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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. SUCHITRA KAMBLE & SHRI BHAGIRATH MAL BIYANI
PER SUCHITRA KAMBLE, JUDICIAL MEMBER :
This appeal is filed by the assessee against the order dated 04.08.2021 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2018-19.
The grounds of appeal raised by the assessee are as under :
“1. The Learned CIT(A) NFAC haven taken a contrary view and decided the appeal against the assessee:
(i) CIT(A) relied upon to the CBDT Circular No.22/2015 as well as section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act and held that the contribution to PF and ESI is up to the due date provided in the respective statement is allowable deduction and not up to due date of filing of return.
(ii) CIT(A) has also referred the provisions of Section 36(1)(va) as well as Section 43B which have been amended to this extent by
ITA No.175/Ind/2021 A.Y. 2018-19 Page 2 of 6 inserting explanation 2 by the Finance Act 2021, produced as under : “[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;].”
The enactment of para (ii) above is applicable from the Assessment Year 2021-2022. The learned CIT(A), NFAC has erred on relying newly amended provisions of Section 43B as well as 36(1)(va). But same are not applicable for the assessment year under consideration.
The learned CIT(A) NFAC erred in confirming the additions of Rs.23,03,667/- made by DCIT CPC without considering our submissions made by the Appellant.
The learned CIT(A) NFAC has erred by ignoring/omitting the various Judicial decisions on this issue, In the case of Commissioner vs. Extrusions Limited, 185 TAXMAN 416 (SC), the Apex Court held that the amendments made in section 43B of the Act i.e. deletion of section proviso and amendment in the proviso, being curative in nature are retrospectively applicable from 1.4.1988. It further held that by deleting the second proviso to section 43B of the Act and amending the first proviso, the contribution to welfare funds have been brought at par with the other duty, cess, fee, etc. Thus the proviso is equally applicable to the welfare funds also. Therefore the deduction is allowable to the employer if he deposits the contributions to welfare funds on or before the ‘due date of filing of return of income.
The learned CIT(A) NFAC has erred by ignoring the fact that if the employee’ contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Relevant Acts permit the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income Tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Supreme Court in Vinay Cement (supra).
The assessee derives income from business. Return of income was e-filed on 25.10.2018 showing a total income of Rs. 37,13,420/-. In the intimation under Section 143(1), the Assessing Officer determined the total income at Rs. 60,17,087/- after disallowance of Rs. 23,03,667/- under Section 36(1)(va) of the Act.
ITA No.175/Ind/2021 A.Y. 2018-19 Page 3 of 6 4. Being aggrieved by the assessment order, the assesse filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assesse.
At the time of hearing none appeared on behalf of the assesse, therefore, we are taking the submissions of the assessee mentioned in the Assessment Order as well as the order of the CIT(A) as contentions before us. The assesse submitted before the revenue as well as appellate authorities that the sole issue in the present assessment is related to upholding addition of Rs.23,03,667/- under Section 36(1)(va) of the Act in respect of delay in payments of Employee’s contribution of Provident Fund/Employees’ State Insurance. The assessee further submitted that the Centralized Processing Centre (CPC) has made the said addition without appreciating that the same was deposited within the time available to the assessee under Section 43B of the Act i.e. before filing the return of income. The assessee further submitted that the assessee claimed the benefit of Section as the issue is covered in favour of the assessee by the various decisions of the Hon’ble High Courts across the country most specifically that of the decision of Hon’ble Delhi High Court in the case of AIMIL Limited (2010) 321 ITR 508. The assessee submitted that prima facie adjustment under Section 36(1)(va) of the Act could not be made as the same was beyond the scope of provisions of Section 143(1) of the Act and that the said adjustment was made giving the assessee opportunity of being heard. The assessee challenged the action of the CPC in invoking provisions of Section 143(1)(a)(iv) of the Act based on the Audit Report. The assessee submitted that the Visakhapatnam Bench of the Tribunal in the case of M/s. S.V. Engineering Constructions India (P) Limited vs. DCIT (ITA No.130/Viz/2021) has categorically held that the issue on account of late payment of employee’s contribution to Provident Fund and Employees State Insurance Corporation is debatable in nature and is outside the purview of Section 143(1) of the Act. The assessee further relied upon the following decisions wherein it is held that in case of debatable issues, the assessee will get the benefit of the decisions which are in the favour of assessee: * Bajaj Auto Finance Limited vs. CIT (2018), 93 Taxmann.com 63 (Bom.HC) * CIT vs. Nagarjuna Fertilizers and Chemicals Limited (2015) 232 Taxmann 349 (Andhra Pradesh HC) * DCIT vs. Raghuvir Synthetics Limited in Appeal No.333 of 2004 (Guj. HC) * Kamal Textiles vs. ITO (1991) 59 Taxmann 555 (M.P. HC)
ITA No.175/Ind/2021 A.Y. 2018-19 Page 4 of 6 6. The Ld. D.R. submitted that the CIT(A) has rightly dismissed the appeal of the assessee thereby stating that the Finance Act, 2021 has amended Section 43B of the Act as well as Section 36(1)(va) by inserting Explanation 5 to Section 43B of the Act and Explanation 2 to Section 36(1)(va) of the Act wherein it is categorically stated that the provisions of these Sections 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 as well as it will never be applied for the purpose of determining “due date” under this clause. The Ld. D.R. further submitted that though the insertion of this explanation are w.e.f. 01.04.2021, it is clarificatory in nature and, therefore, it will be applicable retrospectively in the light of the decision of Hon’ble Apex Court in the case of Zile Singh vs. State of Haryana (2014) 5 SCC 1. The explanations’ will be applicable for earlier assessment years as well. The Ld. D.R. further submitted that the contribution made by employees have been deposited after the due date of statutory time limit under the PF Act as well as Employees State Insurance Act. The Ld. D.R. submitted that these statues are beneficial legislation and the due date should be adhered to. As regards various decisions cited by the assessee, the Ld. D.R. submitted that these decisions are contrary to the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Gujarat State Road Transport Corporation, reported in (2014) 41 taxmann.com 100 (Guj.) holding that employees' contribution to the Employees' Provident Fund (EPF) and Employees' State Insurance Corporation (ESIC) deposited beyond the due date prescribed u/s.36(1)(va) of the Income Tax Act, 1961 would not be eligible for deduction u/s. 43B of the Act even after deposited before the due date of filing of tax return. The Ld. DR also relied upon the decision of the Delhi High Court in the case of CIT vs. Bharat Hotels Limited 410 ITR 417 which held against the assessee. The Ld. DR also relied upon the recent decision of the Hon’ble Gujarat High Court in case of Pr. CIT vs. M/s Suzlon Energy Ltd. R/Tax Appeal No. 860 of 2019 order dated 11.02.2020.
