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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2019-20) Adani Electricity Mumbai Ltd., Vs. AO CPC, Bangalore, Adani Corporate House, Shantigram, (Jurisdictional AO: DCIT Nr. Vaishno Devi Circle, Circle-1(1)(1), Ahmedabad) S.G. Highway, Khodiyar, Ahmedabad-382421 [PAN No.AADCD0086F] (Appellant) .. (Respondent) Shri Dhrunal Bhatt, A.R. Appellant by : Respondent by: Shri Rignesh Das, Sr. DR Date of Hearing 01.10.2024 14.10.2024 Date of Pronouncement O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), ADDL/JCIT (A)-4, Hyderabad vide order dated 30.01.2024 passed for A.Y. 2019-20.
2. The Assessee has taken the following grounds of appeal:-
“1. In law and on the facts and in the circumstances of the case, the order u/s 250 of the Act passed by the Ld. CIT (A) is arbitrary, erroneous, contrary to the provisions of law and on facts.
In law and in the facts and circumstances of the case of the Appellant, the order u/s 250 of the Income Tax Act, 1961 passed by Ld. CIT(A) is without considering the facts of the case and submissions made by the appellant, is bad in law and deserves to be cancelled.
In law and in the facts and circumstances in the case of the appellant, the Ld. CIT(A) has grossly erred in upholding adjustment of Rs. 3,34,28,177/- on account of payment of employees’ contribution to National Pension Scheme (NPS) under section 36(1)(va) of the Act, made while passing intimation order u/s 143(1) of the act. The Ld. CIT(A) ought to have appreciated that no due date of payment is prescribed for payment Adani Electricity Mumbai Ltd. vs. DCIT Asst.Year –2019-20 - 2– of such employees’ contribution to NPS and payment has been immediately made by appellant.
4. The appellant craves leave to add to alter, amend and/or withdraw any ground or grounds of appeal
either before or during the course of hearing of the appeal.”
3. The brief facts of the case are that the assessee Company initially filed its original return of income on September 25, 2019, and later submitted a revised return on January 1, 2020, declaring a total loss of Rs. (-) 10,06,36,03,425/- under the normal provisions of the Income Tax Act, while also reporting a book profit of Rs. 1,93,74,48,309/- under Section 115JB of the Act. Subsequently, the assessee received an intimation under Section 143(1) from the Central Processing Centre (CPC) in Bangalore on July 24, 2020. This communication determined the total loss at Rs. (-) 10,03,01,75,248/-, which was a modification from the loss amount stated in the revised return. In the course of assessment proceedings, the Assessing Officer at the CPC made a disallowance under Section 36(1)(va) concerning employees' contributions to the National Pension Scheme (NPS), amounting to Rs. 3,34,28,177/-. Being aggrieved by this disallowance, the assessee appealed to the Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (CIT(A)-NFAC), in which the CIT(A) upheld the Assessing Officer's disallowance of Rs. 3,34,28,177/- for the employees' contribution to the NPS. The CIT(A) drew a parallel between the case at hand and the established judicial precedents related to employees' contributions to Provident Funds (PF) and Employees' State Insurance (ESI). Ld. CIT(Appeals) observed that the amount of Rs. 3,34,28,177/- represented late payments of employee contributions to the NPS. Ld. CIT(Appeals) observed that the core issue revolves around the addition of Rs.
