharat Hotels Ltd (2019) 410 ITR 417 while deciding the issue in favour of the Department. Hence, with due respect to the earlier decisions of Hon'ble Supreme Court and various Hon'ble High Courts/Tribunals cited by the appellant and in the light of the above discussion on the amendments brought in Finance Bill, 2021 in sec. 36(1)(va) and sec. 43B of the IT Act i.e. the change in law, it is held that the disallowance of belated payment of Employees Contribution to PF and ESI accounts amounting to Rs.9,08,405/- has been correctly made in the intimation u/s 143(1). The grounds are dismissed.’’ 4 M/s. Jyoti Automobiles (P) Ltd. vs Asstt. Director of Income Tax,Bangalore Conclusively, the ld. CIT(A) confirmed the disallowance of Rs.9,08,405/- on account of delay in depositing the Employees Contribution towards PF and ESI Act by the employer. 2.3 During the course of hearing, the ld. AR of the assessee has filed a detailed written submission through paper book praying that the ld. CIT(A) erred in sustaining the disallowance of Rs.9,08,,405/- on account of delayed payments of employee’s contribution to EPF and ESI . The said disallowance is unlawful and deserves to be deleted. The ld.AR further submitted that employees contribution to PF and ESI funds are allowable u/s 43B of the Act if they have been paid within the due date of filing the return u/s 139(1) of the Act for which he has relied various case laws and few of them are mentioned as under:- 1. PCIT vs Today Network Ltd. (2022) 141 Taxmann.com 275 (Del.) 2. KA Hospitality Private Limited vs Income Tax Departmemnt (2022) 141 Taxmann.com 440 (Mumbai Tribunal) 3. Mehra Eyetech Private Limited vs ACIT (2022), 141 Taxmann.com 470 (Mumbai Tribunal). The ld. AR further submitted that through employees contribution to PF and ESI amounting to Rs.9,08,405/- is deposited beyond the due date but the same had been deposited well before due date of filing of return of income. He further submitted that the jurisdictional High Court and the Tribunal in various cases held that the 5 M/s. Jyoti Automobiles (P) Ltd. vs Asstt. Director of Income Tax,Bangalore amendment introduced in Finance Bill 2021 wherein it is provided that the late deposit of employees contribution by the employer shall never be allowed as a deduction to the employer, is prospective in nature and shall apply from A.Y. 2021-22. Since the subject issue in the case of the assessee pertains to AY 2020- 11, therefore the amendment introduced in Finance Bill 2021 is not applicable as per the same is prospective in nature and applicable from AY 2021-22. Hence, the assessee should be allowed the deduction for employees contribution to EPF and ESI and thus the addition made by the AO amounting to Rs.9,08,405/- should be deleted. 2.4 On the other hand, the ld. DR relied upon the orders of the lower authorities. 2.5 We have heard both the parties and perused the materials available on record including the case laws cited by both the parties. In this case, it is noted that the AO disallowed the amount of Rs.9,08,405/- u/s 36(1)(va) of the Act on the ground that payments of employees contribution towards EPF and PF had not been made on or before the due date by the employer as per respective Acts which has been confirmed by the ld. CIT(A). It is not imperative to repeat the facts of the case and the case laws cited by both the parties. The Bench has observed that the recently the Hon’ble Supreme has opined in the case of Checkmate Services Pvt. Ltd. vs CIT-1, 143 Taxmann.com 178 (SC)/Civil Appeal No. 2833 of 2016 held that the provision of Section 43B of the Act shall not apply to employee’s contribution to 6 ITA NO. 354/JP/2022 M/s. Jyoti Automobiles (P) Ltd. vs Asstt. Director of Income Tax,Bangalore PF/ESI and the due date specified u/s 36(1)(va) of the Act shall apply for determination of deductibility of employee’s contribution to PF/ESI. The relevant portion of the Judgement of Hon’ble Supreme in the case of Checkmate Services Pvt. Ltd. vs CIT-1 (supra) is reproduced as under:-

‘’53. The distinction between an employer’s contribution which is its primary liability under law – in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers’ income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts – the employer’s liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees’ income and held in trust by the employer. This marked distinction has to be borne while interpreting the obligation of every assessee under Section 43B.