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TMI Blog2021 (12) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, treating the amended provision's applicability as retrospective. For this, the assessee has raised various grounds running into 1 to 13, which are common in both the appeals, which need not be reproduced. The facts and circumstances are exactly identical in both the years and both the years relate to assessment year 2018-19 & 2019-20. Hence, will take up the facts in ITA No.402/CHNY/2021 for assessment year 2018-19 and will decide the issue. 3. Brief facts are that the Centralized Processing Centre, Bengaluru processed the return of income of the assessee u/s.143(1) of the Act on 21.02.2020 by disallowing a sum of Rs. 12,48,25,558/- by invoking provisions of Section 43B r.w.s. 36(1)(va) of the Act for not depositing the employees contributions to PF & ESI within time specified under the respective acts. Against this, adjustment made / disallowance made being employees contribution of PF & ESI,assessee preferred appeal before CIT(A). Before CIT(A), assessee filed complete details of the entire payment i.e., employees contribution to PF & ESI paid before the due date of filing of return of income, which are reproduced in CIT(A) order at pages 3 to 19. The assessee before CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of Delhi Bench of this Tribunal in the case of Indian Geotechnical Services vs. ACIT in ITA No.622/DEL/2018, wherein the amendment brought out by Finance Act, 2021 in the provision of Section 36(1)(va) by inserting the Explanation 2 as well as Section 43B of the Act was held to be prospective. The ld.counsel drew our attention to Para 14 of the Tribunal order, which reads as under:- "14. Therefore, the amended provisions of Section 43B as well as 36(1)(va) are not applicable for the assessment year under consideration. By following the binding decision of Hon'ble Jurisdictional High Court, the employees contribution paid by the assessee before the due date of filing of return of income u/s.139(1) is an allowable deduction. Accordingly, we decide this issue in favour of the assessee and the disallowance made by the Assessing Officer is deleted." 4.2 The ld.counsel for the assessee also relied on the decision of Bengaluru Bench of this Tribunal in the case of Bevel Gears India P Ltd. vs. ACIT in ITA No.376/BANG/2021. 5. On the other hand, the ld. CIT-DR only relied on the order of the CIT(A) and stated that the CIT(A) has passed exhaustive order explaining all provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to accept the contention of the Revenue. 15. In CIT v. Dharmendra Sharma, 297 ITR 320, this Court specifically dealt with this issue and relying upon the aforesaid judgment of the Guwahati High Court, as affirmed by the Supreme Court in Vinay Cement (supra), the appeal of the Revenue was dismissed. More detailed discussion is contained in another judgment of this Court in CIT v. P.M. Electronics Ltd. (ITA No. 475/2007 decided on 3.11.2008). Specific questions of law which were proposed by the Revenue in that case were as under :- "(a) Whether amounts paid on account of PF/ESI after due date are allowable in view of Section 43B, read with Section 36(1)(va) of the Act? (b) Whether the deletion of the 2nd proviso to Section 43B by way of amendment by the Finance Act, 2003 is retrospective in nature?" 16. These questions were answered by the Division Bench in the following manner :- "7. Having heard the learned counsel for the Revenue, as well as, the assessee, we are of the view that the view taken by the Tribunal deserves to be sustained as it is no longer res integra in view of the decision of the Supreme Court in the case of CIT v Vinay Cement Ltd: 213 ITR 268 which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein it observed as follows:- "Delay condoned. In the present case we are concerned with the law as it stood prior to the amendment of Section 43-B. In the circumstances, the assessee was entitled to claim the benefit in Section 43-B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return. Special Leave Petition is dismissed." 10. In view of the above, it is quite evident that the special leave petition was dismissed by a speaking order and while doing so the Supreme Court had noticed the fact that the matter in appeal before it pertain to a period prior to the amendment brought about in Section 43B of the Act. The aforesaid position as regards the state of the law for a period prior to the amendment to Section 43B has been noticed by a Division Bench of this Court in Dharmendra Sharma (supra). Applying the ratio of the decision of the Supreme Court in Vinay Cement (supra) a Division Bench of this Court dismissed the appeals of the Revenue. In the passing we may also note that a Division Bench of the Madras High Court in the case of CIT v. Nexus Computer (P) Ltd by a judgment dated 18.8.08 passed in Tax Case (A) No. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated above, we are of the opinion that no substantial question of law arises for our consideration in the present appeal. The appeal is, thus, dismissed." It also becomes clear that deletion of the 2nd proviso is treated as retrospective in nature and would not apply at all. The case is to be governed with the application of the 1st proviso. 