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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI ARUN KHODPIA
आदेश / ORDER PER BENCH: The captioned appeals filed by the aforementioned assessee’s are directed against the respective orders passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, which in turn arises from the respective intimations issued by the A.O
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under Sec. 143(1) of the Income-tax Act, 1961 (in short ‘the Act’) for the respective assessment years. As common issues are involved in the aforementioned appeals, therefore, the same are being taken up and disposed off together by way of a consolidated order.
We shall take up the appeal in ITA No.53/RPR/2022 for the assessment year 2017-18 as the lead matter and the order therein passed shall mutatis-mutandis apply to the remaining cases. Before us the assessee has assailed the impugned order on the following grounds of appeal: “1. That on the facts and in the circumstances of the case, the addition made is unsubstantiated on the strength of any evidence brought against the assessee, being opposed to facts and law on several grounds, such assessment framed u/s.143(1) and consequential levy may very kindly be struck down from its root. The CIT(Appeals) had erred in confirming the Ground No.1. 2. The Ld. CIT(Appeals) has erred on facts and in law while confirming the disallowance of Rs.14,20,386/- u/s.36(1)(va) in respect of delay in payment of Employees contribution of provident fund. 3. The appellant craves leave to add, urge, alter, modify or withdraw any ground/s before or at the time of hearing.”
2.1 At the very outset of the hearing of the appeals, it transpired that some of the appeals were barred by limitation for which necessary condonation application have been filed by the respective assessee- appellant, viz. ITA Nos. 53 & 54/RPR/2022. The reasons enshrined in the respective application therein reveals that the delay was caused because of
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circumstances which could neither be attributed to any deliberate conduct nor smack of a lackadaisical approach on the part of the respective assessee-appellant. The Ld. DR did not raise any objection to the seeking of condonation of delay. After hearing the parties, we are satisfied with the reasons leading to the delay and condone the same after drawing support from the order of the Hon’ble Supreme Court of India in Suo Moto Writ Petition (Civil) No.3 of 2020 dated 23.03.2020 which had thereafter from time to time been modified by the Hon’ble Apex Court vide its order(s) dated 08.03.2021, 27.04.2021, 23.09.2021 and 10.01.2022.
Shorn of unnecessary details, the return of income filed by the assessee for the assessment year 2017-18 was processed by the Centralized Processing Center (CPC), Bengaluru vide an intimation issued u/s.143(1) of the Act, dated 20.11.2019. As is discernible from records, the CPC while processing the return of income of the assessee had triggered the provisions of section 36(1)(va) r.w.s. 43B of the Act and disallowed an amount of Rs.14,20,386/- qua the delayed deposit of employee’s share of contributions towards Provident fund (PF) & Employees State Insurance (ESI) by the assessee.
Aggrieved, the assessee assailed the intimation issued u/s.143(1) of the Act before the Commissioner of Income Tax (Appeals) but without any success.
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The assessee being aggrieved with the order of the Commissioner of Income-Tax (Appeals) has carried the matter in appeal before us.
We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his aforesaid contentions.
Admittedly, it is though a matter of fact borne from record that the assessee firm had delayed the deposit of an amount of Rs.14,20,386/- towards employee’s share of contribution towards PF & ESIC i.e. beyond the stipulated time period contemplated under the respective Employees Welfare Acts, but had deposited the same prior to the “due date” of filing of its return of income for the year under consideration. Backed by aforesaid facts, it is the claim of the Ld. Authorized Representative (for short ‘AR’) for the assessee that now when the amount in question had been deposited by the assessee prior to the “due date” of filing of its return of income, therefore, no disallowance of the same was called for u/s.43B of the Act. In support of his aforesaid contention, the Ld. AR had pressed into service certain pronouncements/orders of various judicial forums.
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Per contra, the Ld. Departmental Representative (for short ‘DR’) relied on the orders of the authorities below. It was vehemently submitted by the Ld. DR that pursuant to insertion of ‘Explanation-5’ to Section 43B a/w. ‘Explanation-1’ to Section 36(1)(va) of the Act, the legislature had made it abundantly clear beyond any doubt that the delayed deposit of the employee’s share of contribution towards welfare funds by the assessee would not be saved by the extended time period contemplated u/s.43B(b) of the Act.
