TMI Blog2021 (12) TMI 940X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee - ITA No. 568/Bang/2021 - - - Dated:- 16-12-2021 - Shri N.V.Vasudevan, Vice-President And Shri Chandra Poojari, AM Appellant by : Sri.Mahesh Reddy, CA Respondent by : Sri.Sankar Ganesh K, Joint CIT-DR ORDER Per Chandra Poojari, AM : This appeal at the instance of the assessee is directed against the order of the CIT(A), dated 17.09.2021. The relevant assessment year is 2018-2019. 2. The grounds raised by the assessee are as follows:- 1. The order of the ld.Assessing Officer is opposed to law, facts and circumstances of the case. 2. The ld.Assessing Officer has erred in assessing the taxable income of the appellant at ₹ 1,99,97,020/- as against the returned income of ₹ 26,62,050/-. 3. The ld.Assessing Officer has erred in disallowing the employees contribution towards PF and ESI u/s 36(1)(va), whereas the same are allowable under section 43B as they were paid before the due date of filing the return of income for A.Y. 2018-19. 4. The ld.Assessing Officer has erred in levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Departmental Representative, on the other hand, supported the order of the CIT(A). 7. We have heard rival submissions and perused the material on record. On identical facts, the Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company Vs. DCIT (supra) by following the dictum laid down by the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra) had held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) of the I.T.Act. It was further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory. The relevant finding of the ITAT in the case of M/s. Shakuntala Agarbathi Company Vs. DCIT (supra), reads as follows: 7. We have heard rival submissions and perused the material on record. Admittedly, the assessee has remitted the employees' contribution to ESI before the due date for filing of return u/s 139(1) of the I.T.Act. The Hon'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. v. DCIT re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he substantial question of law framed by us is answered in favour of the appellant-assessee and against the respondent-revenue. There shall be no order as to costs. 7.2 The further question is whether the amendment to section 36[1][va] and 43B of the Act by Finance Act, 2021 is clarificatory and declaratory in nature. The Hon'ble Supreme Court in the recent judgment in the case of M.M.Aqua Technologies Limited v. CIT reported in (2021) 436 ITR 582 (SC) had held that retrospective provision in a taxing Act which is for the removal of doubts cannot be presumed to be retrospective, if it alters or changes the law as it earlier stood (page 597). In this case, in view of the judgment of the Hon'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. v. DCIT (supra) the assessee would have been entitled to deduction of employees' contribution to ESI, if the payment was made prior to due date of filing of the return of income u/s 139(1) of the I.T.Act. Therefore, the amendment brought about by the Finance Act, 2021 to section 36[1][va] and 43B of the I.T.Act, alters the position of law adversely to the assessee. Therefore, such amendment cannot be held to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] Ltd., [2008] 304 ITR 308 [SC], held that the Parliament clarified the position by using the expression if any , which was not a substantive amendment creating penalty for the first time. It was held that income always included loss and even the unamended provisions would have to be interpreted in the manner that right from 01.06.1976 penalty would have been leviable. Hence, the Hon'ble Apex Court went on to hold that the amendment is clarificatory in nature and hence will apply for the period before 01.04.2003. The relevant observations of the Hon'ble Apex Court reads as follows :- 6. It would be of some relevance to take note of what this Court said in Virtual's case (supra). Pointing out one of the important tests at para 51 it was observed that even if the statute does contain a statement to the effect that the amendment is clarificatory or declaratory, that is not the end of the matter. The Court has to analyse the nature of the amendment to come to a conclusion whether it is in reality a clarificatory or declaratory prsvision. Therefore, the date from which the amendment is made operative does not conclusively decide the question. The Court has to examine t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a figure smaller than the concealed income or even to a minus figure, the tax sought to be evaded should be calculated as if the concealed income were the total income. 9. Reference to the Department Circular No.204 dated 24.7.1976 reported in 1977 (110) ITR 21 (St.) has also substantial relevance. Same reads as follows: New Explanation 4 defines 'the amount of tax sought to be evaded'. According to the definition, this expression will ordinarily mean the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed. In a case, however, where on setting off the concealed income against any loss incurred by the assessee under other head of income or brought forward from earlier years, the' total income is reduced to a figure Lower than the concealed income or even to a minus figure, 'the tax sought to be evaded' will mean the tax chargeable on the concealed income as if it were the total income. Another exception to the general definition of the expression 'tax sought to be evaded' given earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the concept of 'due date' as appearing in 36[1][va] and section 43B of the Act and has taken the view that the assessee is entitled to the relief having regard to the use of the expression contribution under the Provident Fund Act. Now it has been provided that the due date in section 43B is of no consequence to judge the applicability of provisions of section 36[1][va]of the Act and that too with effect from 01.04.2021. In other words, there is sufficient intrinsic evidence to show that these amendments are not clarificatory in nature and the mere use of the expression it is clarified cannot be determinative of the nature of the amendment made. Furthermore, in the present case, Legislature has expressly given only prospective effect to these Explanations as is evident from the Memorandum Explaining the Provisions in the Finance Bill, 2021, by stating that the said amendment i.e., the insertion of another Explanation to the already existing explanation to clause [va] to sub-section [1] of section 36 of the Act, will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-2022 and subsequent assessment years. In contradistincti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts ought not to change the character of past transactions carried on upon the faith of the then existing law. 32. The obvious basis of the principle against retrospectivity 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. The obvious basis of the principle against retrospectivity is the principle of fairness, which must be the basis of every legal rule as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble Apex Court in the case of CIT v. Essar Teleholdings Ltd. (supra), held that judgment in the case of CIT v. Gold Coins Health Foods (P.) Ltd. (supra) is distinguishable and not applicable for the reason that Parliament clarified the position of law by changing the expression `any' by `if any' which was not a substantive amendment creating penalty for the first time. The Hon'ble Supreme Court followed the judgment in the case of CIT v. Vatika Township P. Ltd. (supra) and held that Rule 8D of the I.T.Rules does not apply retrospectively. For the aforesaid reason and the judicial pronouncements, cited supra, we hold that the judgment of the Hon'ble Apex Court relied on by the CIT(A) in the case of CIT v. Cold Coins Health Foods (P.) Ltd. (supra) does not have application to the present case. 7.5 Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision of the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees contribution paid by the assessee before the due date of filing of return of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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