TMI Blog2021 (11) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 relying on the ratio of the Hon ble Supreme Court in the case of Vatika Township Pvt. Ltd. [ 2014 (9) TMI 576 - SUPREME COURT] and M/s Snowtex Investment Ltd. [ 2019 (5) TMI 1165 - SUPREME COURT] and also taking note of the binding decision of the Hon ble Jurisdictional Calcutta High Court on this issue before us in Shri Vijayshree Ltd. Ltd.[ 2011 (9) TMI 30 - CALCUTTA HIGH COURT ] M/s Coal India Ltd [ 2015 (8) TMI 1451 - CALCUTTA HIGH COURT] , M/s Akzo Nobel India Ltd. [ 2016 (6) TMI 1128 - CALCUTTA HIGH COURT] , we set aside the impugned order of Ld CIT(A) and direct the AO to allow the claim of deduction in respect of employees contribution shares towards ESI, PF, by the assessee before the due date of filing of return u/s 139(1) of the Act. Therefore the appeal of assessee succeeds and so, it is allowed in favor of assessee. Disallowance u/s 14A - HELD THAT:- Since there is no dispute that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Goetz India [ 2006 (3) TMI 75 - SUPREME COURT] does not come in the way of the Tribunal as held by the Hon ble Supreme Court as noted (supra), so we set aside the impugned order of Ld CIT(A) and direct the AO to give relief to the assessee on this issue. However, it is clarified that when the assessee receives or when this amount accrues to the assessee, then it should be taxed in that assessment year and not in this assessment year - Decided in favour of assessee. - I.T.A. Nos. 231 & 365/Kol/2021 I.T.A. No. 366/Kol/2021 I.T.A. Nos. 369 &367/Kol/2021 I.T.A. No. 368/Kol/2021 I.T.A. No. 371/Kol/2021 - - - Dated:- 17-11-2021 - Shri P. M. Jagtap, Vice President (KZ) And Shri A. T. Varkey, Judicial Memberber For the Appellant : Shri Miraj D Shah, A.R For the Respondent : Shri Jayanta Khanra, JCIT ORDER Per Bench: All these appeals are preferred by the different assessee s which are against the separate orders of the Ld. CIT(A)-National Faceless Appeal Centre(NFAC) dated 01.06.2021, 26.07.2021, 26.08.2021, 07.09.2021, 16.08.2021 25.08.2021 for AYs 2015-2016, 2017-18, 2018-19 2019-20 respectively. 2. First we will consider the appeal in ITA No. 365 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w as well as on facts in not admitting the claim of deduction of retention money in ground number 4, on the pretext that the assessee appellant had submitted revised return of income before the Ld. AO during assessment proceedings. 7. For that the appellant craves leave to supplement, cancel or otherwise modify any of the above grounds before or at the time of hearing. 4. Ground no. 1 is preferred by the assessee against the action of Ld. CIT(A) (NFAC) [hereinafter referred to Ld. CIT(A)] confirming the action of AO disallowing the sum of ₹ 10,946/- being contribution of employees share towards ESI, PF, Superannuation Fund or any other fund set up for the welfare of the employee u/s 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961 [hereinafter referred to as the Act] when the payments were made within the due dates of filing of return u/s 139 of the Act. 5. Brief facts of the case as noted by the AO is that from the Tax Audit Report submitted by the assessee, he noted that the assessee company has made delayed payment amounting to ₹ 10,946/- in respect of employees contribution towards provident fund as per the Provident Fund (hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section 2 of the IT Act, applies. The clarificatory amendment is, by its very definition, retrospective in nature and, therefore, the disallowance as made by the AO is perfectly in order, and therefore, the addition is confirmed. This ground of appeal is dismissed. 7. Aggrieved by the action of Ld. CIT(A) the assessee is before us. 8. We have heard both the parties and perused the records. We find that the assessee had remitted the payment which are in the nature of contribution of employees share towards PF to the fund set up for the welfare of the employees within the due date of filing of return of income u/s 139(1) of the Act. In the present case the AO have disallowed the payment made towards these funds by relying on CBDT Circular No. 22/2015 dated 17.12.2015 and by taking note of the decision of Hon ble Gujrat High Court in the case of M/s Gujrat State Road Transport (supra) and ITAT (Mumbai) decision in the case of M/s LKP Securities(supra) that the employees contribution to PF/ESI can be allowed only if the same has been deposited within the due date prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e into force [See Shyam Sunder v. Ram Kumar, (2001) 8 SCC 24 (para 44); Brij Mohan Das Laxman Das v. CIT, (1997) 1 SCC 352, 354; CIT v. Podar Cement (P) Ltd., (1997) 5 SCC 482, 506]. But if it changes the law it is not presumed to be retrospective, irrespective of the fact that the phrases used are it is declared or for the removal of doubts . 