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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
आदेश/ORDER PER :SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER :- This assessee’s appeal for A.Y. 2019-20, arises from order of the National Faceless Appeal Centre (NFAC), Delhi dated 23-07-2021, in DIN & Order No. ITBA/NFAC/S/250/2021-22/1034379713(1), proceedings under section 154 of the Income Tax Act, 1961; in short “the Act”.
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The assessee has taken the following grounds of appeal:-
“1 The learned CIT(Appeals) have erred in confirming the disallowance of employee’s contribution u/s. 36(1)(va) amounting to Rs. 1,82,898/- 2. The learned CIT(Appeals) has erred in not at all dealing and ignoring the vital fact of the case that there is no delayed payment of the employees dues but it is a case of merely an interchange of columns due to System error in generating XML file
The Appellant craves and reserve the right to add, to vary and/or to modify the ground of appeal.”
The brief facts of the case are that the assessee received intimation under section 143(1) of the Act, with an addition under section 36(1)(va) of the Act on account of lesser payment of ESI thereby creating a demand of � 57,065/- on account of addition of � 1,82,898/-. The said demand amount was adjusted against the refund of � 2,38,065/- from the ADIT-CPC, Bangalore. The assessee filed Rectification Appellation under section 154 of the Act. However, CPC-Bangalore rejected the rectification application for the reason that as per the demand/preferred position in the latest order passed by CPC under section 143 (1)/154, there is no change in the income declared/tax credits available.
The assessee preferred appeal before Ld. CIT(Appeals), who rejected the assessee’s appeal with the following observations:
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“4.1 The present appeal is against Rs. 1,82,898/- disallowance was made u/s.36(1)(va) in the order u/s 154 for failure of the appellant to pay the employees' contribution to PF/ESI before the prescribed due dates under the relevant Acts . However, it is the contention of the appellant that since the amount has been paid before the due date for filing of return of income u/s.139(1), the same ought to be allowed as a deduction as per the case laws cited. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 5.5 Any failure to pay within the prescribed dates leads to different results. In the case of employee's contribution, any failure to, pay within the prescribed due date under the respective PF Act or Scheme will result in negating employer's claim for deduction permanently forever u/s. 36(1)(va). This legal distinction between employees' contribution and employer’s Contribution under the Act was duly recognised by the Courts also. In the most recent of the decisions, Hon'ble Madras High Court in UnifacManagement Services (India) (IP.) Ltd. vs DCIT in 409 ITR 225 held 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 assessee 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 assessee/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
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course and any other interpretation would only defeat the object and scope of both the provisions viz., 43B and 36(1)(va). [Para 27]" 6. The case laws relied by the applicant are not relevant to the present case after the recent amendments in the Finance Act, 2021. The provisions of Finance Act have been amended by the Government by adding another Explanation to section 36(1 )(va) clarifying that provision of section 43B does riot apply and deemed to never have been applied for the purpose of determining the 'due date" under this clause; and amend Section 43B, 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 2(24)(x) applies. The following amendments to the relevant sections as per The Finance, 2021 (No.13 of 2021) reads as under: "9. Amendment of section 36. 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; 11. Amendment of section 43B. In section 43B of the Income-tax Act, after Explanation 4, the following Explanation shall be inserted, namely:--
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"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." Thus, the Finance Act 2021 has Clarified that definition of due dates as per Sec 43B is deemed never to have been applied for the purpose of Employee's Contribution. Therefore, the payment employee's contribution made after the due date, by which the appellant is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under Employee Provident Fund Scheme, is liable to be added to the income of appellant. 7. The order u/s.154 of AO is therefore, fully confirmed. Hence, the appeal is dismissed.”
Before us, the counsel for the assessee submitted that all the ESI amounts have been paid within the statutory time limits under the ESI Act. The counsel for the assessee stated that it was owing to a software error in filing Audit Report that the columns got interchanged, leading to the present misunderstanding. The counsel for the assessee drew our attention to pages 96-107 (copies of Challaans for payment of Employees State Insurance Corporation) of the paper book to point out that all ESI contributions have been paid before the due dates as per the relevant Act. Accordingly, it was submitted that the matter may kindly be restored to the file of AO to carry
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out the necessary verifications. The DR also did not object to the matter being restored to the file of the AO for the same.
Therefore, in the interests of justice, we are restoring the matter to the file of the AO to carry out the necessary verification to ascertain if the payments have been made within due date under the ESI/relevant Act.
In the result, the appeal of the assessee is allowed for statistical purposes.
Sd/- Sd/- (WASEEM AHMED) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 20/10/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order,
Assistant Registrar, Income Tax Appellate Tribunal, Rajkot