TRANSINDIA NONWOVENS PVT. LTD.,JAIPUR vs. DCIT, CPC, BANGALORE

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR MkWa- ,l-lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 267/JP/2021 fu/kZkj.k o"kZ@Assessment Years : 2018-19 DCIT, cuke Transindia Nonwovens Private Limited P-47 P-47 Raj Angan Society NRI Colony, Vs. CPC, Bengaluru. Sec. 24, Jaipur, Pratap Nagar, Jaipur 302033. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAACF 5802 E vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri B.P.Mundra (C.A.) jktLo dh vksj ls@ Revenue by : Shri A.S. Nehra (Addl.CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 24/03/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 29/03/2022

vkns'k@ ORDER

PER: DR. S. SEETHALAKSHMI, J.M. The appeal is filed by the assessee arising out of order of ld. CIT(A) in ITBA/NFAC/S/250/2021-22/1036331982(1) vide order dated 12.10.2021 for the assessment year 2018-19.

“1.The ld. CIT(A) erred in confirming the addition of Rs. 2,47,833/- made by the Assessing Officer representing delay in remittance of employees contribution towards provident fund.

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3 ITA No. 267 /JP/2021 Transindia Nonwovens Pvt. Ltd. Petition filed by the revenue against the aforesaid judgement is pending before the Supreme Court. Even though these questions with respect to interpretation of Section 43B of the Act were answered against the revenue, but they are subject to the final order of the Supreme Court on these questions. • Shailendra Garg, C/O Garment Craft India (P) Ltd. February 15, 2018 (Raj HC) Delayed payment of PF & ESI contribution — ITAT deleted the addition — Held that:-As decided in State Bank of Bikaner and Jaipur [2014 (5) TMI 222 — RAJASTHAN HIGH COURTI 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 u/s 139(1), cannot be disallowed u/s 438 or u/s 36(1)(va) of the IT Act • CIT vs. State Bank of Bikaner & Jaipur 99 DTR 131 • CIT vs. Jaipur Vidyut Vitran Nigam Ltd. 363 ITR 307 • CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. 366 ITR 163 • Principal Commissioner of Income-Tax v/s Rajasthan state Seed Corporation Ltd. [2016] 386 ITR 267 (Raj) • Income Tax vs. M/s State Bank of Bikaner and Jaipur (2014) 363 ITR 70 (Raj) • Deputy Commissioner of Income Tax vs Jaipur Vidyut Vitran Nigam Limited in the ITAT Jaipur Bench “B” ITA No. 1287/JP/2019 Jan 18, 2021 (2021) 61 CCH 0057 Jaipur Trib.

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“ 6.9 Thus, from the above, it is clear that the amendment brought in the statue i.e., by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the act amended by inserting explanation in prospective and not retrospective. Hence, the amended provisions of Section 43B r.w.s. 36(1)(va) of the act are not applicable for the assessment year 2018-19 but will apply from assessment year 2021-

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22 and subsequent assessment year. Hence, this issue of assessee’s appeal is allowed.

“Admittedly and undisputedly, the employee’s 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, it is noted that the ld CIT(A) has referred to the explanation to section 36(1)(va) and section 43B introduced 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, he has simply failed to consider the express wordings in the said memorandum which say “these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years”. The impugned assessment year is assessment year 2019-20 and therefore, the said amendment cannot be applied in the instant case.”

• Moona Dewan vs. CPC, Bengalure in ITA No. 282/JP/2021 dated 19.01.2022 (Jaipur-Trib.)

• M/s Punjab Engineering Works vs. DCIT in ITA No. 132/JP/2021 dated 15.11.2021 (Jaipur-Trib.)

6 ITA No. 267 /JP/2021 Transindia Nonwovens Pvt. Ltd. • M/s Mohanlal Khatri vs. ACIT in ITA No. 144/JP/2021 dated 29.11.2021 (Jaipur-Trib.)