Adani Electricity Mumbai Ltd. vs. DCIT Asst.Year –2019-20 - 3– 3,34,28,177/- as unpaid employee contributions to the National Pension Scheme, with the assessment made under Section 43B of the Income Tax Act. The assessee contended that this amount was deposited belatedly but prior to the filing of the income tax return as per Section 139(1), thereby asserting that it should be allowed as a deduction according to the law. It was submitted by the assessee that legal precedents indicate that contributions such as those for Provident Funds (PF) and Employees' State Insurance (ESI), even if paid late, can still be claimed as deductions under Section 43B, provided the payments are made before the return filing deadline. This stems from the interpretation that these contributions fall under the purview of Section 43B(b) of the Act. However, a contradictory trend in various court rulings suggests that Section 43B predominantly applies to employer contributions, thereby leading to disallowances for late payments of employee contributions, a matter that has created considerable debate. Significantly, Ld. CIT(Appeals) observed that amendments introduced in the Finance Bill of 2021 provided clarity on this issue through the insertion of Explanations to Sections 43B and 36(1)(va) of the Act. Explanation 5 to Section 43B clarifies that its provisions do not apply to amounts received from employees, and Explanation 2 to Section 36(1)(va) similarly states that Section 43B is irrelevant for determining due dates in this context. The legal language in these Explanations clearly indicates that, so far as employee contributions to PF and ESI is concerned, the provisions of Section 43B "shall not apply and shall be deemed never to have been applied." Further, Ld. CIT(Appeals) observed that the legal definition under Section 2(24)(x) includes employee contributions as Adani Electricity Mumbai Ltd. vs. DCIT Asst.Year –2019-20 - 4– part of income, allowing a corresponding deduction when such payments are made. The question then arises whether Section 43B would apply to these employee contributions. A straightforward reading of the relevant sections and the historical context reveals that Section 43B(b) pertains solely to employer contributions, which aligns with the intentions of the Legislature as articulated in the 1983 Finance Bill Memorandum. The memorandum explicitly refers to "employer's contribution" and does not mention “employee contributions”, underscoring the intent to exclude the latter from the provisions of Section 43B. The recent amendments merely reinforce this original legislative intention, clarifying that Section 43B has never applied to employee contributions. Accordingly, Ld. CIT(Appeals) dismissed the appeal of the assessee in light of the aforesaid observations.
The assessee is in appeal before us against the order passed by Ld. CIT(Appeals).
Before us, the Counsel for the assessee submitted that the Learned Commissioner of Income Tax (Appeals) has issued a decision based on an assumption that the issue at hand is comparable to the late payments of employees' contributions to the Provident Fund (PF) and Employee State Insurance (ESI), which is not the case. The Counsel for the assessee submitted that the CIT(A) overlooked crucial details, particularly that the National Pension Scheme (NPS) is governed by the Pension Fund Regulatory and Development Authority (PFRDA) and that the PFRDA Act, 2013 does not specify a due date for contributions to NPS accounts. To clarify the context, the Counsel Adani Electricity Mumbai Ltd. vs. DCIT Asst.Year –2019-20 - 5– for the assessee provided an overview of the NPS, explaining it as a pension and investment initiative by the Government of India designed to offer old-age security to citizens. It was submitted that the NPS is a regulated scheme that allows individuals, including those in the public, private, and unorganized sectors, to contribute regularly toward their pension. This program aims to create a corpus for retirement, with portions of the corpus available for withdrawal at retirement and the remaining amount disbursed as a monthly pension thereafter. The NPS has evolved to become accessible to all Indian citizens, fostering a culture of saving for retirement, and it offers tax benefits under Sections 80C and 80CCD of the Income Tax Act. The Counsel for the assessee submitted before us that contributions to the NPS can occur in two ways: individuals may contribute directly, availing deductions under sections 80CCD(1) and 80CCD(1B), or through their employer, which allows for deductions under section 80CCD(2). In the assessee's scenario, employees contribute through the assessee company, necessitating the company to make these payments, which the assessee submits were made before the filing of the return of income. This assertion of the assessee is supported by evidence from the tax audit report, indicating that all contributions were made timely before the specified due date of September 30, 2019. The Counsel for the assessee submitted that CIT(A) failed to appreciate the absence of a due date set by the PFRDA for NPS payments, and thereby erroneously applied principles relevant to PF and ESI contributions. Furthermore, the Counsel for the assessee submitted that the CIT(A) disregarded the evidence and arguments presented during the appeal, which reflects a lack of thorough Adani Electricity Mumbai Ltd. vs. DCIT Asst.Year –2019-20 - 6– consideration that is deemed unacceptable in judicial proceedings. Moreover, the Counsel for the assessee relied on favorable rulings ITAT Ahmedabad in other group cases, where employee contributions to NPS were recognized as valid when made before the return filing deadline. The appellant submitted that these precedents demonstrate that the disallowance by the Assessing Officer was unjustified.
In response, the Ld. DR during the course of hearing, drew attention of the Bench to Central Civil Services (Implementation of National Pension System) Rules, 2021 on the issue of the date by which employees' contribution NPS has to be deposited.
In counter to this contention of the Ld. DR, the Counsel for the assessee reproduced an extract from above stated Rules and submitted that these rules shall only apply to the Government servants, including civilian Government servants in the Defence Services, appointed substantively to Civil Services and posts in connection with the affairs of the Union. Therefore, these are not applicable to employees of the assessee company.
We have heard the rival contentions and perused the material on record. We observe that in the case of Adani Petronet (Dahej) Port (P.) Ltd.165 taxmann.com 531 (Ahmedabad - Trib.) the assessee- company which was engaged in port activities, filed its return of income claiming employees contribution under any other welfare fund namely National Pension System (NPS) as business expenditure. The Assessing Officer disallowed the said amount on ground that such remittances were made beyond date as prescribed in respective Adani Electricity Mumbai Ltd. vs. DCIT Asst.Year –2019-20 - 7– Pension Fund Regulatory and Development Authority Act, 2013 and the said amount was added to income of assessee and tax demanded thereon. The ITAT noted that there was no due date prescribed in respective PFRDA Act, 2013 as to when payment was required to be made to NPS account. Further, all payments were duly made before filing of return of income as per section 139(1) of the Act. The ITAT held that the impugned adjustment made on payment under NPS was not justified and amount in question was to be treated as allowable under Section 43B(b) of the Act. While passing the order, the ITAT made the following observations:
7. We have given our thoughtful consideration and perused the materials available on record. It is seen from the Return of Income, the assessee made deposit of Rs.8,19,544/- being Employees contribution under any "other welfare fund" namely National Pension System (NPS). On perusal of the Tax audit report, it is seen that the contribution is made under NPS before due date of filing Return of Income. NPS is regulated by Pension Fund Regulatory and Development Authority and PFRDA Act, 2013. There is no due date prescribed by the PFRDA as to when the payment is required to be made to the NPS account. Further section 12[3][iii] of the PFRDA Act, 2013 clearly prohibits the provisions of this Act shall not apply to the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. Thus the impugned adjustment made on the payment under NPS by CPC is not justified as there is no due date prescribed in the respective PFRDA Act, 2013 and all the payment has been duly made before filing of the Return of Income as per section 139[1] of the Act. Therefore the amount of Rs.8,19,544/- is treated to be allowable u/s.43B[b] of the Act and therefore the addition made by CPC is liable to be deleted. Further we observe when the assessee had replied to the communication to the CPC and explaining the above facts, CPC is not correct in ignoring the reply and making the disallowance in the 143[1] proceedings. Thus the Grounds of Appeal
raised by the assessee are hereby allowed.
8. In the result the appeal filed by the assessee is hereby allowed.
9. Again in the case of Adani Hazira Port Ltd. vs. DCIT in vide order dated 30.07.2024, while dealing with the similar issue, the Tribunal made the following observations:
“7. We have given our thoughtful consideration and perused the materials available on record. It is seen from the Return of Income, the assessee made deposit of Rs.29,85,610/- being Employees contribution under any “other welfare fund” namely National Pension System (NPS). On perusal of the Tax audit report, it is seen that the contribution is made under NPS before due date of filing Return of Income. NPS is regulated by Pension Fund Regulatory and Development Authority and PFRDA Act, Adani Electricity Mumbai Ltd. vs. DCIT Asst.Year –2019-20 - 8– 2013. There is no due date prescribed by the PFRDA as to when the payment is required to be made to the NPS account. Further section 12[3][iii] of the PFRDA Act, 2013 clearly prohibits the provisions of this Act shall not apply to the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. Thus the impugned adjustment made on the payment under NPS by CPC is not justified as there is no due date prescribed in the respective PFRDA Act, 2013 and all the payment has been duly made before filing of the Return of Income as per section 139[1] of the Act. Therefore the amount of Rs.29,85,610/- is treated to be allowable u/s.43B[b] of the Act and therefore the addition made by CPC is liable to be deleted. Further we observe when the assessee had replied to the communication to the CPC and explaining the above facts, CPC is not correct in ignoring the reply and making the disallowance in the 143[1] proceedings. Thus the Grounds of Appeal raised by the assessee are hereby allowed. In the result the appeal filed by the assessee is hereby allowed.” 8.
10. Further, it would also be useful to reproduce the Notification dated 31.03.2021 issued by the Department of Pension and Pensioners’ Welfare which specifies that the National Pension System Rules, 2021 shall apply only to Government servant and not to public at large:
In view of the above notification, we note applies specifically to Government Servants including Civilian Government Servant in Defence Services.
Accordingly, in light of the above discussion and the judicial precedents on the subject, the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 14/10/2024