TMI Blog2021 (11) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... irrespective of the view expressed therein, hold for the relevant years, being prior to the year of applicability of the Explanations under reference. No adjustment, in view of the conflicting judicial opinion could, accordingly, be made to the returned income u/s. 143(1)/154, which sections admit only issues on which there could be conceivably no two views, rampant, irrespective of merits thereof, in the instant case, which aspect, as explained therein, has been given cognizance to in making the provision applicable not retrospectively. The assessee, accordingly, succeeds in his challenge to the impugned adjustments, which are held as bad in law and directed for deletion. This is of course subject to any different view taken by the Hon ble jurisdictional High Court for any year prior to AY 2021-22. Assessee appeal allowed. - ITA No. 37 & 38/Jab/2021 - - - Dated:- 18-11-2021 - SH. SANJAY ARORA, HON'BLE ACCOUNTANT MEMBER Appellant by : Sh. JancyBiju , Advocate Respondent by : Sh.S.K.Halder, DR ORDER Per Sanjay Arora, AM This is a set of two Appeals by the Assessee, i.e., for two consecutive years, being assessment years 2018-19 2019-20, agitating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the employee s contribution. It is only this contribution that is the subject matter of and governed by sec. 43B. The Explanations to ss. 36(1)(va) and 43B, though inserted by Finance Act, 2021, w.e.f. 01/4/2021, are, clearly, declaratory in character, even as expressed therein and, thus, retrospective. 3. I have heard the parties, and perused the material on record. The scope of the controversy 4.1 My first observation in the matter is that the adjustment to the returned income stands made u/s. 143(1) (for AY 2019-20) and u/s. 154 (for AY 2018- 19). The scope of an adjustment under these two sections is very limited, excluding any contentious or debatable issue, i.e., on which there could conceivably be two points of view (ITO v. Volkart Brothers v. ITO [1971] 82 ITR 50 (SC)). Clearly, therefore, the merits of the case of the opposing sides aside, the Revenue s case can survive only where the Explanations to section 36(1)(va) and 43B, inserted simultaneously by Finance Act, 2021, remove the allowance (or otherwise) of the impugned sums outside the realm of controversy, which has in fact attended it for long, with there being decisions by the Hon'ble High Courts on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferent fields. While that to the former clarifies the due date u/s. 36(1)(va) to be that under the relevant statute, i.e., under which the deposit of the contributions is to be made, that to the latter is qua the sum received by the assessee from any of his employees to which the provision of s.2(24)(x) apply, excluding thus the employers contribution to these funds. This, again, is not in doubt or dispute, but, as afore-noted, as to whether the same, as their clear language states, do indeed clarify the law as it always stood? That is, are the said Explanations essentially and intrinsically explanatory or clarificatory in nature, so as to be given a retrospective effect. It would, therefore, be necessary to discern and appreciate the true meaning and scope thereof, toward which it would be appropriate to read the relevant provisions of the Act as well as traverse their legislative history. The law 4.3 The relevant provisions read as under: Definitions. 2. In this Act, unless the context otherwise requires,- (24) income includes- (x) any sum received by the assessee from his employeesas contributions to any provident fund or superannuation fund or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided further that no deduction shall, in respect of any sum referred to in cl. (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below cl. (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realized within fifteen days from the due date. By Finance Act, 2003, w.e.f. 01/4/2004, the second proviso to sec. 43B of the Act was deleted and the first proviso amended to read as under: Provided that 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. (emphasis, supplied) It is clear that the Act provides separately for the employee s and employer s contribution to the employee welfare funds; the former being required by law to be deducte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statute (Ishikawajima-Harima Heavy Industries Ltd. v. DIT [2007] 288 ITR 408 (SC)). A deduction in computing business profit u/s. 28 in its respect is correspondingly provided for u/s. 36(1)(va) on payment by the due date for its deposit with the relevant fund. This was done, as explained in the relevant Finance Bill, to penalize the employers who retained the employee s monies, received thus. The employer s contribution to the relevant fund, on the other hand, is that which the assessee, as an employer, is required to contribute and deposit therewith, as explained hereinbefore, i.e., over and above the employees salary, in equal sum (or even otherwise), and which is deductible u/s. 37(1). Section 43B, however, introduces a disability, so that the statutory payments specified therein, including the employer s contribution to the employee welfare funds (under clause (b) thereof), would, despite being otherwise allowable and irrespective of the assessee s method of accounting, be deductible in computing his income u/s. 28 only on actual payment. If the assessee-employer as argued in EssaeTeraoka P. Ltd.