• Mohangarh Engineers and Construction Company vs. DCIT, CPC in ITA No. 405/JOdh/2021 dated 12.08.2021.

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8.1 Identical issue with the similar facts have already been adjudicated by the various Benches of the ITAT.

8.2 In the case of Harendra Nath Biswas vs DCIT Koltaka, ITA No. 186/Kol/2021 for the A.Y. 2019-20, similar issue has been decided vide order dated 16.7.2021 by the ITAT ‘B’ Bench, Kolkata. The Relevant findings have been given in para 4 of the said order, which read as under;-

“4. We have heard both the parties and perused the record. First of all we do not countenance this action of the Ld. CIT(A) for the simple reason that the Explanation 5 was inserted by the Finance Act, 2021, with effect from 01.04.2021 and relevant assessment year before us is AY 2019-20. Therefore the law laid down by the Jurisdictional Hon’ble High Court will apply and since this Explanation- 5 has not been made retrospectively. So we are inclined to follow the same and we reproduce the order of Hon’ble Calcutta High Court in the case of Vijayshree Ltd. supra wherein the Hon’ble Calcutta High Court has taken note of the Hon’ble Supreme Court decision in CIT vs. Alom Extrusion Ltd. reported in 390 ITR 306. The Hon’ble Calcutta High Court’s decision in Vijayshree Ltd. supra is reproduced as under:

“This appeal is at the instance of the Revenue and is directed against an order dated 28th April, 2011 passed by the Income Tax Appellate Tribunal, “A” Bench, Kolkata in ITA No.1091/Kol/2010 relating to assessment year 2006- 07 by which the Tribunal dismissed the appeal preferred by the Revenue against the order of CIT(A).

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The only issue involved in this appeal is as to whether the deletion of the addition by the AO on account of Employees Contribution to ESI and PF by invoking the provision of Section 36(1)(va) read with Section 2(24)(x) of the Act was correct or not.

It appears that the Tribunal below, in view of the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., reported in 2009 Vol.390 ITR 306, held that the deletion was justified.

Being dissatisfied, the Revenue has come up with the present appeal.

After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., we find that the Supreme Court in the aforesaid case has held that the amendment to the second proviso to the Sec 43(B) of the Income Tax Act, as introduced by Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from 1st April, 1988.

Such being the position, the deletion of the amount paid by the Employees’ Contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act.

We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal.

Urgent xerox certified copy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.”

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In the light of the aforesaid discussion we do not accept the Ld. CIT(A)’s stand denying the claim of assessee since assessee delayed the employees contribution of EPF & ESI fund and as per the binding decision of the Hon’ble High Court in Vijayshree Ltd. (supra) u/s 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds and we allow the appeal of the assessee.”

“2. Coming to the sole substantive issue of ESI/PF disallowance of Rs.1,09,343/- and Rs.3,52,622/-, the assessee’s and revenue’s stand is that the same has been paid before the due date of filing sec. 139(1) return and after the due date prescribed in the corresponding statutes; respectively. I notice in this factual backdrop that the legislature has not only incorporated necessary amendments in Sections 36(va) as well as 43B vide Finance Act, 2021 to this effect but also the CBDT has issued Memorandum of Explanation that the same applies w.e.f. 1.4.2021 only. It is further not an issue that the forergoing legislative amendments have proposed employers contributions; disallowances u/s 43B as against employee u/s 36 (va) of the Act; respectively. However, keeping in mind the fact that the same has been clarified to be applicable only with prospective effect from 1.4.2021, I hold that the impugned disallowance is not sustainable in view of all these latest developments even if the Revenue’s case is supported by the following case law.

(i) CIT vs. Merchem Ltd, [2015] 378 ITR 443(Ker)

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(ii) CIT vs. Gujarat State Road Transport Corporation (2014) 366 ITR 170 (Guj.) (iii) CIT vs. South India Corporation Ltd. (2000) 242 ITR 114 (Ker) (iv) CIT vs. GTN Textiles Ltd. (2004) 269 ITR 282 (Ker) (v) CIT vs. Jairam & Sons [2004] 269 ITR 285 (Ker) The impugned ESI/PF disallowance is directed to be deleted therefore.”

“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.

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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).

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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.

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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(1)(va) of the Act.

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“The deletion with effect from April 1, 2004 by the Finance Act, 2003 of the second proviso to section 43B of the Income-tax Act, 1961, which stipulates that contributions to the provided fund and Employees State Insurance Fund should be made within the time mentioned in section 36(1)(va), that is, the time allowed under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, as well as the Employees’ State Insurance Act, 1948, it treated as retrospective in nature. If the employees’ contribution is not deposited thereafter, the employer not only pays interest and delayed payment but can incur penalties also, for which specific provisions are made in the those Acts. In so far as Income-tax Act, 1961, is concerned, the assessee can get the benefit of deduction of the payments, if the actual payment is made before the return is filed. Where for the assessment year 2002-03 the assessee had deposited employer’s contribution as well as employees’ contribution towards provident fund and ESI after the due date, as prescribed under the

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relevant Act/Rules but before the due date for filing the return under the Income-tax Act: Held accordingly, that no disallowance could be made in view of the provisions of Section 43B as amended by the Finance Act, 2003.”

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Section 36 of the Act pertains to the other deductions. Sub-section (1) of the said section provides for various deductions allowed while computing the income under the head ‗Profits and gains of business or profession‘. Clause (va) of the said sub-section provides for deduction of 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” to mean 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 there-under or under any standing order, award, contract of service or otherwise. Section 43B specifies the list of deductions that are admissible under the Act only upon their actual payment. Employer's contribution is covered in clause (b) of section 43B. According to it, if any sum towards employer's contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date for furnishing the return of the income under sub-section (1) of section 139, assessee would be entitled to deduction under section 43B and such deduction would be admissible for the accounting year. This provision does not cover employee contribution referred to in clause (va) of sub-section (1) of section 36 of the Act. Though section 43B of the Act covers only employer‘s contribution and does not cover employee contribution, some courts have applied the provision of section 43B on employee contribution as well. There is a distinction between employer 40 contribution and employee‘s contribution towards welfare fund. It may be noted that employee‘s contribution towards welfare funds is a mechanism to ensure the compliance by the employers of the labour welfare laws. Hence, it needs to be stressed that the employer‘s contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the employee‘s contribution towards welfare funds. Employee‘s contribution is employee own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee

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contribution, the employers get unjustly enriched by keeping the money belonging to the employees. Clause (va) of sub-section (1) of Section 36 of the Act was inserted to the Act vide Finance Act 1987 as a measures of penalizing employers who mis-utilize employee‘s contributions. Accordingly, in order to provide certainty, it is proposed to – (i) amend clause (va) of sub-section (1) of section 36 of the Act by inserting another explanation to the said clause to clarify that the provision of section 43B does not apply and deemed to never have been applied for the purposes of determining the ―due date‖ under this clause; and (ii) amend section 43B of the Act by inserting Explanation 5 to the said section to clarify that the provisions of the said section do not apply and deemed to never have been applied to a sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section 2 applies. These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.” 15. The present appeal is filed by the assessee against disallowance of Rs. 2,68,900/-pertaining to employees contribution made towards ESI & PF which was paid by the appellant company after the "due date" under respective statute of ESIC/PF. This disallowance was made by the AO under section 143(1) of the Act on the basis of remarks in the relevant column of Form no. 3CD report attached with the return of income. In the appeal petition, the appellant has stated that total income returned at Rs.5,32,317/- has been processed at Rs. 8,01,217/- after making adjustment u/s. 143(1)(a)(ii) for Rs. 2,68,900/- by disallowing PF and other contribution paid after due date prescribed by respective labour laws, out of sum collected from employees contribution to PF/ESIC etc. The assessee has stated that disallowance of Rs. 2,68,900/-was not in accordance with the provision of

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Section 43B of the Act as the said amount were duly remitted before the due date of filling of return of income. The appellant has referred to the decisions of various High Courts including the decision of jurisdictional Rajasthan High Court in the case of Rajasthan State Beverages Corporation Ltd 392 ITR 2 and similar other decisions on this issue.