We have heard Ld. DR and perused all the relevant materials available on record. The CIT(A) has confirmed the disallowance on the ground that insertion of Explanation 2 and 5 in Section 43B, 36(1)(va) by Finance Act 2021 is retrospective in nature. Therefore, the payment made to the contribution related to employee’s contribution of PF and ESI and after the due date of statutory limit under those Statute
ITA No.175/Ind/2021 A.Y. 2018-19 Page 5 of 6 but before filing of the return of income was rightly disallowed by the Assessing Officer. Section 36(1)(va) of the Act has stated that any sum received by the assessee from any of his employees to which the provisions of the sub-clause (x) of clause (24) of Section 2 applies 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. Prior to Finance Act, 2021 there was no explanation to the word “due date” given and, therefore, the due date was interpreted by various High Courts as being the due date of filing return of income. As the due date was not specified in the earlier occasion, the Finance Act, 2021 has inserted explanation 1 to the Section thereby clarifying that due date means the statutory due date given under the specific Statute. This amendment/insertion is not clarificatory in nature and therefore not retrospective as there is clear mention in the Finance Act that this explanation will come w.e.f. 01.04.2021, thus it will be applicable to A.Y. 2021-22 and subsequent A.Ys. The assessee’s appeal is of 2018-19 which is prior to this explanation. The reliance of the Ld. D.R. upon the decision of Hon’ble Apex Court in the case of Zile Singh (supra) in fact supports the assessee’s case and clearly set out that when there is specific effective date given by the Act, the amendment/Insertion/deletion will be effective from that date itself and if there is no mention of retrospective word then it will not be applicable to the earlier dates. Though the assessee categorically stated that some of the Hon’ble High Courts has decided this issue against the assessee but majority of the Hon’ble High Court decisions are in favour of the assessee where employee’s contribution was paid after the due date but before filing of Income Tax return. The assessee company has not deposited the employees' contribution within the due date which is prescribed under the said statute i.e. Provident Fund and ESI. This issue is dealt by the Hon'ble Delhi High Court in case of CIT vs. M/s Bharat Hotels Ltd. 410 ITR 417 wherein the issue is decided in favour of the Revenue, without considering the decision of the Hon'ble Delhi High Court in case of CIT vs. AIMIL Ltd. (2010) 321 ITR 508 (Del.). But the decision of the Hon'ble Delhi High Court in case of Pr. CIT vs. Pro Interactive Service (India) Pvt. Ltd. ITA No. 983/2018 pronounced on 10.09.2018, the Hon'ble High Court decided the issue in favour of the assessee relying upon the judgment of AIMIL Ltd. (supra). The Hon'ble Delhi High Court held that the legislative intent is to ensure that the amount paid is allowed as expenditure only when payment is actually made. We do not think that
ITA No.175/Ind/2021 A.Y. 2018-19 Page 6 of 6 the legislative intent and objective is to treat belated payment of Employee's Provident Fund (EPF) and Employee's State Insurance Scheme (ESI) as deemed income of the employer under Section 2(24)(x) of the Act. It is settled law that when two judgments are available giving different views then the judgment which is in favour of the assessee shall apply as held in case of Vegetable Products Ltd. 82 ITR 192 by the Hon'ble Supreme Court. Hence, in light of the latest decision in case of Pro Interactive Service (India) Pvt. Ltd., the issue is covered in favour of the assessee. Therefore, the CIT(A) as well as the Assessing Officer was not at all justified in disallowing this claim. Thus, the order of the CIT(A) is not just and proper. The appeal of the assessee is thus allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on this 30th day of March, 2022.
Sd/- Sd/- (BHAGIRATH MAL BIYANI) (SUCHITRA KAMBLE) Accountant Member Judicial Member Indore, the 30th day of March, 2022 PBN/*
Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY
Assistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore