AMIT SINGH,BHIWADI (ALWAR) vs. DCIT, CPC- BENGALURU, CPC- BENGALURU

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. 284/JP/2021 fu/kZkj.k o"kZ@Assessment Years : 2018-19 DCIT, cuke Amit Singh M/s Amit Travels, A-13 Bhagat Singh Vs. CPC, Bangalore. Colony, Bhiwadi, Tizara, Alwar. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: CAWPS 4777 C vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri Rahish Mohammed (C.A.) jktLo dh vksj ls@ Revenue by : Smt. Runi Pal (Addl.CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 22/03/2022 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/250/2021-22/1035419012(1) vide order dated 09.09.2021 for the assessment year 2018-19.

“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

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functioning of faceless processing’s in honesty and judicially manner and to avoid litigation as created unnecessary by the AO. 2. 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. DCIT, CPC on account of disallowing late deposit of Employees Contribution to ESIC and EPC u/s 2(24)9x) 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. Udaipur Dugdh Utpadak Sahkari Sangh Limited reported in 2014 366 ITR 163 Rajasthan, which may kindly be allowed. 3. That the ld. CIT(A), NFAC, Delhi has erred in law and on facts in holding that the amendments made in the Finance Act, 2021 are retrospective in nature. 4. That the ld. CIT(A), NFAC, Delhi as well ld. AO has erred on facts and in law not provided last opportunity to the appellant to explain its case and passed the assessment order in jury. Therefore, principal of natural justice violated. 5. 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.”

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after referred to as Act) vide intimation dated 16.05.2019, wherein CPC made disallowance of Rs. 86,905/- and thereby creating demand of Rs. 15,62,080/-.

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The Commissioner of Income Tax vs. Ghatge Patil Transport Ltd. 10. Delhi High Court [2010] 321 ITR 508 (Delhi) December 23,2009 Commissioner of Income Tax vs. Aimil Limited, Nirmala Swami Spearhead Digital Studio, M/s Net 4 India Ltd. Modipon Ltd. & M/s Ekta Agro Industries Ltd. 11. Hon’ble Supreme Court [2009] 319 ITR 306 (SC) November 25, 2009 Commissioner of Income Tax vs. M/s Alom Extrusions Limited 12. Hon’ble Supreme Court [1997] 224 ITR 677 (SC) March 10, 1997 Allied Motors Private Limited vs. Commissioner of Income-Tax 13. SC order [2009] 313 ITR 1 March 7, 2007 CIT vs. Vinay Cement Ltd. 14 SC order: July 4, 2017 Principal Commissioner of Income Tax, Jaipur vs. M/s Rajasthan State ;beverages Corpn. Ltd. 15. Hon’ble Supreme Court of Incie:[ 2009] 313 ITR (St.) 1: March 7, 2007 CIT vs. Vinay Cement Ltd. (16) Gauhati High Court [2006] 284 ITR 619: June 26, 2006 Commissioner of Income Tax vs. George Williamson (Assam) Limited. 17. Allahabad High Court: December 21, 2016 Sagun Goundry Private Limited vs. Commissioner of Income Tax, Kanpur 18. Patna High Court: [2017} 393 ITR 386 March 16, 2016 M/s Bihar State warehousing Corporation Ltd. vs. Commissioner of Income Tax-1, 19. DY Commissioner of Income Tax (19) Patna High Court : March 341. 2015 COMMISSIONER OF INCOME TAX-1, PATNA, ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-II, PATNA VERSUS ALKEN LABORATORIES LTD, EXHIBITION ROAD, PATNA 20. PUNJAB AND HARYANA. HIGH COURT September 21, 2015 COMMISSIONER OF INCOME TAX, FARIDABAD VERSUS M/S LAKHANI RUBBER UDYOG P. LIMITED 21. Mahadev Cold Storage Vs Jurisdictional AO Circle-4(1)(2), Aligarh.(ITAT Agra) Appeal Number: 1TA No. 41 & 42/Agr/2021 Date of Judgment/Order: 14/06/2021 Related A.Y.: 2018-19 and A.Y. 2019- 20.

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“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.)