“9. Determination 9.1 The 1st and 2nd grounds of appeal pertain to the adjustment done by the CPC on account of delayed deposit of employees contribution to PF and ESI and are taken up together for adjudication. 9.2 The provision of Section 143(1) is reproduced below: 143.(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:- (a) the total income or loss shall be computed after making the following adjustments, namely;- ……………………… (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; ………………….. (iv) disallowance of expenditure indicated in the audit report but not taken intoaccount in computing the total income in the return; 9.3 In the instant case the dates of actual deposit of employee’s contribution to PF and ESI vis-à-vis due date of deposit is required to be entered under column 20(b) of the Tax Auditor Report. Although the auditor is not required to specifically mention the disallowance, the fact of delayed deposit leading to disallowance in apparent from

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the details filed. These details have been filed by the appellant itself and that processing has been done without any human interface. In view of the provisions of Section has been done without any human interface. In view of the provisions of Section 36(1)(va), the details entered by the appellant are automatically detected and added back. Thus, there is no infirmity in the adjustment done by the CPC as the adjustments have been done on the basis of information submitted by the appellant in the return of income. The only requirement is that the CPC should give an opportunity before making such an adjustment. In the instant case such an opportunity has been duly provided by the CPC and hence there is neither any legal infirmity nor any procedural infirmity in the action of the CPC. 9.4 The submissions made by the appellant with respect to application of Sec 43B to the Employees contribution to PF and ESI need to be evaluated in the context of legal provisions laid down in the Act. The same are enumerated here under:- 9.4.1 The definition of Income u/s 2(24)(x) includes any sum received by the appellant from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948, or any other fund for the welfare of such employees. 9.4.2 Section 36(1)(va) deals with deduction in respect of the sum received by the appellant from any of his employees to which the provisions of sub-section 2(24)(x) applies, provided such sum is credited to the employees account in the relevant fund on or before the due date. 9.4.3 A deduction from the amount of income received by the employer from employees as contributions to any provident fund or superannuation fund etc. is provided u/s 36(1)(va). According to this section any sum received by the appellant from any of his employees to which the provisions of section 2(24)(x) will be allowed as deduction, is such sum is credited by the appellant to the employee's account in the relevant fund or funds on or before the due date. "Due date" here means the date by which the appellant is required as an employer to

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credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued there under or under any standing order, award, contract of service or otherwise. 9.4.4 The Act also allows certain deductions, one of them being the employers contribution to the PF and ESI, u/s 43B of the Act. Section 43B specifies the list of deductions that are admissible under the Act only upon their actual payment. Employer's contribution is covered in clause (b) of section 43B. According to it, if any sum towards employer's contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date for furnishing the return of the income under subsection (1) of section 139, assessee would be entitled to deduction under section 43B and such deduction would be admissible for the accounting year. This provision does not cover employee contribution referred to in clause (va) of sub-section (1) of section 36 of the Act. 9.4.5 There is a distinction between employer contribution and employee's contribution towards welfare fund. While the due date for depositing the employees' contribution is 15th of the month next to the month for which the contribution was collected as per the respective Acts, u/s 4(b) the due date for depositing the employer's contribution is the due date for filing of the return of income u/s 139(1). 9.4.6 If any of the deposit of the Employees contribution is outside the due date of 15th of next month then that amount shall never be allowed as deduction under section 36(1)(va) even though it might have been deposited with a delay of just 1 day. There is no provision in the Act under which this amount can be allowed as deduction in any year thereafter. 9.4.7 Prior to the amendments to the Provisions of Section 36(1)(va) and Section 43B by the Finance Act, 2021 various Courts have been interpreting these Sections differently. While some Courts such as the Gujarat High Court, Kerala High Court have consistently held that the employees contribution to PF and ESI are not covered within the

