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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: HON’BLE SHRI SANDEEP GOSAINvk;dj vihy la-@ITA No. 294/JP/2022
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ds le{k BEFORE: HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 294/JP/2022 fu/kZkj.k o"kZ@Assessment Year : 2020-21. cuke Rajasthan Ex-Servicemen Corporation Assistant Director, Vs. Ltd., Room No. 7222, Food Building, Income Tax, CPC, IInd Floor, Rajasthan Government Bengaluru. Secretariat, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AAFCR 8037 E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Mukesh Goyal, CA jktLo dh vksj ls@ Revenue by : Ms Monisha Choudhary (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 20/09/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 07/10/2022 vkns'k@ ORDER
PER: SANDEEP GOSAIN, J.M.
This appeal by the assessee is directed against the order dated 17.06.2022 of ld. CIT (A), National Faceless Appeal Centre (NFAC), Delhi passed under section 250 of the IT Act for the assessment year 2020-21. The assessee has raised the following grounds :-
“1. That on the facts and in the circumstances of the case, the Ld. CIT(A), NFAC, Delhi has grossly erred in the violating the principal of faceless appeal as announced for justice of honest taxpayers and the functioning of faceless processing's in honesty and judicially manner and to avoid litigation as created unnecessary by the AO.
2 ITA No. 294/JP/2022 Rajasthan Ex-Servicemen Corpn. Ltd., Jaipur.
That on the facts and in the circumstances of the case and in law the Ld. A.O. (CPC) erred in making disallowance of Rs. 2,58,480/- u/s 36 of the Income Tax without giving nature of the above disallowance and more so without considering the facts of the case and contents of return filed by the appellant. 3. That on the facts and in the circumstances of the case, the Ld. CIT(A),NFAC, Delhi has grossly erred in confirming the additions made by the Ld. ADIT, CPC, Bengaluru on account of disallowing late deposit of Employees Contribution to ESIC and EPF u/s 2(24)(x) r.w.s 36(1)(va) of the I.T. Act, 1961. Even otherwise, the claim of the assessee is allowable u/s 36(1)(va) r.w.s 43B of the I.T. Act, 1961, in view of binding decision of the Hon'ble jurisdictional Rajasthan High Court in the cases of CIT vs. State Bank of Bikaner and Jaipur reported in 2014 363 ITR 70 Rajasthan, CIT vs. Jaipur Vidyut Vitran Nigam Limited and in Assessee 's own case for the assessment year 2018-2019 and 2019- 2020 of CIT(A),NFAC, Delhi order dated 30/ 12/2021,which may kindly be allowed. 4. That on the facts and in the circumstances of the case, the Ld. CIT(A), NFAC, Delhi has grossly erred in not considering the written submission submitted online on 09/04/2022, 26/04/2022 and 01/06/2022 by the appellant though the portal and passed the order in hurry without application of mind. Therefore, principal of natural of justice violated. 5. That the Ld. CIT(A), NFAC, Delhi has further erred in confirming the disallowance, based on the amendments made in sec 36(1) and sec. 43B of the Act by The Finance Bill 2021, when the said amendments are prospective and applicable w.e.f. 01.04.2021. Appellant prays such reliance placed being unjustified; addition made deserves to be deleted; 6. That the appellant craves his right to add, annul, amend, alter, withdraw and/or substitute any/ or all of the grounds of appeal before the finalization of the appeal.”
The main ground of the assessee relates to challenging the confirmation of 2.
addition in respect of employees contribution towards EPF/ESI pertaining to
assessment year 2020-21.
3 ITA No. 294/JP/2022 Rajasthan Ex-Servicemen Corpn. Ltd., Jaipur.
Briefly stated the facts of the case are that the assessee is a State
Government Corporation engaged in, organize make available employment, self-
employment, business and occupational opportunities for the ex-servicemen in
industrial, commercial, educational, social establishments and departments including
government, semi-government, co-operative and corporations and private sector,
establishments in the state of Rajasthan and other state. The assessee filed its
return of income for the assessment year 2020-21 vide e-filing no.
254275661120221 on dated 12.02.2021 declaring as Nil Income as claiming
exemption u/s 10(26BBB) and claiming a refund of Rs. 62,05,760/-. The return of
the assessee was processed by the AO through Intimation u/s 143(1) of the I.T. Act,
1961 on dated 24.12.2021 after making adjustment on account of disallowance of
Rs. 2,58,480/- on delayed payment of employees’ contributions to Provident Fund /
Employees State Insurance (PF/ESI), and on such disallowance a Tax Demand of Rs.
67,205/- is adjusted from the claimed refund of Rs. 62,05,760/-. Aggrieved by the
order of A.O., the assessee filed appeal before the ld. CIT (A). The ld. CIT (A)
dismissed the appeal by observing that the clarification brought out by Explanation-2
to sec. 36(1)(va) will equally hold good for the assessment years prior to 2021-2022.
Against the said order, now the assessee is in appeal before the Tribunal.
During the course of hearing, the ld. A/R submitted that the assessee-
corporation deposited employee’s contribution of PF/ESI though with a delay
of few days from the due dates mentioned in the respective Acts, however the
same was deposited well before the due date of filing of return of income
under section 139(1) of the IT Act. It was submitted that the said fact is not
4 ITA No. 294/JP/2022 Rajasthan Ex-Servicemen Corpn. Ltd., Jaipur.
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 and in support thereof, the ld. A/R submitted that the
Coordinate Bench of the Jaipur Tribunal in assessee’s own case for the
preceding assessment year 2014-15 in ITA No. 503/JP/2017 dated 08.08.2017
has also taken a similar view. The ld. A/R placed reliance on the decisions of
Hon’ble Rajasthan High Court in case of CIT vs. JVVNL Ltd. (2014) 363 ITR
207 (Raj.), CIT vs. SBBJ Ltd. (2014) 363 ITR 70, PCIT vs. Rajasthan State
Beverages Corporation Ltd. (DB IT 150/2016) (Raj.), CIT vs. Udaipur Dugdh
Utpadak Sahkari Sangh Ltd. (2014) 366 ITR 163 and the decision Jaipur
Tribunal in the case of DCIT vs. Rajasthan State Electricity Board in ITA No.
