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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
Per Dr. M. L. Meena, A.M.:
These appeals are filed by different assessees against the order of
the ld. CIT (Appeal) regular and National Faceless Appeal Centre, (NFAC),
Delhi, in respect of the Assessment Years: 2017-18 to 2019-20 as above
on the common issue of claim of deduction of varying amount of
employees' contribution to EPF & ESI which have been deposited prior to
the due date of filing of return of income of income u/s 139(1) of the Act.
Since the common issue of claim of deduction of employees'
contribution to EPF & ESI, on identical facts being involved, except varying
3 ITA No. 159/Asr/2022 & Ors Gurinder Kaur v. ITO & Ors amount of deduction claim and the short delay in filing of the 2 appeals.
Therefore, these appeals are adjudicated by this common order for the
sake of brevity.
There has been delay of 1 day and 11 days in filing appeal in ITA
Nos. 122/ASR/2022 and 37&38/ASR/2022 respectively, were being
explained as circumstances beyond the control of the assessee. The Ld.
DR has no objection. Accordingly, the aforesaid short delay in filing these
appeals is hereby condoned and the appeals are admitted for merits.
At the time of hearing, Shri Sudhir Mehar, the counsel for the
assesses in I.T.A. No. 159/Asr/2022 explained the claim of the appellant
and in other appeals written submission were received in support of their
claims. Admittedly, the appellants deposited the employees' contribution to
PF & ESI before the due date of filing of the income tax return. It was
argued, the Ld. CIT(A) was not justified in sustaining the adjustment made
by the A.O.-CPC, on account of belated payment of employees’
contribution to EPF & ESI, although before the due date of filing the return
of income U/s 139(1) of the Act, ignoring the decision of the coordinate
bench in the case of “Jupiter Aqua Lines P. Ltd vs. DCIT in ITA No.
83/Chd/2021 dated 27.08.2021. It was also submitted that the amendment
to section 36(1)(va) and u/s 43B of the Act, by the Finance Act 2021 is
4 ITA No. 159/Asr/2022 & Ors Gurinder Kaur v. ITO & Ors applicable prospectively and the Notes on Clauses specifically states that
the amendment being applicable in relation to assessment year 2021-22
and subsequent years. Accordingly, It is prayed that on the facts and
circumstances of the cases, the assessees are entitle to deduction of
employees' contribution to EPF & ESI as per principle of law laid down by
the higher judicial forums granting relief to the deposits made prior to filing
of return of income u/s 139(1).
The Ld. Addl. CIT(DR) stands by the impugned orders.
In the latest decision, in ITA No. 131/Asr/2022 & Ors, in the case
of Parminder Singh & Ors v. ITO, we had followed coordinated bench
decision in I.T.A. No. 55/Asr/2022 M/s Royal Furnishes, Jammu, dated
11.08.2022, while granting relief to the appellants on the same issue. The
relevant part of the tribunal decision in M/s Royal Furnishes, Jammu reads
as under:
“8. We have heard both the sides and perused the material on record. Admittedly, the addition was made in the intimation u/s 143(1) of the act dated 01/05/2020 on account of delayed payments of Employees contribution to Provident Fund and ESI account, as per PF and ESI Act, although before the due date of filing of return of income u/s 139(1) of the Act.
In the case of ‘Vinko Auto Industries Ltd Vs. DCIT’, CPC, Bangalore in ITA No. 63 & 64/ASR/2021 dated 08/11/2021 the tribunal observed on a specific query as regards to the amendments made available on the statue vide the Finance Bill, 2021 i.e “Explanation 5” to Section 43B and “Explanation 2” to section 36(1)(va) of the Act qua the adjudication of the issue in hand, that as
5 ITA No. 159/Asr/2022 & Ors Gurinder Kaur v. ITO & Ors both of the said amendments were prospective in nature and that were effective from 01.04.2021. Therefore, the same would not be applicable to the present case of the assessee which pertained to a period prior to the aforesaid amendments.