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ambit of Section 43B, some other courts such as the Bombay High Court, Delhi High Court etc have held that the provisions of Section 43B are applicable to Employees contribution to PF also. 9.4.8 The Memorandum Explaining the Provisions of "Finance Bill, 2021" are extracted as under:- "Section 438 specifies the list of deductions that are admissible under the Act only upon their actual payment. Employer's contribution is covered in clause (b) of section 43B. According to it, if any sum towards employer's contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date for furnishing the return of the income under sub-section (1) of section 139, assessee would be entitled to deduction under section 438 and such deduction would be admissible for the accounting year. This provision does not cover employee contribution referred to in clause (va) of sub-section (1) of section 36 of the Act. Though section 438 of the Act covers only employer's contribution and does not cover employee contribution, some courts have applied the provision of section 43B on employee contribution as well. There is a distinction between employer contribution and employee's contribution towards welfare fund. It may be noted that employee's contribution towards welfare funds is a mechanism to ensure the compliance by the employers of the labour welfare laws. Hence, it needs to be stressed that the employer's contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the employee's contribution towards welfare funds. Employee's contribution is employee own money and the employer deposits this contribution on behalf of the employee in finduciary capacity. By late deposit of employee contribution the employer get unjustly enriched by keeping the money belatedly to the employees. Clause (va) of sub- section (1) of Section 36 of the Act has inserted to the Act vide Finance Act 1987 as a measures of penalizing employers who mis-utilize employee's contributions."

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9.4.9 In this regard, Finance Act 2021, has made the following amendments: In section 36 of the Income-tax Act, in sub-section (1), in clause (va), the Explanation shall be numbered as Explanation 1 thereof and after Explanation 1 as so numbered, the following Explanation shall be inserted, namely:— `Explanation 2.—For the removal of doubts, it is hereby clarified 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 this clause; In section 43B of the Income-tax Act, after Explanation 4, the following Explanation shall be inserted, namely:- "Explanation 5.—For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applies." 9.4.10 The Finance Act 2021 has cleared the aspect related to the operation of these clauses also. The wordings of the captioned Explanation clearly assert that the clarification will apply to earlier Assessment years also as the newly added Explanation 2 below Section 36 clearly uses the word that "it is hereby clarified 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 this clause. Similarly, in the Explanation 5 inserted below 43B also, the words used are "it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied……….” 9.4.11 Any difference in interpretation with respect to applicability of Section 43B to the Employees contribution has therefore been removed by the above amendments and it is explicitly laid down that the provisions of Section 43B shall not apply to Employees contribution and infact deemed never to have been applied to the Employees contribution.

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Thus, employee's contribution to the PF and ESI is allowable only if paid within the due dates as prescribed in the PF and ESI Act. 9.4.12 From the wordings at para 9.4.8 & 9.4.9, it is also clear that the above clarificatory amendment brought in by the Finance Act, 2021 applies to the issue in the instant appeal also. While in the Explanatory Memorandum to the Finance Bill, it was stated that "these amendments will take effect from 1st April, 2021 and will accordingly apply to the as moment year 2021-22 and subsequent assessment years", but the said lines are not there in the Finance Act, 2021, which has been finally passed by the Parliament and received Presidential Assent. 9.4.13 Reference is also made to the Supreme Court Judgement in the case of Commissioner Of Income Tax-I, Ahmedabad vs Gold Coin Health Food Pvt. Ltd (2008) 304 ITR 308, wherein while dealing with a similar issue, Hon'ble Supreme Court in Para 15 of its decision has quoted the following: "In Principles of Statutory Interpretation, 11th Edn. 2008, Justice G.P. Singh has stated the position regarding retrospective operation of statutes as follows: "The presumption against retrospective operation is not applicable to declaratory statutes. As stated in Craies and approved by the Supreme Court: For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the word 'enacted'. But the use of the words 'it is declared' is not conclusive that the Act is declaratory for these words may, at times, be used to introduce new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the Corm. If a new Act is 'to explain' an earlier Act, it

