KARAM UDHOG,AGRA vs. J.A.O., DY. CIT.., CIRCLE-1(1)(1), AGRA

Per Bench

The present appeals are filed by the above mentioned assesses feeling aggrieved by the orders passed by appellate authority for various assessment years mentioned hereinabove. The Bench had summarized the common ground raised by the assessee, which are to the following effect :-

1- Because the impugned Disallowances under section 36(1)(v)(a), confirmed by the Ld. CIT(A) (NFAC) (of Employees Contribution to Provident Fund/ E.S.I deposited during the Financial Year itself before due date of filing of Return) is grossly arbitrary, highly unjust, unwarranted, perverse, wrong, illegal and bad in law. 2- Because in any view, the above-impugned Disallowances were by the Ld. CIT(A) (NFAC) in summary and prejudiced manner, without even considering and refuting the Judgments including that of Jurisdictional Hon’ble "Allahabad High Court" cited in favour of the Appellant. The impugned Order of Ld. CIT(A), NFAC is perverse, in the light of M/s Sagun Foundry (P) Ltd. vs CIT (2017) 78 Taxmann 47 vide ITA No.41& 42/Agr/2021 of A.Y.2018-19 and A.Y. 2019-20 M/s Mahadev Cold Storage. vs. Assessing Officer, Circle-4(1)(2), Aligarh and ITA No.20& 2I/Agr/2021 of A.Y.2018-19 & 2019-20 Vinod Thanwerdas vs. Assessing Officer Ward-1(1)(5), Agra.

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1) At the outset the Ld.AR for the assessee had submitted that the CIT(A) had wrongly concluded that the amended provision was retrospective in nature and therefore had wrongly denied the benefit of section 43B to the assessee. It was submitted that the amendment to the provision was creating a new liability and therefore it was not retrospective rather it was prospective nature he relied upon the decision of the coordinate bench in the matter of M/s Mahadev cold storage ITA no 21/agra/2021, Delhi Bench decision in the matter of Indian Geotechnical Services , ITA no 622/De1/2018, Kolkata Bench decision in the matter of Harendra Nath Biswas ITA no 186/KOL/2021, ProwizMansystems Pvt. Ltd. ITA No. 818/Del/2021, Express Roadways Pvt. Ltd. 5570/Del/2017 & Punjab Bevel Gears Ltd. ITA No. 1540 &1662/Del/2021 order dated 11.03.2022.

2) Per contra the Ld. DR relied upon the order passed by the CIT(A) and our attention was drawn to the following paragraphs :-

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4.1 1 have considered the submission made by the appellant it is seen that the return of income is processed by CPC. As the Employee's Contribution of PF and ES1 amounting to Rs. 1,85,482/- were paid by the appellant after the "due date" as per the explanation below section 36((1)(va) of the 1 T Act,1961, the same was added back to the total income of the appellant in the light of provision of Section 2(24)(x) r.w.s. 36(1)(va) of the Act relying upon the information given by the auditor in Form 3CD. As per the provisions of section 143(1)(a)(iv) the following adjustment can be made:

"143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely: — (a) the total income or loss shall be computed after making the following adjustments, namely: (i) (ii) .. (iii) ........ (iv) disallowance of expenditure indicated in the Audit Report but not taken into account in computing the total income in the return; This shows that CPC is within the power to make such adjustment as Appellant's auditor himself has indicated in the tax audit report that such payments have been made beyond the due date prescribed in section 36(1)(va) of the I T Act,1961, but Appellant has claimed it in the Return of Income against the Audit Report

The submission of the appellant in respect of disallowance of employee's contribution is duly considered. However, the same cannot be accepted in view of the amendments made to section 36 and 43B by the Finance Act, 2021. The Finance Act, 2021 has amended section 36, which reads as under- "In section 36 of the Income-tax Act, in sub-section (I), 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: —

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'Explanation 2.—For the removal of doubts, it is hereby clarified that the provisions of section 438 shall not apply and shall be deemed never to have been applied for the purposes of determining the "due date" under this clause;'." The finance Act, 2021 has also amended section 43, as under- "In section 438 of the Income-tax Act, after Explanation 4, the following Explanation shall be inserted, namely: "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." 4.3 Thus, the Finance Act, 2021, has amended section 36 of the Income-tax Act, relating to other deductions. Sub-section (1) of the said section provides for allowing of deductions provided for in the clauses thereof for computing the income referred to in section 28 of the said Act. 'Clause (va) of the said sub-section provides for allowance of deduction for any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation to the said clause provides that for the purposes of this clause, "due date" means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. By virtue of newly inserted Explanation 2 to clause (va) of sub-section (1) of the said section, the provisions of section 43B shall not apply and shall be deemed never to have 4.4 Section 43B of the Income-tax Act relates to allowing certain deductions only on actual payments. Clause (b) of the said section provides that any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularlyemployed by him) only in computing the income referred to in section 28 of that previous year, in which such sum is actually paid by him. Proviso to the said section provides that

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nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub- section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. By virtue of insertion of Explanation 5 to this section, 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 subclause (x) of clause (24) of section 2 applies.4.5 Reference is also made to the Supreme Court judgment in the case of Commissioner of Income Tax-I, Ahmedabad vs. Gold Coin Health Food Pvt. Ltd. (2018) 9 SSC 622 wherein while dealing with a similar issue. Hon'ble Supreme Court in Para 15 of the decision has quoted the following stated the position regarding retrospective operation of statutes as follows:- The presumption against retrospective operation is not applicable to declaratory statutes. As stated in Craies and approved by the Supreme Court. For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law or the meaning or effect of any statute. Such Acts areusually held to be retrospectives. The usual reason for passing a declaratory Actis to set aside what Parliament deems to have been judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the word 'enacted'. But the use of the words 'it is declared' is not conclusive that the Act is declaratory for these words may, at times, be used to introduce new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to be substance rather than to the form. If a new Act is 'to explain' an earlier act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law prospective operation is generally intended. The language 'shall be deemed always to have meant' or 'shall be deemed never to have included" is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was

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already implicit. A clarificatory amendment of this nature will have a retrospective effect and, therefore, if the principal Act was existing law when the constitution came into force, the amending Act also will be part of the existing law. The presumption against retrospective operation is not applicable to declaratory statutes In determining, therefore, the nature of the Act, regard must be a had to the substance rather than to the form. If a new Act is "to explain" an earlier act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. Aclarificatory amendment of this nature will have a retrospective effect (ibid., pp.46B-69). Where a statute is passed for the purpose of supplying an obviousomission in a former statute or to 'explain' a former statute, the subsequentstatute has relation back to the time when the prior Act was passed. The ruleagainst retrospectively is inapplicable to such legislations as these are explanatory and declaratory in nature."- Zile Singh vs. State of Haryana, (2004) 8 SCC 1."4.6 From the wordings above, it is also clear that the above clarificatory amendment brought in by the Finance Act, 2021 applies to the issue in the instant appeal also. The amendment declares that provisions of section 43B does not apply and deemed to have never been applied for the purpose of determining the due date. Therefore, in view of the above discussions, the sum of Rs 1,85,482/- being the employee's contribution to the PF and ESI, not deposited by the appellant within the due date as per section 36((l)(va) of the I T Act,1961, cannot be allowed and accordingly, this ground is dismissed."

