TMI Blog2022 (4) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... ning the provisions to Finance Act, 2021, wherein relevant Clauses to said memorandum clearly intended that the amendment shall take effect from 01.04.2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years. We are of the view that the amendment brought in the statue 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 under consideration i.e. 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue raised in assessee s appeal is allowed. - ITA. No. 263/JP/2021 - - - Dated:- 25-4-2022 - Dr. S. Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : None For the Revenue : Ms. Monisha Choudhary (JCIT) ORDER PER: DR. S. SEETHALAKSHMI, J.M. This appeal by the assessee is directed against the order of the ld. CIT(A), National Faceless Appeal Centre, Delhi [hereinafter referred to as (NFAC)] dated 22.09.2021for the AY 2017-18. 2. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20.05.2016 15.05.2016 May, 2016 76,824- 04.07.2016 15.06.2016 June, 2016 78,209 20.07.2016 15.07.2016 July, 2016 82,400 24.08.2016 15.08.2016 August, 2016 78,021 12.10.2016 15.09.2016 September, 2016 78,410 09.11.2016 15.10.2016 October, 2016 80,194 16.12.2016 15.11.2016 November, 2016 83,965- 16.12.2016 15.12.2016 December, 2016 76,983 25.01.2017 15.01.2017 January, 2017 64,187 03.04.2017 15.02.2017 February, 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 23.01.2021 has not pressed the first ground of appeal and hence the same is not dealt with. 7.1 The second and third ground of appeal are inter-related and hence dealt with together. 7.2 The appellant is aggrieved by the action of Assessing Officer in disallowing the sum of ₹ 12,84,586/- received by the appellant from its employees as contribution to Provident Fund Employee State Insurance since it was not deposited within the time limit as specified under Section 36(1)(va) of the Act. 7.3 The appellant in its submission before the undersigned submitted the following case laws to substantiate that once the contributions are towards ESI PF are remitted within the due date specified under Section 139(1) of the Act, no disallowance can be made: CIT v. Alom Extrusions Ltd (2009) 185 Taxman 416(SC) CIT vs JVVNL (2014) Rajasthan HC CIT vs Udaipur DugdhUtpadakSahkariSagh Ltd (2014) Rajasthan HC ESSAE TERAOKA (P) LTD Vs DCIT 366 ITR 408 (Karnataka HC) CIT Vs Jaipur Vidyut Vitran Nigam Ltd And Rajasthan Rajya Vidyut Utpadan Nigam Ltd [2014] 363 ITR 30 (Rajasthan HC) CIT Vs Udaipur DugdhUtpadakSahakari Sang h Limited, Uda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant extract of the order is provided below for ease of reference: 7.11 In view of the above discussions, both in law and in equity, we are of the considered opinion that Me provisions of Section 438 being not applicable in respect of the employees' contribution towards PF and ESIC, the orders of the Revenue authorities in this regard are justified and, accordingly, we uphold the same. Thus, this ground of the assessee stands partly allowed. Popular Vehicles Services Pvt Ltd v. CIT (2018) 96 taxmann.com 13 (Kerala HC) Supreme Court's decision in the case of Alom Extrusions (supra) was also discussed here and has been distinguished. The relevant extract of the order is provided below for ease of reference: 18. Sub-clause (va) of Section 36(1) takes care of the employee's contribution, which stands unaffected by Section 438 as the restriction available in Section 438 is already available under the Explanation to the said clause, with a qualification of the payment being before the due date, as stipulated by the statute or order creating the fund. We would also observe that, as the Hon ble Supreme Court noticed, the legislature took a different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade to section 36(1)(va), both contribution, Viz., employees and employees cannot be brought under same scope and ambit of section 43B to claim deduction. The following are the list of the decisions whereby the Department's stand has been corroborated: CIT v. South India Corporation Ltd (2015) 232 Taxman 242 (Kerala HC) CIT v. Merchem Ltd (2015) 235 Taxman 291 (Kerala HC) Eagle Trans Shipping Logistics India Pvt Ltd v. ACIT (2019) 178 /TD 84 (Delhi - Trib.) C/T v. Gujarat State Road Transport Corporation (2014) 223 Taxman 398 (Gujarat HC) 7.5 At this juncture it is pertinent to note the recent clarifications made through Finance Bill, 2021 in Section 36(1)(va) and Section 43B of the Act. The extract of the said explanation is provided below for ease of reference: Explanation added to Section 36(1)(va) of the Act: Explanation 5. For the removal of doubts, it is hereby clarified that the provisions of section 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the due date under this clause; Explanation added to Section 43B of the Act: Explanation5. For the removal of doubts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the due date of filing of return of income u/s 139(1) of the Act. Further, it is noted that the ld CIT(A) has referred to the explanation to