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would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant or 'shall be deemed never to have included" is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law when the constitution came into force, the amending Act also will be part of the existing law." "The presumption against retrospective operation is not applicable to declaratory statutes.... In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is "to explain" an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended.... An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 468-69)". “where a statute is passed for the purpose of supplying an obvious omission in a former statute or to ‘explain’ a former statute, the subsequent statute has relation back to the time when the prior Act was passed. The rule against retrospectively is inapplicable to such legislations as are explanatory and declaratory in nature."— Zile Singh vs. State of Haryana, (2004) 8 SCC 1. 9.4.14 Thus, it can be safely concluded that the clarificatory amendment brought out by the Finance Act, 2021 will be applicable to the issue in

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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 the 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 defeat 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. 9.5 The appellant has relied upon various court decisions in support of its claim. These decisions of various courts have been issued prior to the amendments made to Section 36(1)(va) and 43B of the Act. As stated in para 9.4.11 above, Section 43B is deemed to have never applied to the employees contribution. Reliance, in this regard, is also placed on the case of Vedvan Consultants Pvt. Ltd Vs DCIT in ITA No. 1312/De1/2020 for the Assessment Year 2018-19 (Date of Pronouncement: 26.08.2021). 9.6 Accordingly, the grounds taken by the appellant are dismissed and the action of the CPC in adjusting the delayed deposit of Employees contribution to PF and ESI is upheld. 10. In the result the appeal is dismissed.” 17. After considering the above findings of CIT(A), now we have gone through ratio laid down by the Hon’ble Supreme Court in the case of CIT vs. Vatika Township Pvt. Ltd. (2014) 367 ITR 466, wherein the Hon’ble Supreme Court held that unless contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. The law passed today cannot be applied to the events of the past. The Hon’ble Supreme Court held that if

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somebody does something today, he do it keeping in view the law of today and in force and not tomorrow’s backward adjustment of it. According to Hon’ble Apex court every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit, which means law looks forward not backward. In the case of Vatika Township Pvt. Ltd., (Supra), the issue under challenge before Hon’ble Supreme Court was the insertion of proviso to section 113 of the Act by the Finance Act 2002 for charging of surcharge. Hon’ble Supreme Court noted that though provision for surcharge under the Finance Acts have been in existence since 1995, the charge of surcharge with respect to block assessments, having been created for the first time by the insertion of proviso to Section 113 of the Act, by Finance Act, 2002, it is clearly a substantive provision and is to be construed as prospective in operation. The Hon’ble Supreme Court held that the amendment neither purports to be merely clarificatory nor is there any material to suggest that it was intended by parliament.

The Hon’ble Supreme Court finally held that the proviso to Section113 of the Act is prospective and not retrospective. For this proposition their lordships of the Hon’ble Supreme Court observed at page 495 as under:-

“Notes on Clauses” appended to Finance Bill, 2002 while proposing insertion of proviso categorically states that “this amendment will take effect from 1st June, 2002”. These become epigraphic words, when seen in contradistinction to other amendments specifically stating those to be clarificatory or retrospectively depicting clear intention of the legislature. It can be seen from the same notes that few other amendments in the Income Tax Act were made by the same Finance Act specifically making those amendments retrospectively. For example, clause 40 seeks to amend S.92F. Clause iii (a) of S.92F is amended “so as to clarify that the activities mentioned in the said clause include the carrying out of any work in pursuance of a contract.” This amendment

