DANISH PRIVATE LIMITED,JAIPUR vs. INCOME TAX OFFICER WARD-6(1), JAIPUR

ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 26-05-2022, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2019-20 wherein the assessee has raised the following grounds of appeal. (1) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the AO in making adjustment in the intimation u/s 143(1) which are outside the purview of Section 143(1)(a). The

2. DANISH PRIVATE LTD. VS ITO, WARD 6(1), JAIPUR action of the ld CIT(A) is illegal, unjustified, arbitrary and again the facts of the case. Relief may please be granted by deleting the entire disallowance of Rs.3,38,962/-. (2) In the facts and circumstances of the case and in law, ld.CIT(A) erred in confirming the action of the AO in making disallowance of Rs.3,38,962/-. in respect of ESIC and PF u/s 36(1)(va) of Income Tax Act, 1961. The action of the ld CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the disallowance of Rs.3,38,962/-. .

2.1 Apropos Ground Nos. 1 and 2, brief facts of the case are that the assessee company is engaged in the business of manufacturing of transformers. During the relevant previous year, the assessee company filed its return of income on 30-10- 2019 declaring total income of Rs,5,59,21,157/-. The Assistant Director of Income Tax, CPC, Bengaluru (in short ‘’the AO’’) while making the assessment passed the order u/s 143(1) of the Act on 10-05-2020 and made addition/ disallowance of Rs.1,00,000/- u/s 43B, Rs.3,38,362/- on account of delay in deposit of employees share of ESI and PF u/s 36(1)(va) of the I.T. Act, Rs.11,021/- u/s 37 of the I.T. Act and giving lesser credit of TDS by Rs.65,055/-. It is worthwhile to mention here that the assessee is in appeal before us only as regards the limited issue of late deposit of ESI/PF share of the employees. 2.2 Aggrieved by the order of the AO as regards the issue of ESI/PF, the assessee carried the matter before the ld. CIT(A)-NFAC, Delhi who confirmed the action of the AO by observing as under:-

3 DANISH PRIVATE LTD. VS ITO, WARD 6(1), JAIPUR ‘’5.7 ( r) However, this amendment has also been the subject matter of litigation and few benches of ITAT have decided the issue as to whether the amendments made to Section 36(1)(va) and Section 43B are retrospective or prospective in nature. The Hyderabad ITAT in the case of M/s Crescent Roadways Private Ltd. In ITA No. 1952/Hyd/2018 in its decision has relied upon the Memorandum of Explanation and held that amendments to Section 36(1)(va) and 43B would apply with effect from 01-04-2021 and not to earlier years. The ITAT Jodhpur Bench in the case of Mohangarh Engineers & Constructions Co. in its decision dated 12-08-2021 has also held that the amendments made to Finance Act shall be prospective only. However, the ITAT Delhi Bench in the case of M/s., Vedavan Consultants Pvt. Ltd. in its decision dated 26-08-2021 has held that the amendments are clarification in nature and hence applicable to earlier years also.

(s) In the instant case, the appellant has not brought on record any decision of the jurisdictional Courts on the issue of the amendments being clarificatory or not.

(t) In view of the discussion above, it can be safely concluded that the clarificatory amendment brought out by the Finance Act, 2021 will be applicable to the issue in the instant appeal also. It is also clear that the scope of Section 43B and Section 36(1)(va) are different and thus, there is no question of reading both provisions together to consider as to whether the taxpayer is entitled to deduction in respect of te sum belatedly paid towards such contribution, especially when such sum is admittedly a sum received by the taxpayer / employer from his employee. Therefore, for considering such question, application of Section 36(1)(va) read with section 2(24(x) alone is the proper course and any other interpretation would only defect the object and scope of both the provisions viz. 43B and 36(1)(va). If the payment was not done within the stipulated time prescribed under the relevant enactment, the benefit of deduction cannot be claimed, since such belated payment is not a valid payment to attract deduction, under the purview of the Income Tax Act.