7 ITA No. 284 /JP/2021 Amit Singh vs. DCIT, CPC • M/s Punjab Engineering Works vs. DCIT in ITA No. 132/JP/2021 dated 15.11.2021 (Jaipur-Trib.)

• M/s Mohanlal Khatri vs. ACIT in ITA No. 144/JP/2021 dated 29.11.2021 (Jaipur-Trib.)

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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

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provident fund and ESI after the due date, as prescribed under the 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.” 14. From the above discussion, it is clear that there are series of decisions of various Hon’ble High Courts on this issue and even Hon’ble Jurisdictional High Court in the case of M/s. Industrial Security & Intelligence India P Ltd., (supra) held that the payment of employees contribution in regard to PF & ESI if made before the due date of filing of return of income u/s.139(1) of the Act, the same is allowable as deduction as per the provisions of Section 2(24)(x) r.w.s. 36(1)(va) r.w.s. 43B of the Act. Now, the question arises, whether by the Finance Act, 2021, the provisions of Section 36(1)(va) by inserting the Explanation 2 r.w.s. 43B of the Act have been amended, whereby it is clarified that the provisions of Section 43B of the Act shall not apply and shall be deemed ought to have been applied for the purpose of determining the due date under this clause. In our opinion, this amendment has been brought in the statute book to provide certainty about the applicability of provisions of Section 43B of the Act inspite of belated payment of employee’s contribution. We also noted from the memorandum explaining the provisions to Finance Act, 2021, wherein relevant Clauses to said memorandum clearly intended that the amendment shall take effect from 01.04.2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years. The relevant Clauses 8 & 9 of the memorandum explaining the provisions are reproduced as under:- “Rationalisation of various Provisions Payment by employer of employee contribution to a fund on or before due date Clause (24) of section 2 of the Act provides an inclusive definition of the income. Sub-clause (x) to the said clause provide that income to include any sum received by the assessee from his employees as contribution to any provident fund or superannuation fund or any fund set up under the provisions of ESI Act or any other fund for the welfare of such employees.

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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.86,905/- 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.14,75,170/- has been processed at Rs.15,62,080/- after making adjustment u/s. 143(1)(a)(ii) for Rs. 86,905/- 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. 86,905/- 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.

“I have considered the provisions of Act, case laws, grounds of appeal and statements of facts. I have carefully perused the submission filed by the assessee. 6.1 In this regard, it is pertinent to note Circular No. 22/2015 dated 17/12/2015 issued by the CBDT is as under: "3. Accordingly, w.e.f. 1.4.1988, the settled position is that if the assessee deposits any sum payable by it by way of tax, duty, cess or fee by whatever name called under any law for the time being in force, or any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, on or before the 'due date' applicable in his case for furnishing the return of income under section 139(1) of the Act, no disallowance can be made under section 43B of the Act. 5. It is clarified that this Circular does not apply to claim of deduction relating to employee's contribution to welfare funds which are governed by section 36(1)(va) of the IT. Act. 6.2 The ITAT, Ahmedabad in case of Morakhia Copper and Alloys (P.) [2020] 119 taxmann.com 214 (Ahmedabad - Trjb.) has held as under : "11. We have heard the rival contentions and perused the materials available on record. The issue arises before us whether the payment of employee contribution made by the assessee towards ESI are within the due date as specified under the relevant Act. In this regard, we note that the assessee has made the payment of employees