(supra), is to pay the employee s contribution (to the employee welfare fund) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant year, by the Finance Act, 1987, applied. This, however, was not without its concomitant issues. A delayed payment by the employer (of his contribution) thus attracted an absolute bar for deduction. Further still, how could a provision mandated to provide for a timing difference introduce such a bar, exceeding its purview? The second proviso was accordingly deleted by Finance Act, 2003 w.e.f. 01/4/2004, and the first proviso amended, providing a uniform treatment for all the sums covered u/s. 43B. All this was noted and explained by the Apex Court in Alom Extrusions Ltd. (supra). However, due to the issues afore-stated, which were thereby sought to be addressed, the amendments to s. 43B were held by it as retrospective, i.e., since 01/4/1988, the inception of the provisos. This, despite the provision having been on the statute book since 1988, carving out a separate treatment, i.e., vis- -vis the sums specified under other clauses of s. 43B, thereby conveying the legislative intent, manifest in its clear and unambiguous language. That is, to keep the employer s contribution to the employee welfare funds on the same footing as the employee s contribution thereto, governed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-starter. The foregoing is of course without detracting from the fact of the clear provisions of law, which provide separately for the employee and employer part of the contribution to be credited to the account of the employee with the relevant welfare fund under the relevant welfare legislation, so that there is nothing in the clear and unambiguous language thereof to suggest of the two being at par, i.e., insofar as their deductibility under the Act in the computation of the income u/s. 28 is concerned. Suggesting so therefore implies a complete disregard of the clear provisions of law. It is this difference, which continues to obtain to date in view of no amendment to s. 36(1)(va), that the newly inserted Explanations to ss. 36(1)(va) and 43B emphasize, seeking to, even as clarified therein, explain the law as it stands; rather, as it always stood. In fact, that sec. 43B(b) governed only the employer s contribution, deduction qua which is entitled only on payment by the due date u/s. 36(1)(va), which was later extended to the due date of filing the return u/s.139(1), was the uniform view of the different High Courts. Delineating a separate date (for payment) for sums specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that the Court cannot read anything into a statutory provision which is plain and unambiguous. A statute is an edict of the legislature. The language employed in a statute is the determinative factor of legislative intent. The first and primary rule of construction is that the intention of the legislation must be found in the words used by the legislature itself. The question is not what may be supposed and has been intended but what has been said. Statutes should be construed not as theorems of Euclid . Judge Learned Hand said, but words must be construed with some imagination of the purposes which lie behind them [see Lenigh Valley Coal Co. vs. Yensavage 218 FR 547]. The view was reiterated in Union of India vs. Filip Tiago de Gama of Vedem Vasco de Gama AIR 1990 SC 981. In Dr. R. Venkatachalam Ors. etc. vs. Dy. Transport Commissioner, AIR 1977 SC 842, it was observed that Courts must avoid the danger of a priori determination of the meaning of a provision based on their own pre-conceived notions of ideological structure or scheme into which the provision to be interpreted is somewhat fitted. They are not entitled to usurp legislative function under the disguise of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not a new problem, though our standard of drafting is such that it rarely emerges . (pgs. 154-155) Coming back to the interpretation of the employee s contribution, being the sum contributed by him to his fund (through the agency of his employer by first receiving it), as governed by s. 43B(b), surely there is no case of a manifestly absurd or anomalous result, much less one which could not have been intended by the Legislature, so as to do any violence to the words. Rather, as pointed out, even so, sec. 36(1)(va) would prevail to eschew any deduction in its respect where not paid by the due date specified under the relevant statute. No case of a caususomissus, even otherwise not lightly inferred, is also made out. Hardship, it is well-settled, cannot by itself be a ground for reading down a clear provision, even as in the instant case it would contradict the avowed object of a timely fulfillment of the statutory obligations qua the labor welfare legislations by the assessee-employers. There is in fact no case of hardship; the money to be paid being of the employee, held under trust by the employer, who thus acts in respect of those monies in a fiduciary capacity. This also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the same concerned s. 43B, and had nothing to do with interpreting s. 2(24)(x) or s. 36(1)(va). In fact, the constitutionality of both, the provisos to sec. 43B and sec. 36(1)(va), stand upheld in Hitech (India) (P.) Ltd. v. UoI [1992] 227 ITR 446 (AP). In fact, one of the arguments assumed in the challenge thereto (by way of writ petition), which though did not find favour with the Hon ble Court, was that sec. 43B is discriminatory insofar as it places the sums specified in cl. (b) thereof on a footing different from those in other clauses thereof. Where, then, one may ask, is the question of reading down the said provision so as to extend the time limit for the deposit of employee s contribution to the due date of filing the return of income u/s. 139(1) for the relevant year? The legislative history of s. 43B also shows that the two components of the contribution were initially conceived to be treated on the same footing, which in fact is the premise of the several decisions which have held, particularly post the amendments to s. 43B, the employee part of the contribution to be covered thereby, and which has been explained hereinbefore to be unfeasible in view of the clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, what would be more express; the Explanation/s itself providing, with a view to remove doubts, of the stated position to have been always the case, so that at no point of time, i.e., since the inception of sections 43B and 36(1)(va), has the sum referred to in section 2(24)(x) been regarded as subject to the former and, further, the due date referred to in the latter (s. 36(1)(va)), defined