17. We may only add that if the employees‟ contribution is not deposited 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 (supra). 18. We, thus, answer the question in favour of the assessee and against the Revenue. As a consequence, the appeals filed by the assessees stand allowed and those filed by the Revenue are dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;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. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have retrospective effect because it would be without object unless construed retrospectively. If the amendments in Sec. 36(1)(va) are viewed from this perspective, there will not be any room for doubt about its nature being clarificatory. This matter has been clarified in the amendment i.e. the true import of 'due date 'was very much implicit in the existing explanation 1 of Sec 36(1)(va) even prior to the amendment. More clarity has been. brought about and the existing interpretation is reconfirmed through this amendment by way of insertion of explanation 2. A harmonious construction will not emerge if these amendments were to be construed as prospective. Therefore, relying on the principles of interpretation of statutes as has been adumbrated by Hon'b1e Apex Court supra, it is to be held that the clarification brought out by Explanation 2 to Sec.36(1)(va) will equally hold good for the AYs prior to 2021-22. 7.18 The appellant has placed reliance on the decisions of Hyderabad Bench of the Income Tax Appellate in the case of M/s Crescent Roadways P Ltd in ITA No. 1952/HYD/2018 and of Delhi Bench of the Income Tax Appellate Tribunal in the case of Indian Geotechnical Services in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s something today, he do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. According to Hon'ble Apex court every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit, which means law looks forward not backward. In the case of Vatika Township Pvt. Ltd., supra, the issue before Hon'ble Supreme Court was the insertion of proviso to section 113 of the act by the Finance Act 2002 for charging of surcharge was under challenge. Hon'ble Supreme Court noted though provision for surcharge under the Finance Acts have been in existence since 1995, the charge of surcharge with respect to block assessment years, having been created for the first time by the insertion of proviso to Section 113 of the Act, by Finance Act, 2002, it is clearly a substantive provision and is to be construed as prospective in operation. The Hon'ble Supreme Court held that the amendment neither purports to be merely clarificatory nor is there any material to suggest that it was intended by parliament. 6.6 The Hon'ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect Taxes". This circular has been issued after the passing of the Finance Act, 2002, by which amendment to Section 113 was made. In this circular, various amendments to the Income Tax Act are discussed amply demonstrating as to which amendments are clarificatory/retrospective in operation and which amendments are prospective. For example, explanation to Section 158BB is stated to be clarificatory in nature. Likewise, it is mentioned that amendments in Section 145 whereby provisions of that section are made applicable to block assessments is made clarificatory and would take effect retrospectively from 1st day of July, 1995. When it comes to amendment to Section 113 of the Act, this very circular provides that the said amendment along with amendments in Section 158BE, would be prospective i.e. it will take effect from 1st June, 2002. (f) Finance Act, 2003, again makes the position clear that surcharge in respect of block assessment of undisclosed income was made prospective. Such a stipulation is contained in second proviso to sub-section (3) of Section 2 of Finance Act, 2003. This proviso reads as under: "Provided further that the amount of income-tax computed in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ESI Acts, will still be permissible deduction if the same is actually paid in pursuance of Sec. 43B. The CIT(A) further noted the decisions in favour of assessee in para 7.7, and the same are as under: 1. Alom Extrusions Ltd. (supra) 2. CIT v. Aimil Ltd. [2010] 321 ITR 508/188 Taxman 265 (Delhi); 3. CIT v. NispoPolyfabriks Ltd. [2013] 350 ITR 327/213 Taxman 376/30 taxmann.com 90 (HP); 4. CIT v. Alembic Glass Industries ltd. [2015] 279 ITR 331/149 Taxman 15 (Guj.); 5. CIT v. Sabari Enterprises [2008] 298 ITR 141 (Kar.); 6. CIT v. Pamwi Tissues Ltd. [2009] 313 ITR 137 (Bom.); 7. Spectrum Consultants India (P.) Ltd. V. CIT [2013] 215 Taxman 597/34 taxmann.com 20 (Kar.); 8. CIT v. Udaipur Dugdh Utpadak Shakari Sangh Ltd. [2013] 217 Taxman 64/35 taxmann.com 616 (Raj.) and 9. CIT v. Hemla Embroidery Mills (P) Ltd. [2013] 217 Taxman 207 (Mag.)/37 taxmann.com 160 (Punj. & Har.). 6.8 In the present case also, before insertion of Explanation 2 to Section 36(1)(va) of the Act, there is ambiguity regarding due date of payment of employees' contribution on account of provident fund and ESI, whether the due date is as per the respective acts or up to the due date of filing of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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