3) it was submitted by the Ld.DR that the order passed by the CIT(A) is required to be upheld. The

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Ld DR had also filed the written submissions to the following effect:-

A Distinction between statutory liability and contractual liability reasons for insertion of sec 438 vide Kedarnath Jute 82itr 363 Pope the King Match Factory 50 Itr 495 Mad high court affirmed by supreme court Kalinga Tubes ltd 218 itr 164 Supreme court A statutory liability arises at the stage of obligation to pay , irrespective of the whether it is disputed .Thus an assessee following a mercantile system of accounting ould be eligible for deduction simply on the accrual of the liability i.e. at the stage of Book Entries IRRESPECTIVE OF PAYMENT OR WHETHER IT WAS DISPUTED. This is distinct from a contractual liability which crystallises only on the cessation of dispute.

B to overcome this anomaly in respect of disputed and unpaid liabilities sec 43b was inserted from 1-4-1984 BUT ONLY FOR STATUTORY LIABILITIES.VIDE sec 43B deduction was to allowed in respect of statutory liablities if they were actually paid.

C vide 1-4-1938 sec 43B was amended with the insertion of first and second proviso

D THE LANGUAGE OF SEC 43B and the amendments to proviso to sec 43B vide finance act 2003 wef 1-4-2004 sec 438 " Notwithstanding anything contained in any other provision of this act , a deduction otherwise allowable , under this Act , in respect of (a) any sum payable by the assessee by way of tax duty, cess or fee by whatever name called under any law for the time being in force or (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or any other fund for the welfar of the employees (c)any sum referred to in sub clause (ii)of section(1) of 36 (d)any sum payable by the assessee as an interest on any loan or borrowing from any public financial institution or a state financial institution ora state industrial development corporation (e) any sum payable by the assessee as interest on any loan or advances from a scheduled bank or a cooperative bank other than a primary cooperative agricultural and rural development bank (c) any sum payable by the assessee as an employer in lieu of any leave at the credit of an employees (g)any sum payable by the assessee for use of Railway assets shall be allowed (irrespective of the previous year in which such liability was incurred by the assessee according to the method

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of accounting employed • by him) only in computing the income referred to in sec 28 of that previous year in which sum is actually paid by him.

First Proviso Provide that nothing contained in this section shall apply in relation to any to any sum [referred to in clause (a) or clause(c) or clause(d) or clause(e) or clause(f)] which is actually paid by the assessee on or before the due date applicable in the case of filing the return of income unde section 139(1).. in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee alongwith the return .

FIRST PROVISO AMENDED W E F 1-4-2004 FINANCE ACT 2003 WORDS IN PARENTHESES REMOVED

Second proviso (deleted vide finance Act 2003 wef 10-4-2004) read as

"Provided further , that no deduction shall. in respect of any sum referred to in clause (b) be allowed unless such sum has actually been paid in cash or bu issue of cheque or draft or by any other mode on or before the due date as defined in the explanation below clause (va)of subsection (1) of section(36)

Thus ,prior to amendment 43B(b)referred to be paid as per to employers contribution to a provident nine time limit specified superannuation fund or gratuity fund for employees or any other employee welfare fund contribution as defined in the Act governing the relevant fund. Section 36(iv) any sum paid by the assessee as an employer by way of contribution to a recognised superannuation fund. Language of 36(iva) any sum paid by an assessee as an employer by way of contribution towards a pension scheme 36(v) any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund .

36(va)any sum received by the assessee frcm his employees to which the provisions of sub clause (x)of clause (24) of section 2 apply if such sum is credited by the assessee to the employees account and the explanation to the said sub section provides the meaning of due date for this clause.

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The Finance act 2003 wef 1-4-2004 omitted second proviso and amended First proviso

VIDE ALLIED MOTORS SUPREME COURT 224 ITR 677 the amended first proviso although inserted from 1-4-1988 was held applicable from 1-4-1984 retrospectively i.e from the date of insertion of 43B BECAUSE, IT WAS CURATIVE TO SUPPLY AN OMISSION TO ADDRESS AN APPARENT ANOMALY SINCE TO CONSTRUE OTHERWISE WOULD HAVE MEANT ABSURDITY THE ASSESSEE NOT BEING ABLE TO CLAIM IN ANY PREVIOUS YEAR AMOUNT PAID AS SALES TAX WHICH ALTHOUGH ACCRUED DURING THE PREVIOUS YEAR WAS PAID AFTER 31ST MARCH AS PER DUE DATES SPECIFIED IN THE SALES TAX ACT .

Further the second proviso specifically referied to 43B (b) and the same related to 36(iv) ..EMPLOYERS CONTRIBUTION which is claimed as a deduction and did not and could not possibly refer to 36(va) employees contribution which referred to corresponding income under 2(24)(x) which is not a deduction.

F. ACCORDINGLY THE SUBJECT MATTER OF 36(1\a READ WITH 43B(b) IS ENTIRELY DISTINCT FROM 36(va).The plain language of the statute is explicitly different. REMOVAL OF ANOMALY ONLY WITH RESPECT TO EMPLOYER'S CONTRIBUTION.

FURTHER ALOM EXTRUSIONS LTD SUPREME COURT 319ITR 306 RECOGNISED THE DILEMNA AS BETWEEN TAX DUTY FEE CESS PAYMENT OF CONTRIBUTION TO AN AS PER ANY STATUTE EMPLOYEES WELFARE FUND(this referred to employers payment ofhis contribution) PARA 8 OF THE SUPREME COURT , WITH RESPECT TO THE AMENDMENT IN PROVISO FIRST . THE TAX DUTY AND CESS AND FEE WAS EQUATED WITH THE EMPLOYERS CONTRIBUTION i.e. with respect sec 43B (b) not sec 36 (va). Further para 9 of ALOM EXTRUSIONS REFERS ONLY TO THE EXTENT OF SECOND PROVIS043B(b).