18. There was and is no ambiguity in the main provision of Section 9(1)(ii). It includes salaries in the total income of an assessee if the assessee has earned it in India. The word earned had been judicially defined in S.G. Pgnatale [(1980) 124ITR 391 (Guj)] by the High Court of Gujarat, in our view, correctly, to mean as income arising or accruing in India . The amendment to the section by way of an Explanation in 1983 effected a change in the scope of that judicial definition so as to include with effect from 1979, income payable for service rendered in India . 19. When the Explanation seeks to give an artificial meaning to earned in India and brings about a change effectively in the existing law and in addition is stated to come into force with effect from a future date, there is no principle of interpretation which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in pursuance of a contract . (emphasis supplied). This amendment takes effect retrospectively from 01.04.2002. Various other amendments also take place retrospectively. The Notes on Clauses show that the legislature is fully aware of three concepts: i) prospective amendment with effect from a fixed date; ii) retrospective amendment with effect from a fixed anterior date; and iii) clarificatory amendments which are retrospective in nature. 29. In M/s. Vijay Industries (supra), decided on 1 March 2019, a three judge Bench of this Court held that the provisions of Section 80AB which were introduced by the Finance (No. 2) Act, 1980 with effect from 1 April 1981 could not be regarded as clarificatory in nature. The Court held that the provision was made with prospective effect and the amendment would not apply to assessment year 1979-1980 and 1980-1981 because the amended provision was brought on the statute book after the assessment years in question. 30. In conclusion, we therefore, hold that the amendment which was brought by Parliament to the Explanation to Section 73 by the Finance (No 2) Act 2014 was with effect from 1 April 2015. In its legislative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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] [Emphasis given by us] 13. Therefore, taking us through the relevant clauses of Notes of Clauses of Finance Act, 2021, he pointed out to us that it is explicitly made clear that amendment will take effect from 1st April, 2021 and therefore will accordingly apply to the assessment year 2021-11and subsequent years. Therefore according to Shri Miraj Shah the amended provision of Section 43B as well as Section 36(1)(va) are not applicable in the assessment year under consideration for the present case as it is for AY 2017-18 and therefore according to him, the decision of the Hon ble Jurisdictional Calcutta High Court is binding on this issue as held in the case of CIT vs. M/s Vijayshree Ltd. in ITAT No.243 of 2011 GA No. 26607 of 2011, CIT vs. Philips Carbon Black Ltd. in GA No. 1382 of 2014 ITAT 31 of 2014, CIT vs. M/s Coal India Ltd. in ITA 12 of 2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited by the due date prescribed under 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 Supreme Court in Vinay Cement - Decided in favor of assessee. [Emphasis given by us] 16. Thus it was pointed out by the Ld. A.R. that the Hon ble High Court Division Bench had earlier held in M/s Aimil Ltd. (supra) that the PF/ESI Act permits the employer to make deposit with some delays, subject to the consequents as per the respective PF/ESI Acts, however insofar as the Income Tax Act is concerned, the assessee can get the benefit of deduction if the actual payment is made before the return is filed as per the principle laid down by the Hon ble Supreme Court in Vinay Cements reported in 213 CTR 268 (SC). Therefore, according to Ld. A.R., sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration. 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 43B 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid decision and relying on the ratio of the Hon ble Supreme Court in the case of Vatika Township Pvt. Ltd. (supra) and M/s Snowtex Investment Ltd. (supra) and also taking note of the binding decision of the Hon ble Jurisdictional Calcutta High Court on this issue before us in 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), we set aside the impugned order of Ld CIT(A) and direct the AO to allow the claim of deduction in respect of employees contribution shares towards ESI, PF, by the assessee before the due date of filing of return u/s 139(1) of the Act. Therefore the appeal of assessee succeeds and so, it is allowed in favor of assessee. 19. Ground No. 2 is against the action of Ld. CIT(A) in confirming the disallowance made by the AO u/s 14A of the Act. 20. At the outset, the Ld. A.R. pointed out that the assessee is not in receipt of any exempt income and therefore according to him Section 14A disallowance was not warranted in this case and cited the decision of Hon ble Delhi High Court in the case of Chem Investments in 378 ITR 38 (Del). 