981/JP/2017. It was further submitted that the recently Jodhpur Bench of the
Tribunal has also taken a similar view in case of Mohangarh Engineers and
Construction company vs DCIT, CPC (in ITA No. 405/JODH/2021 dated
12.08.2021) and similar view has been taken by the Bangalore Benches in
case of Shri Gopalkrishna Aswini Kumar vs. ACIT (in ITA No. 359/Bang/2021
dated 12.10.2021). It was further submitted that the explanation added to Section 36(1)(va) of the Act by the Finance Act, 2021 will take effect from 1st
April, 2021 and will apply from the assessment year 2021-22 and subsequent
assessment years and not to the impugned assessment year. It was further
submitted that the adjustment is beyond the scope of Section 143(1) of the
5 ITA No. 294/JP/2022 Rajasthan Ex-Servicemen Corpn. Ltd., Jaipur.
Act. It was accordingly submitted that the adjustment so made by the CPC
and confirmed by the ld. CIT(A) NFAC may be directed to be deleted.
On the other hand, the ld. D/R submitted that as per details furnished,
the payment of employee’s contribution of ESI/PF amounting to Rs.
2,58,480/- was not made within the prescribed due date U/s 36(1)(va) of the
Act. Therefore, the ld. CIT (A) has rightly confirmed the disallowance made by
the AO. Further, reliance was placed on the amendment brought in by the
Finance Act, 2021 wherein the explanation to Section 36(1)(va) has been
introduced. It was submitted from the said amendment, it is evident that the
law is and has always very clear i.e. employee’s contribution to specified fund
will not be allowed as deduction U/s 36(1)(va) if there is delay in deposit
even by a single day as per the due dates mentioned in the respective
legislation. It is also clear that the amendments are only
declaratory/clarificatory in nature and are therefore, applicable with
retrospective effect by necessary intendment of deeming nature expressly
stated therein. The ld. D/R accordingly submitted that in view of the
unambiguous wording of the now amended provisions of Section 36(1) and
43B, it is clear that the employee’s contribution can be allowed as a deduction
only if it had been paid within the prescribed due dates under the relevant
welfare funds and this position of law is and has always been the case and
the clarification brought about by the amendment clearly apply
retrospectively. It was therefore rightly held by the ld CIT(A) that the
6 ITA No. 294/JP/2022 Rajasthan Ex-Servicemen Corpn. Ltd., Jaipur.
disallowance made U/s 143(1) of the Act by CPC on account of assessee’s
failure to pay the employees’ contribution of PF/ESI within the prescribed due
dates as per Section 36(1)(va) is strictly in accordance with law and clearly
comes under the prima facie adjustments as envisaged U/s 143(1)(a)(iv) of
the Act.
We have heard the rival contentions and perused 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 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 undisputedly, 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.
7 ITA No. 294/JP/2022 Rajasthan Ex-Servicemen Corpn. Ltd., Jaipur.
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.
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(1)(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 Section 36 for allowing the deduction of GPF, CPF, ESI etc. as per the system followed by the assessees in claiming the deduction 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).
A conjoint reading of the proviso to Section 43-B which was inserted by the Finance Act, 1987 made effective from
8 ITA No. 294/JP/2022 Rajasthan Ex-Servicemen Corpn. Ltd., Jaipur.
01/04/1988, the words numbered as clause (a), (c), (d), (e) and (f), are omitted from the 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.
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 deduction 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
9 ITA No. 294/JP/2022 Rajasthan Ex-Servicemen Corpn. Ltd., Jaipur.
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.
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(1)(va) of the IT Act.”
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 Corportation 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(1)(va) of the Act.
We further note that though the ld. 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 ld 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
10 ITA No. 294/JP/2022 Rajasthan Ex-Servicemen Corpn. Ltd., Jaipur.
appellate authorities as well as the Assessing officer under its jurisdiction in the State of Rajasthan.
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(1)(va) of the Act in view of the binding decisions of the Hon’ble Rajasthan High Court.”
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 ld D/R has referred to the explanation to
section 36(1)(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 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 2020-21 and therefore, the said amended
provisions cannot be applied in the instant case. Similar view has been taken
11 ITA No. 294/JP/2022 Rajasthan Ex-Servicemen Corpn. Ltd., Jaipur.
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 section 43B and 36(1)(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(1)(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(1)(va) of the Act in both the Assessment Years deserves to be deleted.”
12 ITA No. 294/JP/2022 Rajasthan Ex-Servicemen Corpn. Ltd., Jaipur. 8. 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. 2,58,480/- made
by the CPC towards the deposit of the employee’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.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 07/10/2022.
Sd/- ¼lanhi xkslkbZ½ (SANDEEP GOSAIN) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated 07/10/2022. das/ आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- M/s. Rajasthan Ex-Servicemen Corpn. Ltd., Jaipur. 2. izR;FkhZ@ The Respondent-The Assistant Director, Income Tax, CPC, Bengaluru 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File {ITA No. 294/JP/2022} vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत
13 ITA No. 294/JP/2022 Rajasthan Ex-Servicemen Corpn. Ltd., Jaipur.