G. THUS LANGUAGE OF STATUTE AND SUPREME COURT REFERS TO THE REMOVAL OF ANOMALY ONLY IN RESPECT OF 43B(b) EMPLOYER'S CONTRIBUTION.

H. FURTHER, Controversy Sagun Foundries Allahabad High Court Assessee'sfavour 145 DTR 0285 Rajasthan High Court said bank & banker and Jaipur

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43B(b) u/s 36(va) ITAT is perverse should be 43B(b) read with time limits as u/s 36(va) 43B(b) In Revenue's favour to 36(iv) not 36(va) High Court 06.09.2018 Bharat Hotels ITA 271/2005 Ravindra Bharti A.K. Chandra 10 ITR 417

Kerala High Court CIT Vs. Merchem (2015) 6 taxmann 119 South India Enterprises 108 taxmann 322 Popular Vehicles and services (P) Ltd. (2018) Gujarat High Court 2014 95ITC GSRTC 41 Taxmann.com 100 Madras High Court 2015 100 Taxmann.Com 244

In view of the dichotomy en-controversies existing 2014 we amendment came above which as per notes on clauses as per the finance act, starts with EXPLANATION V —''FOR THE REMOVAL OF DOUBTS"

IT IS CLARIFICATORY CURATIVE INTENDED TO SET AT REST THE CONTROVERSY IT IS DOES NOT BRING FORTH ANY SUBSTANTIVE LAW DOES NOT IMPOSE NEW DUTIES DOES NOT IMPOSE NEW OBLIGATIONS OR TAKE AWAY PRE-EXISTINGS RIGHTS.

SUCH AN ACT THEREFORE, IS TO BE GIVEN RETROSPECTIVE APPLICATION. 43B EXPLANATION V — "THE LANGUAGE, DEEMED TO NEVER HAVE BEEN I. APPLIED" IS DECLARATED AND VIDE INDUSIND BANK SUPREME COURT. THE AMENDMENT SHOULD BE CONSTRUED AS RETROSPECTIVE.

A. VIDE, PARAGRAPH 14 'OF SUPREME COURT IN GOLD COIN RELYING ON PODDAR CEMENT 1997 (5) SCC 482 — QUOTING PARA 15 — AN EXPLANATORY ACT IS GENERALLY PASSED TO SUPPLY AN OBVIOUS OMISSION TO CLEAR UP DOUBTS AS TO THE MEANING OF THE PREVIOUS ACT. IT IS WELL SETTLED THAT IF A STATUTE IS CURATIVE OR MERELY DECLARATORY OF THE PREVIOUS LAW RETROSPECIVE OPERATION IS GENERALLY INTENDED.

ITA No. 114/Agra/2021 & Others (58) r

K. "FOR THE REMOVAL DOUBTS" MEANS STATUTORY CURATIVE CLARIFICATORY AND DECLARATORY OF L.AW AND THEREFORE RETROSPECTIVE. VIDE SUPREME COURT IN ALLIED MOTORS — 224 ITR 677 ALOM EXTRUSIONS 309 ITR 319 GOLD COIN HEALTH AND FOOD PRIVATE LIMITED CA 5065 OF 2008 PODDAR CEMENT 1997 (5) SCC 482

FURTHER WHERE THE LANGUAGE OF THE STATUTE IS EXPLICIT AND CLEAR THE INTENTION IS RETROSPECTIVE.

B. Vide notes on clauses can be relied upon for object and purposes and mischief sought to be remedy. Explanatory memorandum is usually not an accurate guide of the final enactment. reliance on Indusind Bank Supreme Court 15 September 2016 CA 9087 — 89 of 2016. Shashikant Laxman Kale Supreme Court 20'h July 1990 AIR 2114 1990 SCR (3) 441.

Paragraph of 24 of Indusind Bank addresses M.M. ACQUA TECHNOLOGIES .

C. QUESTION THEREFORE IS WHEN THE LANGUAGE OF THE STATUE IS EXPLICIT AS TO DATE OF EFFECT AND AMENDMENT DECLARATORY AND CURATIVE SHOULD THE DATE AS IN THE EXPLANTORY MEMORANDUM BE TAKEN AS THE DATE FROM WHICH THE STATUE iS INTENDED TO BE OPERATIVE. Para 10 — Planman HR Private Limited ITAT Delhi "Vinay Cement" SC SLP dismissed was D. in the context of 43B insertion distinguishable on facts.

4) We have considered the rival contention of the parties and perused the material available on record, including the judgments cited at bar during the course of the hearing by both parties. At the outset, it may be relevant to mention here that recently in the matter of Mahadev Cold storage, the coordinate bench had the occasion to deal with the issue of disallowance under

ITA No. 114/Agra/2021 & Others (58) section 43B of the act and after elaborate examining the law on the subject, it was held that the disallowance under section 43B of the act is not permissible if the assessee had made the contribution before the due date of filing of the return of income. The same principle, continues to hold good for issue under consideration as the assessment years under consideration, are much prior to the year of amendment which was inserted in the Act by Finance Act 2021, which had provided the consequence of not depositing the amount within the time provided by the act resulting into the disallowance of the contribution made by the assessee. The aforesaid view of the amendment being not applicable to the assessment years prior to AY 2021 has been followed by various benches of the Tribunal

5) Recently in the decision Lumino Industries Ltd. I.T.A. Nos. 231 & 365/Ko1/2021 Kolkata tribunal had examined the entire gamut of the argument of the revenue and thereafter the same was rejected. We are

ITA No. 114/Agra/2021 & Others (58) reproducing hereinbelow the relevant findings of the Kolkata tribunal which is as under:-