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contribution beyond the due date as specified under the relevant Act. Therefore, the same cannot be allowed as deduction. We also note that the identical issue has been decided vide order dated 15th Oct, 2018 by the Hon'ble Gujarat High Court in the case of M/s Checkmate Facility and 'Electronics Solutions Pvt. Ltd. v. DCIT reported in Tax Appeal No. 1256 of 2018 against the assessee. The head note reads as under: "Disallowance u/s 2(24)(x) r.w.s. 36(1)(va) Held that:- Provision requires an employer before paying .the employee his wages to deduct the employee's contribution along with the employer's own contribution as fixed by the Government. It is further required that he shall within fifteen days of the close of every month pay the same to the fund such contribution and administrative charges. If not so paid then no deduction 36(1)(va)" 11.1 From the above it is very clear that the payment under section 36(1)(va) would be allowed in respect to the payment of employee contribution towards ESI• if such payment is made on/before due date as specified under the relevant Act (i.e. 15 days from the month for which salary is due). Thus the payment made by the assessee on account of employee contribution towards ESI after due date stands disallowed in view of the judgment in the case of M/s Checkmate Facility and Electronics Solutions Pvt. Ltd. v. DCIT (supra). We uphold the order of the lower authorities. Hence the ground of appeal of the assessee is dismissed." 6.3 The head note of the decision of High Court of Kerala in case of Merchem Ltd. [2015] 61 taxmann.com 119 (Kerala) is as under: "Section 36(1)(va), read with sections 2(24)(x) and 43B,. of the Income-tax Act, 1961 - Employee's contributions (Section 36(1)(va) v. section 43B) 7 Assessment year 2010-11 - Whether section 36(1)(va) and section 43B(b) operate in different fields i.e. former takes care of employee's contribution and latter employer's contribution Held, yes - Whether, therefore, an assessee is entitled to get benefit of deduction • under section 43B(b) as provided under proviso thereto only withtregard .tosportien amount paid by employer to contributory fund - Held, yes -. Whether so far as employee's contribution is concerned, assessee is entitled to get deduction of amounts as provided under section 36(1)(va) only if amounts so received from employee is credited in specified account within due date as provided under relevant statute - Held, yes [Paras 19 and 30] [In favour of revenue]

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6.4 The head note of the decision of High Court of Gujarat in case of Gujarat State Road Transport Corporation [2014] 41 taxmann.com 100 (Gujarat) is as under: "Section 43B, read with section 36(1)(va) of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed on actual payment (Employees contribution) - Whether where an employer has not Credited sum received by it as employees' contribution to employees' account in relevant fund on or before due date as prescribed in Explanation to section 36(1)(va), assessee shall not be entitled to deduction of such amount though he deposits same before due date prescribed under section 43B i.e., prior to filing of return under section 139(1) - Held, yes - Assessee State transport corporation collected a sum being provident fund contribution from its employees - However, it had •deposited lesser sum in provident fund- account Assessing Officer disallowed same under section 43B - However, Commissioner (Appeals) deleted disallowance on ground that employees contribution was deposited before filing return - Whether since assessee had not deposited said contribution in respective fund account on date as prescribed in Explanation to section 36(1)(va), disallowance made by Assessing Officer was just and proper 'Held, yes [Para 8] [In favour of revenue]" 6.5 The head note of decision of High Court of Madras in case of Unifac Management ServiCes (India) Pvt. Ltd. [2018] 100 taxmann.com 244 (Madras) is as under : "Section 36(1)(va), read with sections 43B and 2(24)(x), of the Income-tax Act, 1961 - Employees contribution (General) - Whether sum received by assessee as an employer from employee is an income at hands of assessee, as per section 2(24)(x) and .said sum would be entitled for deduction only when ..it is paid to concerned authority within due date as per section 36(1)(va) and certainly, sum payable by assessee as an employer by way of his contribution towards beneficial fund cannot be treated as an income at his hand but only as an expenditure allowable for deduction when such payment is made in accordance with section 43B(b) - Held, yes - Whether 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 assessee-employer is entitled' to deduction in

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respect of sum paid (employees contribution to PE, ESI)'belatedly and therefore, for considering such question, application of section 36(1)(va), read with section 2(24)(x) alone is proper course and any other interpretation would only defeat object and scope of both provisions, viz., 43B and 36(1)(va) - Held, yes [Paras 18 to 27] [In favour of revenue] Section 43B, read with section 36(1)(va), of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed on actual payment - Employers 'contribution (General) Whether though an amendment has been introduced to section 43B, whereby actual date of payment is enough for considering deduction, if such date falls before date for filing return but in absence of any amendment made to section 36(1)(va), both contributions, viz., 'employees' and 'employers' cannot be brought under same scope and ambit of section 43B to claim deduction - Held, yes - Whether Circular No. 22/2015 dated 17-12-2015 , issued in consequence of amendment made td section 43B, to inform settled position that if assessee deposits contribution before due date for furnishing return, no disallowance can be made under section 43B, specifically excludes extension of such scope to employee's contribution governed by section 36(1)(va) - Held, yes [Para 19] [In favour of revenue]"