Thus, the amendments were made available on the statue vide the Finance Act, 2021 i.e “Explanation 5” to Section 43B and “Explanation 2” to Section 36(1)(va) were clarificatory in nature and would be applicable to the earlier years, as was claimed by the department, or, were applicable prospectively, as claimed by the assessee, had exhaustively been deliberated upon and answered in favour of the assessee by the tribunal.
The ld. CIT(A) has merely stated that the issue has been highly contentious and different High Courts have taken divergent views on the same issue, out of which some are in favour of the assessee and some are against the assessee. The ld. CIT(A) further observed that the judgments and orders relied upon by the assessee have been rendered before the clarificatory amendments made in the Finance Act, 2021 and the Finance Act, 2021 has put an end to this controversy.
Admittedly, there are plethora of judgments in favour of the Assessee’s contention and of the Revenue. The controversy with regard to divergent views of different High Courts, has been settled by the Hon'ble Apex Court in the case of CIT Vs. M/s. Vegetables Products Ltd. (88 ITR 192) by laying the dictum that if two reasonable constructions of a taxing provision are possible that construction which favours the Assessee must be adopted. The Hon’ble jurisdictional High Court in the case of CIT Vs. M/s Hemla Embroidery Mills (P) Ltd. (366 ITR 167) (P&H HC) and in the case of CIT Vs. M/s Mark Auto Industries Ltd. (358 ITR 43) (P&H HC) clearly held that the assessee is entitled to claim deduction of employee’s share of ESI & PF u/s.43B of the Act, if the same has been deposited prior to the filing of return of income u/s.139(1) of the Act. Admittedly, there are no contrary judgements of the jurisdictional High Court against the assessee on the aspect under consideration hence, first determination of the Ld. CIT(A) qua non-applicability of the provisions of Section 43B of the Act to the employee’s share qua PF & ESI, is unsustainable.
On the basis of our aforesaid deliberations, we are of the considered view, that as the amendments made available to the statue vide the Finance Act, 2021 i.e “Explanation 5” to Section 43B and “Explanation 2” to Section 36(1)(va) are applicable w.e.f 01.04.2021 i.e. from A.Y 2021-22 onwards, therefore, the same would not have any bearing on the case of the assessee before us i.e for
6 ITA No. 159/Asr/2022 & Ors Gurinder Kaur v. ITO & Ors A.Y 2019-20. Accordingly, as per settled position of law as laid down as per the aforementioned judicial pronouncements, we, conclude, that since, the employee’s contributions to PF and ESI of Rs. 6,39,490/- was deposited by the assessee before the “due date” of filing of its return of income for the year under consideration, and hence, in the instant case, the provisions of Sec. 43B of the Act are not applicable, and accordingly, the disallowance of Rs. 6,39,490/- on account of contribution of PF and ESI account not be approved.
Respectfully following the coordinate bench decision, we hereby set
aside the orders of the ld. CIT(A)/NFAC and delete the additions made on
account of late payment of employee’s contribution to PF and ESI account.
In ITA No. 122/ASR/2022, in case of M/s Kosmo Vehicles Pvt. Ltd.
the Ld. PCIT has invoked revisionary proceeding u/s 263 of the Act holding
the Assessment Order erroneous and prejudicial to the interest of revenue
without appreciating the facts and the submission of the assessee. In our
view, the Ld. PCIT was incorrect in observing that the appellant should
have shown equal amount of income to the extent of the claim of EPF and
ESI deduction without pointing out any defect in the books of account and
the accounting of the EPF and ESI in particular. Accordingly, such an order
passed on mere presumption and assumption without support of
corroborative evidence that how the assessment order is erroneous and
prejudicial to the interest of revenue, the action u/s 263 of the act, can not
be sustained. We, therefore, hereby quash the PCIT’s order passed U/s
263 of the Act.
7 ITA No. 159/Asr/2022 & Ors Gurinder Kaur v. ITO & Ors 9. In the result, the subject appeals of the assessees are allowed.
Order pronounced in the open court on 12.09.2022.
Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr.PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T.