“Have heard both the parties. We note that the Finance Bill, 2021 has brought in an amendment which disallows the employees' contribution made in PF and ESI if not made within the due date as prescribed by the respective statutes (PF and ESI Act). So after the amendment has been inserted according to Shri Miraj D Shah takes effect from 1st April, 2021 i.e AY 2021-22 and subsequent assessment year and if the remittance of PF/ESI Employees' Contribution is not made within the time prescribed by the PF/ESI Act then the remittance cannot be allowed as a deduction which is prospective in operation. Whereas according to Ld. CIT(A), the amendment brought in is clarificatory in nature so, retrospective In operation. So we have to adjudicate this issue whether the amendment brought in by Finance Act, 2021 is prospective or retrospective in operation. We note that before this amendment has been inserted by Finance Bill, 2021, the Hon'ble Jurisdictional Calcutta High Court in the case of Shri Vijayshree Ltd. Ltd.(supra), M/s Philips Carbon Black Ltd.(supra), M/s Coal India Ltd.(supra), M/s Akzo Nobel India Ltd. (supra) has held that the payment of employees' contribution if made by an assessee before the due date of filing of return of income u/s 139(1) of the Act, Is allowable as a deduction. We note that by Finance Act, 2021, the provision of Section 36(1)(va) as well as Section 438 has been amended to this extend by inserting the Explanation 2 whereby it is clarified that the provision of Section 43B shall not apply and shall be deemed never to have been applied for the purpose of determining the due date under this clause. For ready reference, we reproduce the Explanation-2 to Section 36(1)(va) as under: "Section 36(1)(va) 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 purpose of determining the 'due date' under this clause' 18. We find that this amendment has been brought in the Act to provide certainty about the applicability of Section 43B in respect of belated payment of employees' contributions. In order to test whether the amendment brought in later is retrospective or not one has to apply the test as laid by the Hon'ble Supreme Court in the case of M/s Snowtex Investment Ltd. (supra) wherein the Hon'ble Supreme court took note of the law laid down on this issue by the Constitution Bench in M/s Vatika Township Ltd. and held that the intent of the Parliament/legislature need to be looked into for ascertaining whether the amendment should be retrospective or not. In Vatika Township Ltd. (supra) the Hon'ble Supreme Court held that the notes on clauses appended to 14

ITA No. 114/Agra/2021 & Others (58) the Finance Bill will throw light as to the legislative intent; because it has to be borne in mind that Parliament/legislature is aware of three concepts before an amendment is brought in, which can be discerned from reading of the "Notes on Clauses" to the Bill which are (i) prospective amendment with effect from a fixed date; (ii) retrospective amendment with effect from a fixedanterior date; and (iii) clarificatory amendments which are retrospective in nature. So when we adjudicate whether the view of Ld CIT(A) that the explanation 2 brought in by Finance Act, 2021 is retrospective, let us look at the "Notes on Clauses and the relevant clauses 8 & 9 of the Finance Bill, 2021 (supra) pertaining to the issue in hand which in clear and unambiguous terms spells out the intention of Parliament that the amendment shall take effect from 1st April, 2021 and therefore willaccordingly apply to Assessment Year 2021-22 and subsequent years. So since the legislative intent is clear, the amendment brought in by Finance Act, 2021 on this issue as discussed is prospective and Ld. CIT(A) erred in holding otherwise. So till AY 2021-22, the Jurisdictional High Court's view in favor of assessee will hold good and is binding on us. As discussed the decision of the Hon'ble Delhi High Court in Bharat Hotels Ltd.

6) Similarly in the case of Punjab Bevel Gears Ltd

ITA Nos.1540 & 1662/Del/2021 order dated

11/3/ 2022, ( Comprising of AM) had held as

under:-

“10. We have heard the rival submissions and perused the materials available on record. The issue in the present ground is addition made u/s 36(1)(va) of the Act on account of delayed deposit of PF/ESIC contributions. Before us, Learned AR has pointed to the statement of the deposits made during the year and from that table he has pointed out that though there has been delay in deposit of the PF/ESIC Contributions but all the amounts have been deposited with the appropriate authorities before filing of return of income by the assessee. The aforesaid contention of the Learned AR has not been controverted by Learned DR. We find that the various Benches of the Tribunal at Delhi and other Tribunal have held 15

ITA No. 114/Agra/2021 & Others (58) that the delayed deposits of PF & ESIC before the date of filing of return is an allowable expenditure and for which reliance was placed on the decision of Hon’ble Delhi High Court in the case of AIMIL Ltd. (supra). As far as reliance by Learned DR on the amendment brought out by Finance Act 2021 is concerned, “notes on clauses” to the Finance Bill 2021 clearly states that the amendment will take effect from 1st April 2021 and will apply in relation to the assessment year 2021-22 and subsequent assessment year. In such a situation, we are of the view that the amendment brought out by Finance Act 2021 does not apply to the assessment year under consideration. As far as the reliance of Revenue on the decision of Vedvan Consultants Pvt. Ltd. (supra) is concerned, we find that the various division Benches of the Delhi & other Tribunal have held the delayed deposits of PF/ESIC Contributions to be allowable expenditure if the same are deposited with the appropriate authorities before filing of return of income by the assessee. Further, it is settled law that when two judgments are available giving different views, then the judgment which is in favour of the assessee shall apply as held in case of Vegetable Products Ltd. 82 ITR 192 by the Hon’ble Supreme Court. We therefore, following the decision rendered by Hon’ble Apex Court in the case of M/s. Vegetable Products Ltd. (supra) and AIMIL Ltd. (supra), are of the view that no disallowance u/s 36(1)(va) of the Act is warranted in the present case. We therefore direct the AO to delete the addition. Thus the assessee’s ground is allowed.”

7) Similarly in the matter of ProwizMansystems Pvt.

Ltd., and others in ITA no 818/Del/2021 vide order

dated 28/2/2022 ( 114 appeals ), the coordinate Delhi

Bench had held as under :-

ITA No. 114/Agra/2021 & Others (58) “6. We have gone through amendments in the Income Tax Act inserted by Finance Act 2021, Memorandum, plethora of orders passed by the various benches of Tribunal and the judgments of Hon’ble High Courts of various Judicatures.

>Order of the ITAT, Hyderabad in the case of Crescent Roadways Pvt. Ltd., vs., DCIT vide ITA.No.1952/ Hyd/2018 dated 01.07.2021.

>Order of the ITAT, Delhi in the case of DCIT vs. Dee Development Engineers Ltd., vide ITA.No.4959/Del./2016 dated 08.04.2021.

>Order of the ITAT, Delhi in the case of DCIT vs. Planman HR (P) Ltd., vide ITA.No.5152/ Del./2017 dated 15.07.2021.

>Order of the ITAT, Chennai in the case of DCIT vs. Talenpro India HR Pvt. Ltd., vide ITA.No.265/ Chennai/2019 dated 09.04.2021.