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takes effect retrospectively from 01.04.2002. Various other amendments also take place retrospectively. The Notes on Clauses show that the legislature is fully aware of 3 concepts: (i) prospective amendment with effect from a fixed date; (ii) retrospective amendment with effect from a fixed anterior date; and (iii) clarificatory amendments which are retrospective in nature. Thus, it was a conscious decision of the legislature, even when the legislature knew the implication thereof and took note of the reasons which led to the insertion of the proviso, that the amendment is to operate prospectively. Learned counsel appearing for the assessees sagaciously contrasted the aforesaid stipulation while effecting amendment in Section 113 of the Act, with various other provisions not only in the same Finance Act but Finance Acts pertaining to other years where the legislature specifically provided such amendment to be either retrospective or clarificatory. In so far as amendment to Section 113 is concerned, there is no such language used and on the contrary, specific stipulation is added making the provision effective from 1st June, 2002. (e) There is yet another very interesting piece of evidence that clarifies the provision beyond any pale of doubt, viz. understanding of CBDT itself regarding this provision. It is contained in CBDT circular No.8 of 2002 dated 27th August, 2002, with the subject “Finance Act, 2002 – Explanatory Notes on provision relating to Direct Taxes”. This circular has been issued after the passing of the Finance Act, 2002, by which amendment to Section 113 was made. In this circular, various amendments to the Income Tax Act are discussed amply demonstrating as to which amendments are clarificatory/retrospective in operation and which amendments are prospective. For example, explanation to Section 158BB is stated to be clarificatory in nature. Likewise, it is mentioned that amendments in Section 145 whereby provisions of that section are made applicable to block assessments is made clarificatory and would take effect retrospectively from 1st day of July, 1995. When it comes to amendment to Section 113 of the Act, this very circular provides that the said amendment along with amendments in Section 158BE, would be prospective i.e. it will take effect from 1st June, 2002.

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(f) Finance Act, 2003, again makes the position clear that surcharge in respect of block assessment of undisclosed income was made prospective. Such a stipulation is contained in second proviso to sub- section (3) of Section 2 of Finance Act, 2003. This proviso reads as under: “Provided further that the amount of income-tax computed in accordance with the provisions of section 113 shall be increased by a surcharge for purposes of the Union as provided in Paragraph A, B, C, D or E, as the case may be, of Part III of the First Schedule of the Finance Act of the year in which the search is initiated under section 132 or requisition is made under section 132A of the income-tax Act.” Addition of this proviso in the Finance Act, 2003 further makes it clear that such a provision was necessary to provide for surcharge in the cases of block assessments and thereby making it prospective in nature. The charge in respect of the surcharge, having been created for the first time by the insertion of the proviso to Section 113, is clearly a substantive provision and hence is to be construed prospective in operation. The amendment neither purports to be merely clarificatory nor is there any material to suggest that it was intended by Parliament. Furthermore, an amendment made to a taxing statute can be said to be intended to remove 'hardships' only of the assessee, not of the Department. On the contrary, imposing a retrospective levy on the assessee would have caused undue hardship and for that reason Parliament specifically chose to make the proviso effective from June 1, 2002.” 18. As per ratio laid down by the judgment of Hon’ble Supreme Court in Vatika Township P. Ltd. (Supra), there cannot be imposition of any tax without the authority of law and such law has to be unambiguous and should prescribe the liability to pay taxes in clear terms.

29 ITA No. 267 /JP/2021 Transindia Nonwovens Pvt. Ltd. • Pratap Technocrats Pvt, Ltd. vs. ADIT in ITA No. 18/JP/2022 dated 22.02.2022. • Prahlad Narayan Bairwa vs. ADIT in ITA No. 33/JP/2022 dated 22.02.2022. • Jairaj vs. ADIT in ITA No. 24,25 & 26/JP/2022 dated 22.02.2022. • The Earth House Resorts LLP vs. ADIT in ITA No. 28/JP/2022 dated 22.02.2022. • Group Zeor vs. ITO in ITA No. 250/JP/2021 dated 01.03.2022. • Karni Kehar Security Co-operative Scoeity Ltd. vs. DCIT in ITA No. 310/JP/2021. • Devi Shanker vs. DCIT in ITO 35/JP/2022 dated 01.03.2022.

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