section 36(1)(va) and section 43B introduced by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance bill, 2021, however, he has simply failed to consider the express wordings in the said memorandum which say these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . The impugned assessment year is assessment year 2019-20 and therefore, the said amendment cannot be applied in the instant case. 10. The reliance was also placed on the decisions of the ITAT Jaipur Bench in the following cases:- Moona Dewan vs. CPC, Bengalure in ITA No. 282/JP/2021 dated 19.01.2022 (Jaipur-Trib.) M/s Punjab Engineering Works vs. DCIT in ITA No. 132/JP/2021 dated 15.11.2021 (Jaipur-Trib.) M/s Mohanlal Khatri vs. ACIT in ITA No. 144/JP/2021 dated 29.11.2021 (Jaipur-Trib.) 11. On the other hand, the ld. CIT-DR only relied on the order of ld. CIT(A) and stated that ld. CIT(A) has passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d since this Explanation- 5 has not been made retrospectively. So we are inclined to follow the same and we reproduce the order of Hon ble Calcutta High Court in the case of Vijayshree Ltd. supra wherein the Hon ble Calcutta High Court has taken note of the Hon ble Supreme Court decision in CIT vs. Alom Extrusion Ltd. reported in 390 ITR 306. The Hon ble Calcutta High Court s decision in Vijayshree Ltd. supra is reproduced as under: This appeal is at the instance of the Revenue and is directed against an order dated 28th April, 2011 passed by the Income Tax Appellate Tribunal, A Bench, Kolkata in ITA No.1091/Kol/2010 relating to assessment year 2006- 07 by which the Tribunal dismissed the appeal preferred by the Revenue against the order of CIT(A). The only issue involved in this appeal is as to whether the deletion of the addition by the AO on account of Employees Contribution to ESI and PF by invoking the provision of Section 36(1)(va) read with Section 2(24)(x) of the Act was correct or not. It appears that the Tribunal below, in view of the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., reported in 2009 Vol.390 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 only. It is further not an issue that the forergoing legislative amendments have proposed employers contributions; disallowances u/s 43B as against employee u/s 36 (va) of the Act; respectively. However, keeping in mind the fact that the same has been clarified to be applicable only with prospective effect from 1.4.2021, I hold that the impugned disallowance is not sustainable in view of all these latest developments even if the Revenue s case is supported by the following case law. (i) CIT vs. Merchem Ltd, [2015] 378 ITR 443(Ker) (ii) CIT vs. Gujarat State Road Transport Corporation (2014) 366 ITR 170 (Guj.) (iii) CIT vs. South India Corporation Ltd. (2000) 242 ITR 114 (Ker) (iv) CIT vs. GTN Textiles Ltd. (2004) 269 ITR 282 (Ker) (v) CIT vs. Jairam Sons [2004] 269 ITR 285 (Ker) The impugned ESI/PF disallowance is directed to be deleted therefore. 10. On an identical issue, this Bench of the Tribunal vide order dated 12.8.2021 in the case of Mohangarh Engineers and Construction Company, Jodhpur Others vs CPC, Banglore in ITA No. 5/Jodh/2021 and others held vide para 13 to 18 as under:- 13. We have heard the rival contentions and perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fective from 01/04/1988, the words numbered as clause (a), (c), (d), (e) and (f), are omitted from the above proviso and, furthermore second proviso was removed by Finance Act, 2003 therefore, the deduction towards the employer's contribution, if paid, prior to due date of filing of return can be claimed by the assessee. In our view, the explanation appended to Section 36(1)(va) of the Act further envisage that the amount actually paid by the assessee on or before the due date admissible at the time of submitting return of the income under Section 139 of the Act in respect of the previous year can be claimed by the assessee for deduction out of their gross total income. It is also clear that Sec.43B starts with a notwithstanding clause would thus override Sec.36(1) (va) and if read in isolation Sec. 43B would become obsolete. Accordingly, contention of counsel for the revenue is not tenable for the reason aforesaid that deductions out of the gross income for payment of tax at the time of submission of return under Section 139 is permissible only if the statutory liability of payment of PF or other contribution referred to in Clause (b) are paid within the due date under the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussion and in the entirety of facts and circumstances of the case, the addition by way of adjustment while processing the return of income u/s 143(1) amounting to ₹ 4,38,530/- so made by the CPC towards the delayed deposit of the employees s contribution towards ESI and PF though paid well before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted as the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act in view of the binding decisions of the Hon ble Rajasthan High Court. 