>Order of the ITAT, Agra in the case of Mahadev Cold Storage vs. Jurisdiction Assessing Officer vide I.T.A. Nos. 20 & 21/Agra/2021 dated 14.06.2021.

>Order of the ITAT, Chennai in the case of DCIT vs. Repco Home Finance Pvt. Ltd., reported in [2020] 183 ITD 782 ITAT-C henna i. 17

ITA No. 114/Agra/2021 & Others (58) >Order of ITAT in the case of Eagle Trans Shipping & Logistics (India) (P.) Ltd. Vs ACIT in ITA No. 324/Del/2017 order dated 25.07.2019 wherein the issue has been ruled against the assessee based on the judgments of Hon’ble High Court of Delhi in the case of CIT Vs. Bharat Hotels Ltd. 410 ITR 417.

>Order of ITAT, Delhi in the case of Vedvan Consultants Pvt. Ltd. Vs. DCIT in ITA No. 1312/Del/2020 dated 26.08.2021 wherein the issue has been ruled against the assessee based on the judgments of Hon’ble Madras High Court, Hon’ble Bombay High Court and Hon’ble Kerala High Court. The said orders are examined which are as under:

MADRAS HIGH COURT : October 23, 2018

M/S. UNIFAC MANAGEMENT SERVICES (INDIA) PRIVATE LTD. VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATION CIRCLE 3 (2) , CHENNAI

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) r.w.s. 2(24)(x) alone is the proper course and any other interpretation would only defeat the object and scope of both the provisions viz., 43B and 36(1)(va).

Accordingly, the writ petition fails and the same is dismissed. 18

ITA No. 114/Agra/2021 & Others (58) KERALA HIGH COURT : [2015] 378 ITR 443 : September 8, 2015

THE COMMISSIONER OF INCOME TAX, COCHIN VERSUS M/S MERCHEM LIMITED

The distinction drawn to credit the amount of the employer and the employee was with a clear objective and there is no illegality or other legal infirmity in classifying the contributions of employees and employer in the matter of crediting the same to the appropriate statutory authorities. Considering section 36(1)(va) of the Income Tax Act as it stands, with respect to any sum received by the assessee from any of his employees to which the provisions of clause (x) of sub-section (24) of section 2 applies, assessee shall not be entitled to deduction of such amount in computing the income referred to in section 28 if such sum is not credited by the assessee to the employees’ account in the relevant fund or funds on or before the due date as per explanation to section 36(1)(va) of the Act.

BOMBAY HIGH COURT: [2014] 368 ITR 749 (Bom): October 14, 2014

THE COMMISSIONER OF INCOME TAX VERSUS GHATGE PATIL TRANSPORTS LTD.

The employer assessee would be entitled to deduction only if the contribution to the employee’s welfare fund stood credited on or before the due date and not otherwise – following the decision in Commissioner of Income Tax V/s. Alom Extrusions Ltd. [SUPREME COURT] – both employees’ employer’s and contributions are covered under the 19

ITA No. 114/Agra/2021 & Others (58) amendment to Section 43B of I.T. Act – the Tribunal was right in holding that payments are subject to benefits of Section 43B.

We have examined the decision of the Hon’ble Gujarat High 8.

Court in the case of State Road Transport Corporation (366 ITR 170) wherein the court has held the the payment were not allowable u/s 36(1)(va).It was held as under:

“Section 43B, read with section 36(1)(va) of the Income Tax Act, 1961 Business disallowance - Certain deductions to be allowed on actual payment (employee's contribution) - whether where an employer has not credited sum received by it as employee's contribution to employee's account in relevant fund on or before due date as prescribed in Explanation to section 36(1)(va), assessee shall not be entitled to deduction of such amount though he deposits same before due date prescribed under section 43B i.e. prior to filing of return under section 139(1). Held, yes - assessee State Transport Corporation collected a sum being Provident Fund contribution from its employees. However, it had deposited lesser sum in Provident Fund account. Assessing Officer disallowed same under section 43B. However, Commissioner (Appeals) deleted disallowance on ground that employee's contribution was deposited before filing return. Whether since assessee had not deposited said contribution in respective fund account on date as prescribed inexplanation to section 36(1)(va), disallowance made by Assessing Officer as just and proper.”

Similarly, the judgments of Hon’ble High Court of Delhi in 9.

ITA No. 114/Agra/2021 & Others (58) the case of CIT Vs. Bharat Hotels Ltd. 410 ITR 417 held that the amounts were not allowable u/s 36(1)(va). The relevant portion is as under:

"7. The issue here concerns the interplay of Section 2(24)(x) of the Act read with Section 36(1)(va) of the Act alongside provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (especially Regulation 38 of the Employees' Provident Funds Scheme, 1952) and the provisions of the Employees' State Insurance Act, 1948. The AO had brought to tax amounts which were deducted by the employer/assessee from the salaries and wages payable to its employees, as part of their contributions. It is not in dispute that the employer's right to claim deductions under the main part of Section 43 -B of the Act is not an issue. The question the AO had to then decide was whether the amounts deducted from the salaries of the employees which had to be deposited within the stipulated time (in terms of notification/circular dated 19.03.1964 which was modified on 24.10.1973), as far as the EPF contribution went and the period of three weeks as far as the ESI contributions went. The AO made a tabular analysis with respect to the contributions deducted and actually deposited. The cumulative effect of notifications under the Employees' Provident Funds Act, 1952 and the Employees State Insurance Act, 1948 was that in respect of the EPF Scheme contributions the deductions were to be deposited within 15 days of the succeeding wageperiod with a grace period of 5 days; for ESI contributions the deposit with the concerned statutory authority had to be made within three weeks of the succeeding wage month/period. The CIT in this case confirmed the additions - made by the AO based on the entire

ITA No. 114/Agra/2021 & Others (58) amounts that were disallowed. The ITAT however granted complete relief.

