TMI Blog2022 (1) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... BER For the Appellant : Gurjit Singh, CA For the Respondents : Om Prakash, Sr. DR ORDER Per Kul Bharat, JM Both appeals filed by the assessee for the assessment years 2018-19 2019-20 are directed against the orders of National Faceless Appeal Centre ( NFAC ), Delhi both dated 29.07.2021. Since identical grounds have been raised, both appeals were taken up together for hearing and are being disposed off by way of consolidated order for the sake of brevity. 2. First, we take up assessee's appeal in ITA No. 1286/Del/2021 pertaining to Assessment Year 2018-19. The assessee has raised following grounds of appeal:- 1. 1. Because the action is under challenge on facts law for increasing income amounting ₹ 18,00,520/ - u/s. 143(1). 2. Because the action for making disallowance of Employees Provident Fund amounting Employees ESI amounting ₹ 13,73,715/ - u/s. 143(1)(a) is under challenge on facts and law as the addition is outside the scope of section 143(1)(a). 3. Because the action is being challenged on facts and law for disallowance of Employees Provident Fund Employees ESI amounting ₹ 13,73,715/- amounting Rs. u/s. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 08.01.2016), we are of the opinion that the ITAT's decision in this case was not correct. The assessee undoubtedly was entitled to claim the benefit and properly treat such amounts as having been duly deposited, which were in fact deposited within the period prescribed (i.e. 15 + 5 days in the case of EPF and 21 days + any other grace period in terms of the extent notification). As far as the amounts constituting deductions from employees salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns. 8. I have heard the rival submissions and perused the material available on record and gone through the orders of the authorities below. Ld. CIT(A) has decided the issue by observing as under:- 5. Decision: The submissions of the appellant have been carefully considered. It is the case of the appellant that several courts have held that the employee's contribution to PF/ESI even if paid late under the respective Act, is to be allowed as a deduction u/s. 43B, as long it is paid within the time available u/s. 139(1). This is based on the reasoning that emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bit of sec. 43B. In fact, the present amendments and the corresponding explanatory notes to finance act 2021, only seek to reinforce and reiterate the original intention of the legislature in 1983. Admittedly, the employees' contribution to PF ESI are included in the definition of income u/s. 2(24)(x) and form income of the appellant. Whenever the appellant pays this to the PF/ESI authorities, a deduction for the same is allowed to him. The question therefore is whether provisions of sec. 43B would apply to such payments. It is evidently clear from the above Explanations inserted in sections 43B and 36(1)(va), that sec. 43B would expressly not apply to the employees' contribution. However a plain reading of sec. 43B alongwith clause (b) covers only EMPLOYERS contribution and not employees' contribution. It remains to decide whether the Explanation 5 to sec. 43B Expl. 2 to sec. 36(1)(va) would apply to the present AY. To decide this, a little history of sec. 43B and subsequent amendments would be in order. Sec. 43B was brought into the statute book w.e.f. 01.04.1984, thereafter, the proviso to sec. 43B was inserted w.e.f. 01.04.1988, while Explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so was inserted. In the present amendment, Explanation 5 seeks to clarify that provisions of sec. 43B shall deemed to have never applied to employees' contribution. As has been held by the Hon'ble Supreme Court, it has to naturally follow that this explanation 5 would also apply from 1/4/1984 and would therefore be retrospective. Any other interpretation would lead to an anomaly, whereby the section and proviso itself would be effective from 01.04.1984, but the explanation thereof would be prospective. In this connection, the observation of the Hon'ble Supreme Court in the case of Allied Motors (supra) are relevant in so far as they explain unintended consequences of an amendment. 7 . Therefore, section 43B(a), the first proviso to section 43B and Explanation 2 have to be read together as giving effect to the true intention of section 43B. If Explanation 2 is retrospective, the first proviso will have to be so construed. Read in this light also, the proviso has to be read into section 43B from its inception along with Explanation 2. 8. This position is reinforced by a departmental Circular No. 550 dated 1-1-1990 (See Taxmann's Direct Taxes Circulars, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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). 10. Further, Ld. Counsel for the assessee placed reliance on the judgment of Hon'ble Delhi High Court rendered in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd. in ITA No. 983/2018 [Del.] order dated 10.09.2018 held as under:- In view of the judgment of the Division Bench of Delhi High Court in Commissioner of Income Tax versus AIMIL Limited, (2010) 321 ITR 508 (Del.) the issue is covered against the Revenue and, therefore, no substantial question of law arises for consideration in this appeal. The legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee's Provident Fund (EPD) and Employee's State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x) of the Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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