per Explanation (since renumbered as Explanation 1) thereto, as having any bearing on section 43B, wherein the due date applicable is specified as that for furnishing the return of income u/s.139(1) for the relevant year. Of course this obtains post the amendment to s. 43B by Finance Act, 2003, w.e.f. 01/4/2004, held retrospective by the Apex Court since the inception of the second proviso, inserted w.e.f. 01/4/1988 simultaneous with ss. 2(24)(x) and 36(1)(va), further making apparent the legislative intent. This also explains as well as provides the legal basis for the use of words for the removal of doubts and shall be deemed never to have been applied in the newly inserted Explanations. This in fact has also been the unequivocal reading of the said provisions by several High Courts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance Act, 1948 (34 of 1948) or any other fund for the welfare of such employees. According to us, on a reading of section 36(1)(va) along with section 2(24)(x), it is categoric and clear that the contribution received by the assessee from the employee alone was treated as income for the purpose of Sec.36(1)(va) of the Act and therefore we are of the considered opinion that the assessee was entitled to get deduction for the sum received by the assessee from his employees towards contribution to the fund or funds so mentioned only if, the said amount was credited by the assessee on or before the due date to the employees account in the relevant fund as provided under Explanation 1 to section 36(1)(va) of the Act. According to us, so far as section 43B (b) is concerned, it takes care of only the contribution payable by the employer/assessee to the respective fund. Therefore, in that circumstances, section 36(1)(va) and section 43B(b) operate in different fields, i.e., the former takes care of employee's contribution and the latter employer's contribution. The assessee was entitled to get the benefit of deduction under section 43B(b) as provided under the proviso thereto only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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's contribution referred to in clause (va) of sub-section (1) of section 36 of the Act. Though section 43B of the Act covers only employer's 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective application. The Notes on Clauses state the same, to the same effect. The amendments under reference are, thus, though clarificatory, shall have a prospective application, i.e., for AY 2021-22 and subsequent years. It is unfortunate that neither party brought the same to my notice during hearing, which would have saved considerable effort in deciding the appeals under reference, even as two decisions by the Hyderabad Bench of the Tribunal were sought to be placed on record after the conclusion of the hearing by the assessee s counsel, and which again do not make any reference to either the Notes on Clauses or the Memorandum. There is, however, one aspect that yet remains to be seen, i.e., a decision by the Hon ble jurisdictional High Court, if any, in the matter. This is as the same, where it pertains to an assessment year prior to AY 2021-22, shall prevail. This is as the same would be rendered de hors the Explanations under reference, which have been held as applicable only for AY 2021-22 and subsequent years. An inquiry in its respect was also made hearing, making it clear that, where so, the same, being binding, shall in any case prevail, i.e., irrespective of the retr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... across different High Courts, i.e., of the sums specified u/s. 43B(b) to be, in terms of the said section, deposited within the time stipulated u/s. 36(1)(va) to be eligible for deduction (in the computation of business income of the assessee-employer u/s. 28). That is, the employee s contribution was, and indeed continues to be, subject to section 36(1)(va), making for a uniform treatment under the Act for both the employee s and the employer s contribution to the employee welfare funds. This position, departed from by Finance Act, 2003, w.e.f. 01/4/2004, was held as retrospective by the Apex Court in Alom Extrusions (supra), i.e., w.e.f. 01/04/1988, i.e., the date of insertion of the proviso. The same though has no bearing on the employee contribution (to the welfare fund), which continues to be subject to section 36(1)(va), to which no amendment has been made throughout its existence on the statute-book (with effect from 01/04/1988), save the Explanation 2 under reference, inserted by FA, 2021. This position, i.e., of the employee contribution being subject to s. 36(1)(va) remained undisputed, i.e., till the decision in AlomExtrusions (supra), only where-after decisions taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -contribution being deductible on being deposited (by the employer) to the credit of the employee s account with relevant fund by the due date of filing the return of income u/s. 139(1) in his case. The legislative intent, manifest in the clear, unambiguous language of the relevant provisions and, in fact, read as so, that the Explanations inserted by Finance Act, 2021 seek to make amply clear. There is, again, nothing in Alom Extrusions (supra), post which decision there has been a cleavage of judicial opinion, to suggest otherwise; the question addressed by the Hon'ble court in that case being the retrospectivity or otherwise of the amendments to section 43B by Finance Act, 2003. Even otherwise, a decision is an authority for what it actually decides and not what may remotely or even logically follow from it (see: Bhavnagar University v. Palitana Sugar Mills [2003] (2) SCC 511; CIT v. Sun Engineering Works (P.) Ltd. [1992] 198 ITR 297 (SC); Goodyear India Ltd. vs. State of Haryana Anr.[1991] 188 ITR 402 (SC); LachmanDass Bhatia Hingwala (P.)Ltd. vs. Asstt. CIT [2011] 330 ITR 243 (Del)(FB). The argument of hardship in Alom Extrusions (supra) is not applicable to the employee- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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