ITA No. 114/Agra/2021 & Others (58) has considered the case of Gujarat State Road Transport Corporation and held as under:

“17. We find that with respect to employees contribution to Provident Fund, as to whether disallowable or not with reference to Section 36(1)(va) read with Section 43B, a similar question came up for consideration before Gujarat High Court in Commissioner of Income-Tax v. Gujarat State Road Transport Corporation, (2014) 366 ITR 170. Therein Assessee collected Rs. 51,06,02,712/- from its employees towards provident fund contribution but deposited Rs. 21,16,61,582/ - with provident fund trust. Thus there was a short fall of Rs. 24,89,41,130/-. This amount of short fall was treated by Assessing Officer as income of Assessee vide Secti on 2(24)(x) read with Section 36(1)(va) of Act 1961. Assessing Officer also added Rs. 1,93,55,580/being the amount of short fall towards employers contributory provident fund and disallowed the same under Section 43B of Act 1961. He also disallowed the sai d amount of Rs. 1,93,55,580/- from expenses claimed by Assessee for the A.Y. in question i.e. 200506 as per provisions under Section 43B. Dissatisfied with assessment order, Assessee preferred appeal before CIT(A) who vide order dated 25.06.2009 partly allowed the same and deleted disallowance of Rs. 24,89,41,130/- (short fall in employees contribution to provident fund) and Rs. 1,93,55,580/- (short fall in employerscontribution to provident fund) observing that employees contribution/employers contribution was deposited before filing Return under Section 139(1) of Act 1961 for the relevant period. Revenue, in its turn, preferred appeal before Tribunal. Relying on judgment in Commissioner of Income -Tax v. Alom Extrusions Ltd. (supra), Tribunal dismissed appe al and 23

ITA No. 114/Agra/2021 & Others (58) confirmed order passed by CIT(A). That is how matter came before High Court in appeal. Court considered following question, posed in para 7.01, reads as under:" Short question which is posed for consideration of this court is with respect to the disallowance of the amount being the employees contribution to the PF account/ESI contribution which admittedly which the concerned assessee did not deposit with the PF Department/ESI Department within due date under the PF Act and/or the ESI Act."

ITA No. 114/Agra/2021 & Others (58) Section 36(1)(va) and even the Explanation to Section 36(1) (va) is not deleted and is still on the statute and is required to be complied with. Merely because with respect to the employers contribution the second proviso to Section 43B which provided that even with respect to the employers contribution (Section 43B(b)), the Assessee was required to credit the amount in the relevant fund under the PF Act or any other fund for the welfare of the employees on or before the due date under the relevant Act, is deleted, it cannot be said that Section 36(1)(va) has been deleted and/or amended."

"Therefore, with respect to the employees contribution received by the assessee if the assessee has not credited the said sum to the employees account in the relevant fund or funds on or before the due date mentioned in the Explanation to Section 36(1)(va), the assessee shall not be entitled to deductions of such amount in computing the income referred to in Section 28 of the Act."

ITA No. 114/Agra/2021 & Others (58) DugdhUtpadakSahakari Sangh Ltd., (2014) 366 ITR 163, Punjab and Haryana High Court in Commissioner of Income-Tax v. Hemla Embroidery Mills P. Ltd., (2014) 366 ITR 167 , Himachal Pradesh High Court in Commissioner of Income-Tax v. NipsoPloyfabriks Ltd., (2013) 350 ITR 327 and Karnataka High Court in Commissioner of Income-Tax v. Sabri Enterprises, (2008) 298 ITR 141.

ITA No. 114/Agra/2021 & Others (58) Spectrum Consultants P. Ltd., (2014) 2 ITROL 622 while counsel for Revenue attempted to pursue to take a different view following decision of Gujarat High Court. The Division Bench judgment delivered by Honble Dilip B. Bhosale, (as his lordship then was) held, if the contribution of employees fund is deposited within due date the Assessee is straightaway entitled for deduction under Section 36(1)(va). However Section 43B provides for certain deductions allowable only on actual payment. It gives an extension to the employer to make payment of contribution to provident fund or any other fund, till due date applicable for furnishing of Return under Section 139(1) of Act 1961, in respect of previous year in which liability to pay such sum was incurred, and evidence of such payment is furnished by Assessee along with such Return. Court then said:

"In short, this provision states, notwithstanding anything contained in any other provision contained in this Act, a deduction otherwise allowable in this Act in respect of any sum payable by the assessee as an employer by way of contribution to any fund such as provident fund shall be allowed if it is paid on or before the due date as contemplated under Section 139(1)of the Income-Tax Act. This provision has nothing to do with the consequences, provided for under the PF Act/PF Scheme/ESI Act, for not depositing the "contribution" on or before the due dates therein."

(emphasis added)

ITA No. 114/Agra/2021 & Others (58) under subsection (1) of Section 139 of Act 1961, employer is entitled for deduction.

ITA No. 114/Agra/2021 & Others (58) 1. The question, whether benefit under Section 43B, as a result of amendment of Finance Act, 2003, is retrospective or not, came to be considered in Commissioner of Income -Tax v. Alom Extrusions Ltd. (supra). Court considered the intent, purpose and object in the historical back drop of insertion of Section 43B and its progress by way of various amendments. Referring Section 2(24)(x) it said, income is defined under Section 2(24) which includes profits and gains. Further in clause (x) of Section 2(24) any sum received by Assessee from employees as contributions to any provident fund/superannuation fund or any fund set up under Act 1948, or any other fund for welfare of such employees constitute income. This is the reason why every Assessee/Employer was entitled to deduction even prior to April, 1, 1984, keeping books on mercantile system of accounting, as a business expenditure, by making provision in his books of account in that regard. Assessee was capable of keeping money with him and just by mentioning in accounts, was able to claim deduction as business expenses. Section 43B was inserted to check this practise and it resulted in discontinuing mercantile system of accounting with regard to tax, contributions etc. With induction of Section 43B an Assessee could claim deduction on actual payment basis. By Finance Act, 1988 Parliament inserted first proviso w.e.f. 01.04.1988 which inter alia provides that any sum payable by Assessee by way of tax, duty, cess or fee, if payment is made after closing of accounting year but before date of filing of Return under Section 139(1), Assessee would be entitled to deduction on actual payment basis. This proviso did not include within its ambit, contributions under labourwelfare statutes. By Finance Act, 1988, Second Proviso thus Second proviso was further amended by Finance Act, 1989 w.e.f. 01.04.1989. 29

