TMI Blog2022 (3) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... o.588/Bang/2021 & 589/Bang/2021 (Asst.Year 2018-2019 & 2019-2020) - - - Dated:- 22-12-2021 - Shri George George K, JM And Shri B.R.Baskaran, AM Appellant by : Sri.Kusuma Yatish, CA Respondent by : Smt.Priyadarshini Besaganni, JCIT-DR ORDER Per George George K, JM These appeals at the instance of the assessee are directed against two orders of the CIT(A) dated 01.10.2021 and 18.10.2021. The relevant assessment years are 2018- 2019 and 2019-2020. 2. The grounds raised in both the appeals are identical, except for variation in figures, hence, we reproduce grounds raised for assessment year 2018-2019 (ITA No.588/Bang/2021) :- Disallowance of Employees Contribution which was remitted within the due date for submission of Income Tax Return amounting to ₹ 93,38,791/- a) The Learned Commissioner of Income Tax (Appeals) [herein after referred as 'Ld.CIT(A)'] has erred in law and on facts in confirming the action of Assessing Officer in making addition of ₹ 93,38,791/ - on account of remittance of employee's contribution towards ESIC and EPF were made beyond the due dates specified in the respective Act and without appreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the income determined u/s 143(1) of the I.T. Act was on account of disallowance of ₹ 93,38,791 (for A.Y.2018-2019) and ₹ 1,04,33,007 (for A.Y. 2019-2020) being late remittance of employees contribution to PF and ESI under the respective Acts. 4. Aggrieved, assessee preferred appeals before the First Appellate Authority. It was contended that assessee has paid the employees contribution prior to the due date of filing of return under section 139(1) of the Act. Therefore, it was submitted assessee is entitled to deduction of the employees contribution of PF and ESI having regard to the provision to section 43B of the Act. In this context, the assessee relied on the judgment of the Hon ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT, reported in 366 ITR 408. The CIT(A) after noticing the difference between the employer s contribution and employees contribution to PF and ESI held that only employer s contribution to the PF and ESI is entitled to deduction u/s 43B of the I.T.Act, if the payments are made prior to the due date of filing of the return u/s 139(1) of the I.T.Act. Further, by placing reliance on the judgment of the Hon ble Apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leging that the payment was not made by the appellant in accordance with the provisions u/s 36[1][va] of the I.T.Act? 7.1 In deciding the above substantial question of law, the Hon'ble High Court rendered the following findings:- 20. Paragraph-38 of the PF Scheme provides for Mode of payment of contributions. As provided in sub para (1), the employer shall, before paying the member, his wages, deduct his contribution from his wages and deposit the same together with his own contribution and other charges as stipulated therein with the provident fund or the fund under the ESI Act within fifteen days of the closure of every month pay. It is clear that the word contribution used in Clause (b) of Section 43B of the IT Act means the contribution of the employer and the employee. That being so, if the contribution is made on or before the due date for furnishing the return of income under sub-section (1) of Section 139 of the IT Act is made, the employer is entitled for deduction. 21. The submission of Mr.Aravind, learned counsel for the revenue that if the employer fails to deduct the employees' contribution on or before the due date, contemplated under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g/2021 (order dated 11th October, 2021) 7.3 In view of the aforesaid reasoning and the judicial pronouncements cited supra, the amendment by Finance Act, 2021 to Sec.36[1][va] and 43B of the Act will not have application to relevant assessment year, namely A.Y. 2019- 2020. Accordingly, we direct the A.O. to grant deduction in respect of employees' contribution to ESI since the assessee has made payment before the due date of filing of the return of income u/s 139(1) of the I.T.Act, It is ordered accordingly. 7.1 The CIT(A) had relied on the judgment of the Hon ble Apex Court in the case of CIT Vs. Gold Coin Health Food Pvt. Ltd., (supra) to content that the amendment to section 36(1)(va) and 43B of the Act is clarificatory. The judgment of the Hon'ble Apex Court in the case of CIT v. Gold Coin Health Food Pct. Ltd. (supra) is distinguishable. The Hon'ble Apex Court was considering the question of whether penalty can be imposed u/s.271(1)(c) of the Act for concealment of income where returned losses were reduced in assessment and there was no tax payable by the assessee. Earlier, the Hon'ble Apex Court in the case of Virtual Soft Systems in 289 ITR 83 [SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealt with by this Court in Commissioner of Income Tax (Central), Delhi v. Harprasad Co. P. Ltd. (1975 (99) ITR 118). This Court held with reference to the charging provisions of the statute that the expression 'income' should be understood to include losses. The expression profits and gains' refers to positive income whereas losses represent negative profit or in other words minus income. This aspect does not appear to have been noticed by the Bench in Virtual's case (supra). Reference to the - order by this Court dismissing the revenue's Civil Appeal No.7961 of 1996 in Commissioner of Income Tax v. Prithipal Singh and Co. is also not very important because that was in relation to the assessment year 1970-71 when Explanation 4 to Section 271 (1) ((c) was not in existence. The view of this Court in Horprasods case (supra) Leads to the irresistible conclusion that income also includes Losses. Explanation 4 (a) as it stood during the period 1.4.1976 to 1.4.2003 has to be considered in the background. 8. It appears that what the Finance Act intended was to make the position explicit which otherwise was implied. The recommendations of the Wanchoo Committee pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase where addition of concealed income reduces the returned loss. 11. When the word income is read to include losses as held in Harprasad's case (supra) it becomes crystal clear that even in a case where on account of addition of concealed income the returned loss stands reduced and even if the final assessed income is a loss, still penalty was leviable thereon even during the period 1.4.1976 to 1.4.2003. Even in the Circular dated 24.7.1976, referred to above, the position was clarified by Central Bureau of Direct Taxes (in short' CBDT). It is stated that in a case where on setting of the concealed income against any loss incurred by the assessee under any 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 penalty would be imposable because in such a case the tax sought to be evaded will be tax chargeable on concealed income as if it is total income . 7.2 Thus, the judgment of the Hon'ble Apex Court in CIT Vs. Gold Coin Health Food [P] Ltd., [2008] 304 ITR 308 [SC], took into consideration the evolved jurisprudence on the point of whether inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peculiarity in the mode of verbal communication by legislation. Legislation is not just a series of statements, such as one finds in a work of fiction/ nonfiction or even in a judgment of a court of law. There is a technique required to draft legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of 'Interpretation of Statutes'. Vis-a-vis ordinary prose, legislation differs in its provenance, lay-out and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. 31. Of the various rules guiding how legislation has to be interpreted, one established rule is that unless a contrary intention appears, legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today rind in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any case, we shall refer to few judgments containing these dicta, a little later. 33. We would also like to point out, for the sake of completeness, that where a benefit is conferred by legislation, the rule against a retrospective construction is different. If legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India Et Ors. v. Indian Tobacco Association', the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra Et Ors. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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