TMI Blog2021 (11) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... 2021 - Shri George George K, Judicial Member For the Appellant : Sri.Ravishankar S.V., Advocate For the Respondent : Sri.Ganesh B.Ghale, Standing Counsel ORDER This appeal at the instance of the assessee is directed against CIT(A) s order dated 05.04.2021. The relevant assessment year is 2019-2020. 2. The ITAT Registry has noted a delay of 122 days in filing this appeal. However, there is no delay in view of the judgment of the Hon ble Apex Court in MP No.6651/2021 in SMW(c) No.3/2020 in case of In RE Cognizance for Extension of Limitation (judgment dated 27.04.2021) wherein the Hon ble Supreme Court had extended the limitation period for all filings before all Courts and Tribunals in the country and such extension was in force when this appeal was filed. 3. The grounds raised reads as follows: 1. The impugned order of the learned Commissioner of Income-tax (Appeals) National Faceless Appeal Centre, Bengaluru Karnataka passed under Section 250 of the Income Tax Act, 1961 is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case. 2. The appellant denies himself liable to be assessed on a total incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (hereinafter called the Act ) by assessing a sum of ₹ 37,22,210. The reason for the difference between returned income and the assessed income under section 143(1) of the Act was on account of a disallowance of a sum of ₹ 1,61,480 being late remittance of employees contribution of PF and ESI under the respective Acts. 5. Aggrieved, assessee preferred an appeal before the First Appellate Authority. It was contended that assessee has paid the employees contribution prior to the due date of filing of return under section 139(1) of the Act. Therefore, it was submitted assessee is entitled to deduction of the employees contribution of PF and ESI having regard to the provision to section 43B of the Act. In this context, the assessee relied on the judgment of the Hon ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT, reported in 366 ITR 408. The CIT(A), after noticing the judicial pronouncements in favour of the Revenue, concluded that amendment to sections 43B and 36[1][va] of the Act by Finance Act, 2021, is clarificatory and has got retrospective operation. 6. Aggrieved, assessee has filed this appeal before the Tribunal. The learned AR rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. v. DCIT reported in 366 ITR 408 (Kar.) has categorically held that the assessee would be entitled to deduction of employees' contribution to ESI provided the payment was made prior to the due date of filing of return of income u/s 139(1) of the I.T.Act. The Hon'ble jurisdictional High Court differed with the judgment of the Hon'ble Gujarat High Court in the case of CIT v. Gujarat State Road Transport Corporation reported in 366 ITR 170 (Guj.). The Hon'ble High Court was considering following substantial question of law:- Whether in law, the Tribunal was justified in affirming the finding of Assessing Officer in denying the appellant's claim of deductions of the employees contribution to PF/ESI alleging that the payment was not made by the appellant in accordance with the provisions u/s 36[1][va] of the I.T.Act? 7.1 In deciding the above substantial question of law, the Hon'ble High Court rendered the following findings:- 20. Paragraph-38 of the PF Scheme provides for Mode of payment of contributions. As provided in sub para (1), the employer shall, before paying the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law adversely to the assessee. Therefore, such amendment cannot be held to be retrospective in nature. Even otherwise, the amendment has been mentioned to be effective from 01.04.2021 and will apply for and from assessment year 2021-2022 onwards. The following orders of the Tribunal had categorically held that the amendment to section 36[1][va] and 43B of the Actby Finance Act, 2021 is only prospective in nature and not retrospective. (i) Dhabriya Polywood Limited v. ACIT reported in (2021) 63 CCH 0030 Jaipur Trib. (ii) NCC Limited v. ACIT reported in (2021) 63 CCH 0060 Hyd Tribunal. (iii) Indian Geotechnical Services v. ACIT in ITA No.622/Del/2018 (order dated 27.08.2021). (iv) M/s.Jana Urban Services for Transformation Private Limited v. DCIT in ITA No.307/Bang/2021 (order dated 11th October, 2021) 7.3 In view of the aforesaid reasoning and the judicial pronouncements cited supra, the amendment by Finance Act, 2021 to Sec.36[1][va] and 43B of the Act will not have application to relevant assessment year, namely A.Y. 2019- 2020. Accordingly, we direct the A.O. to grant deduction in respect of employees' contribution to ESI since the assessee has mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is made operative does not conclusively decide the question. The Court has to examine the scheme of the statute prior to the amendment and subsequent to the amendment to determine whether amendment is clarificatory or substantive. In Reliance Jute and Industries Ltd. vs. Commissioner of Income Tax, West Bengal (1979 (120) ITR 921) it was observed, by this Court that the law to be applied in income tax assessments is the law in force in the assessment year unless otherwise provided expressly or by necessary implication. Before proceeding further, it will be necessary to focus on the definition of the expression 'income' in the statute. Section 2 (24) defines' income' which is an inclusive definition, and includes losses i. e. negative profit. The position has been elaborately dealt with by this Court in Commissioner of Income Tax (Central), Delhi v. Harprasad Co. P. Ltd. (1975 (99) ITR 118). This Court held with reference to the charging provisions of the statute that the expression 'income' should be understood to include losses. The expression profits and gains' refers to positive income whereas losses represent negative profit or in other word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the general definition of the expression 'tax sought to be evaded' given earlier is a case to which Explanation 3 applies. Here, the tax sought to be evaded will be the tax chargeable on the entire total income assessed. 10. A combined reading of the Committee's ecommendations and the Circular makes the position clear that Explanation 4(a) to Section 271 (1) (c) intended to levy the penalty not only in a case where after addition of concealed income, a loss returned, after assessment becomes positive income but also in a case where addition of concealed income reduces the returned loss and finally the assessed income is also a loss or a minus figure. Therefore, even during the period between 1.4.1.976 to 1.4.2003 the position was that the penalty was leviable even in a case where addition of concealed income reduces the returned loss. 11. When the word income is read to include losses as held in Harprasad's case (supra) it becomes crystal clear that even in a case where on account of addition of concealed income the returned loss stands reduced and even if the final assessed income is a loss, still penalty was leviable thereon even during the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly to the assessment year 2021-2022 and subsequent assessment years. In contradistinction the relevant Finance Act, 2003 amending section 271(1)(iii) and Explanation 4 did not speak of application and merely provided that the amendments will take effect from 01.04.2003 [reproduced in para 5 of the judgment in case of Gold Coin (supra)]. 9.3 Furthermore, a Constitution Bench of the Hon'ble Apex Court of 5 judges in the case of CIT Vs. Vatika Township [P] Ltd., [2014] 367 ITR 466 [SC], has held as under: General Principles concerning retrospectivity 30. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by legislation. Legislation is not just a series of statements, such as one finds in a work of fiction/ nonfiction or even in a judgment of a court of law. There is a technique required to draft legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity is the principle of fairness, which must be the basis of every legal rule as was observed in the decision reported in L 'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation. is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing these dicta, a little later. 33. We would also like to point out, for the sake of completeness, that where a benefit is conferred by legislation, the rule against a retrospective construction is different. If legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public ..... 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