After giving a thoughtful consideration to the issue in hand in the backdrop of the contentions advanced by the ld. Authorized Representatives of both the parties, we find that the issue herein involved is squarely covered by the order passed by the Tribunal in the case of M/s Ind Synergy Limited Vs. The DCIT-1(2), Raipur, ITA No.312/RPR/2016; dated 10/03/2022 (to which one of us, the JM was a party), wherein after exhaustive deliberations it was held as under :
“Adverting to the disallowance of the assessee’s claim for deduction of the employees share of contribution towards PF of Rs.2,88,976/-, we find that the same had been disallowed by the Assessing Officer u/s.2(24)(x) of the Act, for the reason that the said amount was deposited beyond the stipulated time period that was prescribed under the said Employees Welfare Fund Act. Before us, it was claimed by the Ld. AR, that now when the aforesaid amounts were deposited by the assessee before the “due date” of filing of its return of income for the year under consideration, therefore, the same were allowable as a deduction u/s.43B of the Act. It was submitted by the Ld. AR that the lower authorities had misconceived the settled position of law and disallowed the aforementioned amounts, despite the fact that the same had
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been deposited prior to “due date” of filing of the return of income by the assessee company.
In order to answer the issue as to whether or not the employees contribution to welfare funds falls within the scope and domain of Sec. 43B of the Act, we may herein draw support from the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Hindustan Organic Chemicals Ltd in ITA No. 399/12, dated 11.07.2014. In the said case, the Hon’ble High Court of Bombay was, inter alia, called upon to answer the following substantial question of law that was raised in the appeal filed by the revenue:-
“(A). Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal, in law, was right in allowing the claim of the Assessee on account of delayed payments of P.F. Of employees' contribution amounting to Rs.1,82,77,138/- by relying on the decision of the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusion Ltd. (319 ITR 306) ?” After referring to the amendments that were made available to Section 43B of the Act, the Hon’ble High Court answered the aforesaid question in the affirmative and upholding the order of the tribunal qua the aforesaid aspect dismissed the appeal filed by the revenue. Also, we find that a similar view had been arrived at by various Hon’ble High Courts, as under :- i. CIT Vs. Amil Ltd reported (2010) 321 ITR 508 (Delhi High Court) ii. CIT Vs. Hemla Embroidery Mills (P) Ltd. (2014) 366 ITR 167 (P&H) iii. Bihar State Warehousing Corporation Ltd.Vs. CIT 386 ITR 410 (Patna) iv. Sagun Foundary Pvt. Ltd Vs. CIT 145 DTR 265 (All) v. CIT Vs. Mark Auto Industries (2008) 358 ITR 43 (P&H) vi. CIT Vs. Jaipur Vidyut Vitran Nigam Ltd (2014) 363 ITR 307 (Raj) vii. Essae Teraoka Pvt. Ltd Vs. DCIT (2014)366 ITR 408 (Kar) viii. CIT Vs. Vijay Shree Ltd (2014) 43 Taxmann.com 396 (Cal) ix. CIT Vs. Kichha Sugar Co Ltd (2013) 356 ITR 351 (Uttarakhand) In the backdrop of the aforesaid settled position of law, we are of the considered view that no distinction is to be drawn between the employers as well as employees contribution to PF and ESI, as both are covered u/s 43B of the Act.
Before parting qua the aforesaid issue in hand, we think it apt to deal with the scope of applicability of the amendments that have been made available on the statue vide the Finance Act, 2021, i.e, “Explanation 5” to
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Section 43B and “Explanation 2” to Section 36(1)(va), i.e, as to whether those are applicable prospectively w.e.f A.Y 2021-22 onwards, or, are to be given a retrospective effect. Issue in hand is squarely covered by the order of a coordinate bench of the tribunal, i.e, ITAT, Amritsar in the case of Vinko Auto Industries Ltd. Vs. DCIT 2021 (12) TMI 636. In its aforesaid order, the Tribunal had after drawing support from the order of the ITAT, Hyderabad Bench in the case of the Value Momentum Software Services Pvt Ltd. Vs. DCIT in ITA No. 2197/Hyd/2017, dated 19.05.2021, had observed, that the amendments in section 36(1)(va) and section 43B of the Act, vide respective explanations that had been made available on the statue by the Finance Act, 2021, are applicable only from 01.04.2021 i.e. w.e.f A.Y 2021-22 onwards. For the sake of clarity the observations of the tribunal in its aforesaid order are culled out as under:- “5.1 We may observe that the ld. CIT(A) in its order at para no. 7.15 itself has observed 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. 5.2 Admittedly there is 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. From the above judgments of the Hon’ble jurisdictional High Court, it is clear that the Hon’ble Court has not drawn any distinction between the employee’s and employer’s share qua PF & ESI contributions. 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. 5.3 Now, coming to the second aspect/determination made by the CIT(A) to the effect that the amendment made in Section 36(1)(va) and 43B of the Act by Finance Act 2021 has to be considered as clarificatory in nature and