11. Since the facts of the present cases are identical to the facts involved in the aforesaid referred to cases, therefore respectfully following the earlier orders as referred to herein above of the different Benches of the ITAT, the impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. 8. Since the facts involved in the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) by inserting the Explanation 2 r.w.s. 43B of the Act have been amended, whereby it is clarified that the provisions of Section 43B of the Act shall not apply and shall be deemed ought to have been applied for the purpose of determining the due date under this clause. In our opinion, this amendment has been brought in the statute book to provide certainty about the applicability of provisions of Section 43B of the Act inspite of belated payment of employee s contribution. We also noted from the memorandum explaining the provisions to Finance Act, 2021, wherein relevant Clauses to said memorandum clearly intended that the amendment shall take effect from 01.04.2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years. The relevant Clauses 8 9 of the memorandum explaining the provisions are reproduced as under:- Rationalisation of various Provisions Payment by employer of employee contribution to a fund on or before due date Clause (24) of section 2 of the Act provides an inclusive definition of the income. Sub-clause (x) to the said clause provide that income to include any sum received by the assessee from his employees as contribution to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early distinguished from the employee s contribution towards welfare funds. Employee s contribution is employee own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee contribution, the employers get unjustly enriched by keeping the money belonging to the employees. Clause (va) of sub-section (1) of Section 36 of the Act was inserted to the Act vide Finance Act 1987 as a measures of penalizing employers who mis-utilize employee s contributions. Accordingly, in order to provide certainty, it is proposed to (i) amend clause (va) of sub-section (1) of section 36 of the Act by inserting another explanation to the said clause to clarify that the provision of section 43B does not apply and deemed to never have been applied for the purposes of determining the due date ‖ under this clause; and (ii) amend section 43B of the Act by inserting Explanation 5 to the said section to clarify that the provisions of the said section do not apply and deemed to never have been applied to a sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessments, having been created for the first time by the insertion of proviso to Section 113 of the Act, by Finance Act, 2002, it is clearly a substantive provision and is to be construed as prospective in operation. The Hon ble Supreme Court held that the amendment neither purports to be merely clarificatory nor is there any material to suggest that it was intended by parliament. The Hon ble Supreme Court finally held that the proviso to Section113 of the Act is prospective and not retrospective. For this proposition their lordships of the Hon ble Supreme Court observed at page 495 as under:- Notes on Clauses appended to Finance Bill, 2002 while proposing insertion of proviso categorically states that this amendment will take effect from 1st June, 2002 . These become epigraphic words, when seen in contradistinction to other amendments specifically stating those to be clarificatory or retrospectively depicting clear intention of the legislature. It can be seen from the same notes that few other amendments in the Income Tax Act were made by the same Finance Act specifically making those amendments retrospectively. For example, clause 40 seeks to amend S.92F. Clause iii (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amendment along with amendments in Section 158BE, would be prospective i.e. it will take effect from 1st June, 2002. (f) Finance Act, 2003, again makes the position clear that surcharge in respect of block assessment of undisclosed income was made prospective. Such a stipulation is contained in second proviso to subsection (3) of Section 2 of Finance Act, 2003. This proviso reads as under: Provided further that the amount of income-tax computed in accordance with the provisions of section 113 shall be increased by a surcharge for purposes of the Union as provided in Paragraph A, B, C, D or E, as the case may be, of Part III of the First Schedule of the Finance Act of the year in which the search is initiated under section 132 or requisition is made under section 132A of the income-tax Act. Addition of this proviso in the Finance Act, 2003 further makes it clear that such a provision was necessary to provide for surcharge in the cases of block assessments and thereby making it prospective in nature. The charge in respect of the surcharge, having been created for the first time by the insertion of the proviso to Section 113, is clearly a substantive provision and h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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