SAVITRI WOOD PRODUCTS,HOSHIARPUR vs. INCOME TAX OFFCER WARD-4, HOSHIARPUR

In the case of ‘Vinko Auto Industries Ltd Vs. DCIT’, CPC, Bangalore in & 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 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 6 & Ors Parminder Singh & Ors v. ITO & Ors 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 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 7 & Ors Parminder Singh & Ors v. ITO & Ors 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.