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having retrospective effects, therefore would be applicable to the previous assessment years as well. We may observe that various benches of the ITAT including Hyderabad Bench in the case of Value Momentum Software Services Pvt. Ltd. (ITA No.2197/Hyd/2017 decided on 19.05.2021), have taken into consideration the identical issue qua applicability of the amendment to Section 36(1)(va) and Section 43B of the Act, by inserting Explanations by the Finance Act, 2021 and clearly held that the amendment shall be applicable from 1st April, 2021 onwards . It is also relevant to note that the CBDT has also issued Memorandum of Explanation qua applicability of the amended provisions of Section 36(1)(va) & 43B of the Act w.e.f. 1st April, 2021, and Assessment Year 2021-21 onwards, hence there is no doubt qua applicability of the amended provisions referred above, prospectively. On the aforesaid discussion, the second aspect as considered/determined by the ld. CIT(A) qua retrospective application of the amended provisions of Section 36(1)(va) and 43B of the Act wherein Explanations have been inserted by Finance Act, 2021 qua employees’ share in respect of PF & ESI Act, is also unsustainable . 5.4 In view of the above discussions, the disallowances of Rs.5,88,203/- for A.Y.2018-2019 and Rs.60,540/- for A.Y.2019-2020 made by the A.O. and confirmed by the CIT(A) are not sustainable and, hence, the same stands deleted.” On the basis of our aforesaid deliberations, we are of the considered view, that as the amendments 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) 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 2011-12. Accordingly, drawing support from the aforementioned judicial pronouncements, we, herein conclude, that as the employees contributions to PF and ESI of Rs.2,88,976/-was deposited by the assessee before the “due date” of filing of its return of income for the year under consideration, therefore, the same being saved by the provisions of Sec. 43B of the Act could not have been disallowed by the A.O. We, thus, in the backdrop of our aforesaid deliberations set-aside the order of the CIT(A) and vacate the disallowance of Rs. 2,88,976/- made by the A.O. Thus, the Ground of appeal No. 1 is allowed in terms of our aforesaid observations.”
As the facts and the issue involved in the aforesaid order of the Tribunal in the case of Ind Synergy Lyd. (supra) remains the same as are there before
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us in the case of the present assessee, therefore, we respectfully follow the same. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) and direct the AO to vacate the disallowance of Rs.14,20,386/- made by him u/s.36(1)(va) of the Act qua the delayed deposit of the employees share of contribution of EPF/ESIC. The Grounds of appeal No. 1 to 2 are allowed in terms of our aforesaid observations.
Ground of appeal No.3 being general in nature, is dismissed as not 10. pressed.
In the result, appeal of the assessee in ITA No.53/RPR/2022 for the assessment year 2017-18 is allowed in terms of our aforesaid observations.
ITA No.54/RPR/2022, ITA Nos. 58 & 59/RPR/2022, ITA No.76/RPR/2022, ITA No.88/RPR/2022 & ITA Nos. 131 & 132/RPR/2022
As the facts and issue involved in the captioned appeals remains the same as were there before us in the aforesaid appeal, viz. ITA No.53/RPR/2022 for assessment year 2017-18, therefore, our order therein passed while disposing off the said appeal shall apply mutatis- mutandis for disposing off the captioned appeals i.e. ITA No.54/RPR/2022, ITA Nos. 58 & 59/RPR/2022, ITA No.76/RPR/2022, ITA No.88/RPR/2022 & ITA Nos. 131 & 132/RPR/2022.
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In the combined result, all the captioned appeals of the aforementioned assessee’s are allowed in terms of our aforesaid observations. Order pronounced in the open court on 27th day of July, 2022.
Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : 27th July, 2022 SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant. 2. ��यथ� / The Respondent. 3. The concerned CIT(Appeals), Raipur (C.G) 4. The concerned CIT, Raipur (C.G) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण,रायपुर ब�च, रायपुर / DR, ITAT, Raipur Bench, Raipur. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // �नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.
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Date 1 Draft dictated on 22.07.2022 Sr.PS/PS 2 Draft placed before author 22.07.2022 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order