6.6 The head note of decision of ITAT , Delhi in case of Eagle .Trans Shipping & Logistics (India) ) Ltd. [2019] 109 taxmann.com 426 (Delhi - Trib.) is as under:

"Section 36(1)(va) of the Income-tax Act, 1961 - Employee's contributions (Allowability of deduction) - Assessment year 2013- 14 - Whether where assessee employer failed to deposit entire amount towards employees contribution on account of PF and ESI with concerned department on or before due date prescribed under relevant statutes; assessee would not be entitled to deduction under section 36(1)(va) - Held, yes [Paras 5, 9, 11. and 12] [In favour of revenue]"

6.7 The same view i.e. the assessee is entitled to deduction in respect of employees' contribution to ESI and EPF as provided under

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section 36(1)(va) only if same is paid within due date as specified under relevant statutes was held in the following decisions:

a) The High Court of Kerala in case of Popular Vehicles & Services (P.) Ltd. [2018] 96 taxmann.com 13 (Kerala)

b) The High Court of Gujarat in case of Suzlon Energy Ltd. [2020] 115 taxmann.corn 340 (Gujarat)

6.8 This is also to pertinent to note that a clarificatory amendment was brought in by the Finance Act 2021 by adding explanation 2 in Section 36(1)(va) and explanation 5 to section 43B. The• language of these explanations clearly 'Suggest that the amendment is retrospective and intent of legislature was never to apply provisions of section 43B on provisions of Section 36(1)(va).

Now section 36(1)(va) and section 43B after amendment by Finance Act, 2021 read as under:

"36. (1) The deductions provided for in the following clauses Shall be -allowed in - respect of the matters dealt with therein, in computing the income referred to in section 28—

(va) 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 11.—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.] [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

24 ITA No. 284 /JP/2021 Amit Singh vs. DCIT, CPC

to have been applied for the purposes of determining the "due date" under this clause; ]" “43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of – (b) any sum payable by the assessee as an employer by way of 63 contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him : [Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as .aforesaid and the evidence of such payment is furnished by the assessee along with such return. Explanation5.—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. 6.9 The ITAT, Delhi [ F-Bench] in case of Vedvan Consultants Pvt. Ltd. vs. DCIT, CPC [ ITA No. 1312/De1/2020 dated 26.08.2021] has held as under: " 12. The language of newly proposed explanation 2 to section 36(1)(va) and explanation 5 to section 43B makes it clear that the amendment is retrospective." 6.10 The Explanations inserted now in section 36(1)(va) or section 43B by Finance Act 2021 was not considered in any of the decisions cited by the appellant .

25 ITA No. 284 /JP/2021 Amit Singh vs. DCIT, CPC

6.11 In view of aforesaid discussions, it is held that the AO has correctly disallowed a sum of Rs. 86,905!- being employees contribution to PF / ESI as the appellant failed to deposit the same within due dates specified in the respective Acts by invoking provisions of section 36(1)(va) nw.s. 2(24)(x) and provisions of section 43B are not applicable to the employees contribution to PF/ESI. To conclude, all the grounds of appeal are dismissed: 7. Accordingly, the appeal is treated as Dismissed.”

26 ITA No. 284 /JP/2021 Amit Singh vs. DCIT, CPC

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 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

27 ITA No. 284 /JP/2021 Amit Singh vs. DCIT, CPC

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. (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

28 ITA No. 284 /JP/2021 Amit Singh vs. DCIT, CPC 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. 284 /JP/2021 Amit Singh vs. DCIT, CPC 20. By considering the totality of the facts and the various judicial pronouncements, we are of the view 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 2 is 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 under consideration i.e. 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue raised in assessee’s appeal is allowed.

In the result, the appeal of the assessees is allowed.

Order pronounced in the open Court on 29/03/2022.

Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼,l-lhrky{eh½ (Dr. S. Seethalashmi) (RATHOD KAMLESH JAYANTBHAI) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 29/03/2022. *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Amit Singh, Alwar. 1. izR;FkhZ@ The Respondent- DCIT, CPC, Bangalore. 2. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. xkMZ QkbZy@ Guard File { ITA No. 284/JP/2021} 6. vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत