TMI Blog2022 (3) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... noted by Hon ble Supreme Court an amendment made to a taxing statute can be said to be intended to remove hardship only of the assessee and not of the Department. Imposing of a retrospective levy on the assessee would be caused undue hardship and for that reason Parliament specifically chose to make the proviso affective from a particular date. In the present case also, the amendment brought out by Finance Act, 2021 w.e.f. 01.04.2021 i.e. for and from assessment year 2021-22 of Explanation-2 to s. 36(1)(va) of the Act and not retrospectively. It is clear that the amendment brought in the statute i.e., by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the Act amended by inserting Explanation 2 is prospective and not retrospective. Hence, the amended provisions of Section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue of assessee‟s appeal is allowed. - I.T.A. No. 260/VIZ/2021 - - - Dated:- 9-3-2022 - Shri Duvvuru R L Reddy, Hon ble Judicial Member And Shri S. Balakrishnan, Hon'ble Accountant Member For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicability as retrospective. 6. Brief facts of the case are that assessee filed its return of income for the A.Y. 2017-18 and again filed its return of income in response to the notice u/sec. 139(1) on 14/07/2018 declaring loss of ₹ 1,85,09,268/-. In response to the scrutiny notice u/sec. 143(2), the assessee submitted required information through e-proceedings and filed some information physically as it was voluminous. The AO on verification of 3CD report filed for the A.Y. 2017-18 found that assessee has paid contribution of PF received from Employees‟ to the concerned authorities beyond the due dates prescribed under the respective Acts for some of the months during the F.Y. 2016-17 as detailed below:- Sl.No Name of the fund Sum received from employees Due date of payment Actual date of payment to concerned authorities 1 Provident Fund 1285940 15/07/2016 16/07/2016 2 -do- 615009 15/08/2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insertion of the amended provision should be construed only w.e.f. 01.04.2021 i.e. for from the assessment year 2021-22. The CIT(A) finally held that the insertion of Explanation 2 inserted by Finance Act, 2021 to Section 36(1)(va) of the Act is clarificatory, which clarify that the definition of due date‟ as per Section 43B of the Act is deemed to have been applied for the purpose of employees contribution. 9. On the other hand, the ld. DR only relied on the order of the CIT(A) and stated that the CIT(A) has passed exhaustive order explaining all provisions of the Act. 10. We have heard rival contentions and perused the relevant material on record. Admitted facts are that the payment of PF contribution regarding employees‟ contribution is made within the due date of filing of return of income. The Revenue has disputed that the employees‟ contribution received by the assessee would be treated as income of the assessee because the same has not been deposited in the Government account within the due date as prescribed under the respective acts. We noted that this issue is covered by the decision of Hon ble High Court of Madras in the case of M/s. Indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 been followed by a Division Bench of this Court in the case of CIT v. Dharmendra Sharma: 297 ITR 320. 8. Despite the aforesaid judgments, the learned counsel for the Tribunal has contended that in view of the judgment of the Division Bench of the Madras High Court in the case of CIT v. Synergy Financial Exchange Ltd: (2007)288 ITR 366 and that of the Division Bench of the Bombay High Court in the case of CIT v. M/s Pamwi Tissues Ltd: (2008) Taxindiaonline.com 104 (TIOL) the issue requires consideration. According to us, in view of the dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 1192/2008 discussed the impact of both the dismissal of the special leave petition in the case of George Williamson (Assam) Ltd (supra) and Vinay Cement (supra) as well as a contrary view of the Division Bench of its own Court in Synergy Financial Exchange (supra). The Division Bench of the Madras High Court has explained the effect of the dismissal of a special leave petition by a speaking order by relying upon the judgment of the Supreme Court in the case of Kunhayammed and Others v. State of Kerala and another: 119 STC 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 dismissed. 12. From the above, it is clear that there are series of decisions of various High Courts on this issue and the Hon ble Madras High Court in the case of M/s. Industrial Security Intelligence India P Ltd. (supra) held that the payment of employees contribution in regard to PF ESI if made before the due date of filing of return of income u/s.139(1) of the Act, the same is allowable as deduction as per the provisions of Section 2(24)(x) r.w.s. 36(1)(va) r.w.s. 43B of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 40 contribution and employee s contribution towards welfare fund. It may be noted that employee s contribution towards welfare funds is a mechanism to ensure the compliance by the employers of the labour welfare l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court in the case of CIT vs. Vatika Township Pvt. Ltd., 367 ITR 466, wherein the Hon ble Supreme Court held that unless contrary intention appears, a 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. The law passed today cannot be applied to the events of the past. The Hon ble Supreme Court held that if somebody does 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned, there is no such language used and on the contrary, specific stipulation is added making the provision effective from 1st June, 2002. (e) There is yet another very interesting piece of evidence that clarifies the provision beyond any pale of doubt, viz. understanding of CBDT itself regarding this provision. It is contained in CBDT circular No.8 of 2002 dated 27th August, 2002, with the subject Finance Act, 2002 Explanatory Notes on provision relating to Direct 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Pvt Ltd Vs DCIT, [2018] 100 taxmann.com (Madras) The CIT(A) himself noted the ambiguity in para 5.7 of his order, which reads as under: 5.7 While rendering above decisions the Hon ble High Courts had the occasion to examine and distinguish a catena of judgements which are usually relied upon by appellants to advance the proposition that the provisions of section 43B encompass within its scope the employees‟ Contribution as well and therefore any such contribution though not remitted by the employer within due date specified by the PF/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 5.8.2, 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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