ITA No. 114/Agra/2021 & Others (58) 27. Court held that Assessee/employer thus would be entitled to deduction only if contribution stands credited on or before due date given in the Act 1952 or Act 1948. Second proviso created difficulties, inasmuch as under Act, 1981, due date was after the date of filing of returns and thus industries made representations to the Ministry of Finance. Court, looking to the history of amendments held, it is evident that Section 43 B, when enacted in 1984, commences with a non obstante clause. The underlying object being to disallow deductions claimed merely by making a book entry based on the mercantile system of accounting. At the same time, Section 43B made it mandatory for the Department to grant deduction in computing income under Section 28 in the year in which tax, duty, cess etc. is actually paid. Parliament took cognizance of the fact that accounting year of a company did not always tally with the due dates under Provident Fund Act, Municipal Corporation Act (Octroi) and other Tax laws. Therefore, by way of First Proviso,an incentive/relaxation was sought to be given in respect of tax, duty, cess or fee by explicitly stating that if such tax duty cess or fee is paid before the date of filing of the return under Act 1961, Assessee would than be entitled to deduction. This relaxation/incentive was restricted only to tax, duty, cess and fee. It did not apply to contributions to labour welfare funds. The reason appears to be that the employer should not sit on the collected contributions and deprive workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the welfare funds. But when implementation problems were pointed out for different due dates, uniformity was brought about in first proviso by Finance Act, 2003. Hence, amendment made by Finance Act 2003 in Section 43B is retrospective, being curative in nature 30

ITA No. 114/Agra/2021 & Others (58) and apply from 01.04.1988. In the result when contribution had been paid, prior to filing of return under Section 139(1), Assessee/employer would be entitled for deduction and since deletion of Second Proviso and amendment of First Proviso is curative and apply retrospectively w.e.f. 01.04.1988.

ITA No. 114/Agra/2021 & Others (58) The Hon’ble Allahabad High Court in K. N. Agarwal v. CIT 189 ITR 769 held that,

"Indeed, the orders of the Tribunal and the High Court are binding upon the Assessing officer and since he acts in a quasi judicial capacity, the discipline of such functioning demands that he should follow the decision of the Tribunal or the High Court, as the case may be. He cannot ignore merely on the ground that the Tribunal's order is the subject matter of revision in the High Court or the High Court's decision is under appeal before the Supreme Court. Permitting him to take such a view would introduce judicial indiscipline, which is not called for even in such cases. It would lead to a chaotic situation".

The Hon’ble Apex Court in Baradakanta Mishra vs. Bhimsen 3. Dixit AIR 1972 SC 2466 held that it would be anomalous to

suggest that a Tribunal over which a High Court has superintendence can ignore the law declared by it and if a Tribunal can do so, all the subordinate courts can equally do so, for there is no specific provision as in respect of Supreme Court, making the law declared by the High Court binding on subordinate Courts.

Article 141 of the Constitution lays down that the “law 4. declared” by the Supreme Court is binding upon all the courts with the territory of India. The “law declared” has to be

ITA No. 114/Agra/2021 & Others (58) construed as a principle of law that emanates from a judgment, or an interpretation of a law or judgment by the Supreme Court, upon which, the case is decided. Hence, it flows from the above that the “law declared” is the principle culled out on the reading of a judgment as a whole in the light of the questions raised, upon which the case is decided. Ambica Quarry Works vs. State of Gujarat (1987) 1 SCC 213; and CIT vs. Sun Engg. Works (P) Ltd. (1992) 4 SCC 363.

The Hon’ble Supreme Court in CIT vs. Ralson Industries Ltd. 5. (288 ITR 322) observed that when an order is passed by a higher authority, the lower authority is bound thereby keeping in view the principles of judicial discipline.

ITA No. 114/Agra/2021 & Others (58) Distributors (Baroda) Pvt. Ltd vs. Union of India 1985 AIR 1585 wherein it was held that,

“To perpetuate an error is no heroism. To rectify it is the compulsion of judicial conscience. In this we derive comfort and strength from the wise and inspiring words of Justice Bronson in Pierce v. Delameter A.M.Y. at page 18: "a Judge ought to be wise enough to know that he is fallible therefore everyday to learn: great and honest enough to discard all mere pride of opinion and follow truth wherever it may lead: and courageous enough to acknowledge his errors".

ITA No. 114/Agra/2021 & Others (58) Hon’ble 21. In this background, the various decisions of the Jurisdictional High Courts have been perused.

“2. Whether the payment of provident fund and employees state insurance dues deposited by the assessee within the grace period would qualify for deduction under Section 43B of the Income Tax Act, 1961?”

Thus, the Hon’ble Court has held that the employers 5. contribution is an allowable deduction, if paid before the due date answering the question of law framed. The Hon’ble Court went further and held that as far as the amounts constituting deductions from employee’s salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns.

We have perused the order of the Hon’ble Jurisdictional 6. High Court in the case of CIT Vs. AIMIL Ltd. 321 ITR 508 vide order dated 23.12.2009 held that if the employees' contributionis not deposited by the due date prescribed under

ITA No. 114/Agra/2021 & Others (58) the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income-tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Hon’ble Supreme Court in the case of Vinay Cement Ltd.

“2. The case relates to the assessment year 2002-03. The respondent assessee had filed its return on 30-10-2002 declaring income at Rs. 7,95,430. During the assessment proceedings, the Assessing Officer (AO) found that the assessee had deposited employers' contribution as well as e mployees' contribution towards provident fund and ESI after the due date, as prescribed under the relevant Act/Rules. Accordingly, he made addition of Rs. 42,58,574 being employees' contribution under section 36(1)(va) of the Act and Rs. 30,68,583 being employers' contribution under section 43B of the Act. Felt aggrieved by this assessment order, the assessee preferred appeal before the CIT(A) who decided the same vide orders dated 15-7-2005. Though the CIT(A) accepted the contention of the assessee that if the payment is made before the due date of filing of return, no disallowance could be made in view of the provisions of section 43B, as amended vide Finance Act, 2003, he still confirmed the addition made by the Assessing Officer onthe ground that no documentary proof was given to support

ITA No. 114/Agra/2021 & Others (58) that payment was in fact made by the assessee. The assessee filed an application under section 154 of the Act before the CIT(A) for rectification of the mistake. After having satisfied that payment had, in fact, been made, the CIT(A) rectified the mistake and deleted the addition by holding that the assessee had made the payment before the due date of filing of the return, which was a fact apparent from the record.”

