TMI Blog2021 (11) TMI 1041X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The aforesaid appeals have been filed by the assessee against the order dated 12-8-2021 passed by National Faceless Appeal Centre Delhi for the quantum of assessment passed u/s. 143(3) for the Assessment Years 2018-19 and 2019-20. In both the appeals, the assessee has challenged the disallowance of delay in deposit of employee's contribution to PF/ESI u/s. 36(1)(va) in the intimation order u/s. 143(1) passed by DCIT, CPC, Bengaluru. For the sake of ready reference, the grounds raised in the appeal for the Assessment Year 2018-19 is reproduced hereunder: '1. That on the basis of facts and circumstances of the case, the order passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre-CIT(A), NFAC, ( Ld. CIT(A) ) dated 27-7-2021 (hereinafter referred to as impugned appellate order) is erroneous and bad in law. 2. That the Ld. CIT(A) has erred in law and on facts of the case in confirming the assessment made by Ld. DCIT, CPC, Bangalore ('Ld. AO') in case of the Appellant at ₹ 2,06,89,560/- as against the returned income of ₹ 1,18,31,513/- without any proper basis and appreciation of the facts and circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity/labour/manpower services. It has e-filed its return of income on 22-10-2018 declaring income of ₹ 1,18,35,513/- for the Assessment Year 2018-19; and ₹ 99,19,070/- for the Assessment Year 2019-20 which was filed on 6-10-2019. Thereafter, assessee had received notice via ITBA portal proposing certain adjustments u/s. 143(1)(a) on 21-1-2019 for the Assessment Year 2018-19; and similar adjustments u/s. 143(1)(a) 12-10-2020 for the Assessment Year 2019-20 on disallowance under section 36(1)(va) on account of delay in deposit of employee's contribution towards PF/ESI. After the notice, the assessee had filed its submission within due time as given in the notice. Thereafter, intimation order u/s. 143(1) was passed from CPC, Bengaluru wherein additions have been made and disallowing ₹ 88,58,042/- u/s. 36(1)(va) for the Assessment Year 2018-19; and ₹ 2,11,28,940/- for the Assessment Year 2019-20. The assessee's case has been that firstly, all the payments have been made within due date of filing of return of income u/s. 139(1) of the Income-tax Act and as such payment has been made and deposited in the Government account within the stipulated time u/s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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's 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's contribution, some courts have applied the provision of section 43B on employee contribution as well. There is a distinction between employer's contribution and employee's contribution towards welfare fund. It may be noted that employee's contribution towards welfare funds is a mechanism to ensure that compliance by the employers of the labour welfare laws. Hence, it needs to be stressed that the employer's contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the employee's contribution towards welfare funds. Employee's contribution is employee's own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including that of the Jurisdictional High Court wherein it has been held that the payment of employee's contribution fee if has been made before the due date for filing of return of income u/s. 139(1), then same is allowable deduction. It has been further held that amendment brought by the Finance Act, 2021 in the provision of section 36(1)(va) as well as section 43B by insertion of Explanation 2, is prospective and cannot be held as retrospective and would apply from Assessment Year 2021-22 onwards. 6. On the other hand, Ld. DR submitted that the amendment brought in the statute is very clear that it was for the removal of the doubts and secondly provision of section 43B shall not apply and shall be deemed never to have been applied for the purpose of determining the due date under these clause. Thus, the statute itself has clarified that provision of section 43B for the purpose of due date in the case of payments mentioned in section 36(1)(va) would never deemed to have been applied as due date for filing of return of income it has approved the due date provided under the respective Acts. 7. We have heard the rival submissions and also perused the finding given in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. [2007] 213 CTR 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 dismissal of the Special Leave Petition in the case of Vinay Cement (supra) by the Supreme Court by a speaking order, the submission of the learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid 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 18-8-2008 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 v. State of Kerala [2000] 113 Taxman 470/245 ITR 360 at page 526 in Paragraph 40 and noted the following observations:-- It the order refusing leave to appeal is a speaking order, i.e., gives reasons for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 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). 19. 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. 8. Apart from above, there are series of judgment of Hon'ble Jurisdictional High Court on the same principle, like in the case of CIT v. PM Electronics Ltd. [2009] 177 Taxman 1, CIT v. SPL Industries Ltd. [2011] 9 taxmann.com 195 (Delhi), CIT v. Dharmendra Sharma [2008] 297 ITR 320 (Delhi). Again following the decision of the Jurisdictional High Court which are based on the principle laid down in the case of Vinay Cement Ltd. (supra), the co-ordinate Bench have passed series of judgment holding the same proposition that prior to the amendment brought in the statute w.e.f. 1-4-2021, no disallowance can be made that the payment to the employee's contribution to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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