21. Per contra the Ld. D.R could not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in foreign land, the assessee has not selected Mr. Joy Goel from open competition. There was no scope for any other meritorious candidate for availing such sponsorship. d) It is also pertinent to note that the agreement furnished, made between the assessee and Mr. Joy Goel, is neither registered nor even notarized. The same has no value before the eye of law. Thus it is amply clear that such expenditure was made in the form of a colourable device so that the expenditure can be given a shape of business expenditure though the same is actually an expenditure of personal nature. The assessee has also failed to establish how the said expenditure may be treated as wholly, necessarily and exclusively for business expediency, and under which provision of the I.T Act, 1961 the said expenditure has been claimed as a deduction. In a similar issue, the ITAT, Mumbai Bench, in the case of Intersil India Limited vs Additional Commissioner of Income Tax in 101 ITD 85 Mum, has held that The expenses incurred on the foreign education of Shri Rishavidehra, whose only connection with the assessee company at the relevant point of time was that he was son of the Managing Director of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course. Therefore, according to Ld. AR similar expenditure of assessee should be allowed since it has got nexus with the business of the assessee. Per contra, the Ld. DR contended that Shri Jay Goel is the son of employee of the company and his education at the Bentley University has no connection with the activities of the assessee company and the agreement has not been registered or even notarized. Therefore, according to Ld. DR, it is a colorable device and should not be allowed and, therefore, no deduction should be allowed. 27. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee company s Director s son Shri Jay Goel had signed an agreement (refer page 69-72 of PB) with the assessee company that after completion of his education in business management at Bentley University, USA he would join duties in the business of the assessee and thus serve the company. Further it has been brought to our notice that from 1st June, 2018 he was appointed as CEO of the assessee company.[Copy of the agreement letter dated 01.06.2018 is found placed at page 75 to 79 of PB]. The Ld. A.R. submitted that in the subsequent assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaining the right of the assessee to reverse its claim of reducing its income by ₹ 1,55,74,066/- being retention money deducted/retained by the Electricity Board has been rightly disallowed as the said claim should have been made only by filing a revised return of income (Goetz India Ltd. Vs. CIT (2006) 284 ITR 323 (SC). The case laws cited by the appellant do not carry much weight in view of the Hon ble Supreme Court decision Goetz (India) Ltd. Hence, this ground of appeal is dismissed. 31. Aggrieved, the assessee is in appeal before us. 32. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee had filed its original return of income on 17.09.2015 showing a total income of ₹ 8,80,29,520/-. Later the assessee filed a letter dated 29.06.2017 wherein it was submitted that the retention money deducted and/or retained by the State Electricity Board is receivable subject to fulfillment of no-defect/ liabilities and is contingent in nature and therefore, the right to receive the retention money is not absolute in nature and, therefore, should not be taken into consideration as income for the year under co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were submitted having regard to the nature of the contract, no enforceable liability has accrued or arisen and, accordingly, it cannot be said that the assessee had any right to receive the entire amount on the completion of the work or on the submission of bills the assessee had no right to claim any part of the retention money till the verification of satisfactory execution of the contract. 16. For the reasons aforesaid, we answer this question in this reference in the affirmative and in favour of the assessee. 33. Since we note that the retention money kept with the Electricity Board which would be released latter only once the assessee fulfills all the obligations under the contract then only the assessee would acquire the right to receive such retention money so this is contingent in nature, so the amount in question cannot be held to have been accured to the assessee and since on facts the assessee has not received the same, even by applying the concept of real income theory, the money retained by the Electricity Board cannot be brought to tax. Thus, we note that in this year under consideration, since no enforceable liability has accrued or arisen, so, it cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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