The decision of ITAT:

"11. We have carefully considered the rival submissions in the light of material placed before us. In the assessment order ld. Assessing Officer has categorically stated that what the amount due was for which month in respect of EPF, Family Pension, PF inspection charges and ESI deposits and what were the due dates for these deposits and on which date these deposits were made. The dates of deposits are mentioned between 23rd May, 2001 to 23rd April, 2002. The latest payment is made on 23rd April, 2002 and assessee being limited company had filed its return on 20th October, 2002 which is a date not beyond thedue date of filing of the return. Thus, it is clear beyond doubt that

ITA No. 114/Agra/2021 & Others (58) all the payments which have been disallowed were made much earlier to the due date of filing of the return. The disallowance is not made by the Assessing Officer on the ground that there is no proof of making such payment but disallowance is made only on the ground that these payments have been made beyond the due dates of making these payments under the respective statute. Thus, it was not an issue that the payments were not made by the assessee on the dates which have been stated to be the dates of deposits in the assessment order. If such is a factual aspect then according to latest position of law clarified by Hon'ble Supreme Court in the case of CIT v. V inay Cement Ltd. that no disallowance could be made if the payments are made before the due date of filing the return of income. This issue came before Hon'ble Supreme Court in the case of CIT v. Vinay Cement Ltd. which was a special leave petition filed by the department against the High Court Order of 26th June, 2006 in ITA No. 2/05 and ITA No. 56/03 and ITA No. 80/03 of the High Court of Guwahati, Assam and it is order dated 7th March, 2007. A copy of the said order is placed on record. The observations of their Lordships on the issue are as under :—

'In the present case we are concerned with the law as it stood prior to the amendment of section 43B. In the circumstances the assessee was entitled to claim the benefit in section 43B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return.

The special leave petition is dismissed."

ITA No. 114/Agra/2021 & Others (58) 29. Thus, we find that the Co-ordinate bench of ITAT and the Hon’ble Jurisdictional high Court of Delhi have relied on the judgment of Vinay Cements Ltd. (supra).

Further, the Hon’ble Jurisdictional High Court of Delhi in 7. the case of PCIT Vs. Pro Interactive Services (India) Pvt. Ltd. in ITA 983/2018 dated 10.09.2018 while dismissing the appeal of the Revenue held that “the legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee's Provident Fund (EPD) and Employee's State Insurance Scheme (ESI) as deemed income of the employer under Section 2(24)(x) of the Act.”

“Section 2 (24) (x) of the Income Tax Act, 1961 reads: “any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees.” FINANCE ACT, 2021 [13 OF 2021] An Act to give effect to the financial proposals of the Central Government for the financial year 2021-2022.BE it enacted by Parliament in the Seventy-second Year of the Republic of India as follows:— CHAPTER I

ITA No. 114/Agra/2021 & Others (58) PRELIMINARY Short title and commencement. 1. (1) This Act may be called the Finance Act, 2021. (2) Save as otherwise provided in this Act,— (a) sections 2 to 88 shall come into force on the 1st day of April, 2021; (b) sections 108 to 123 shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. Amendment of section 36.

ITA No. 114/Agra/2021 & Others (58) 32. We have also perused the Memorandum Explaining the Provisions in the Finance Bill, 2021. Under the head “Provision relating to Direct Taxes” with to rationalization of various provisions, the issue of clause (24) of Section 2 sub-clause (x), Section 36(1) clause (va), Section 43B with regard to provisions of sub-Section (1) of Section 139 have been dealt at length. The gist is as under:

“Rationalization of various Provisions Payment by employer of employee contribution to a fund on or before due date

Clause (24) of section 2 of the Act provides an inclusive definition of the income. Sub-clause (x) to the said clause provide that income to include any sum received by the assessee from his employees as contribution to any provident fund or superannuation fund or any fund set up under the provisions of ESI Act or any other fund for the welfare of such employees.

Section 36 of the Act pertains to the other deductions. Sub- section (1) of the said section provides for various deductions allowed while computing the income under the head Profits and gains of business or profession‘.

Clause (va) of the said sub-section provides for deduction of any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date.

ITA No. 114/Agra/2021 & Others (58) Explanation to the said clause provides that, for the purposes of this clause, "due date to mean the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued there-under or under any standing order, award, contract of service or otherwise.

Section 43B specifies the list of deductions that are admissible under the Act only upon their actual payment. Employer's contribution is covered in clause (b) of section 43B. According to it, if any sum towards employer's contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date for furnishing the return of the income under sub-section (1) of section 139, assessee would be entitled to deduction under section 43B and such deduction would be admissible for the accounting year. This provision does not cover employee contribution referred to in clause (va) of sub-section (1) of section 36 of the Act.

employer ‘s Though section 43B of the Act covers only contribution and does not cover employee contribution, some courts have applied the provision of section 43B on employee contribution as well. There is a distinction between employer contribution and employee‘s contribution towards welfare fund. It may be noted that employee‘s contribution towards welfare funds is a mechanism to ensure the compliance by the employers of the labour welfare laws. Hence, it needs to be stressed that the employer‘s contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the

ITA No. 114/Agra/2021 & Others (58) employee‘s contribution towards welfare funds. Employee‘s contribution is employee own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee contribution, the employers get unjustly enriched by keeping the money belonging to the employees. Clause (va) of sub-section (1) of Section 36 of the Act was inserted to the Act vide Finance Act 1987 as a measures of penalizing employers who mis-utilize employee‘s contributions.

Accordingly, in order to provide certainty, it is proposed to –

(i) amend clause (va) of sub-section (1) of section 36 of the Act by inserting another explanation to the said clause to clarify that the provision of section 43B does not apply and deemed to never have been applied for the purposes of determining the ―due date under this clause; and

(i) amend section 43B of the Act 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 sub-clause (x) of clause (24) of section 2 applies. These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.” [Clauses 8 and 9]

to demonstrate that the aforesaid order cited hereinabove

has been overruled/stayed/set aside by higher judicial

forum. In view of the aforesaid facts, we are of the view that

the AO was not justified in denying, the deduction claimed

by the assessee on account of late deposit of PF/ESI/EPF,

albeit before filing the return of income. Admittedly in all

the above-stated matters, the revenue had not contended

that the assessee has deposited the contribution after the

filing of the return of income. In view of the above,

ITA No. 114/Agra/2021 & Others 45

respectfully following the decision of the coordinate bench

cited hereinabove, we allow the appeals filed by the

assessee. In the result all the appeals filed by the

assessee are allowed.

Sd/- Sd/-

(Laliet Kumar) (Anil Chaturvedi) Judicial Member Accountant member

Dated: 22nd March, 2022 *docs* Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Sr. Private Secretary Income Tax Appellate Tribunal Agra Bench, Agra