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TMI Blog2022 (5) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... eposit of employees contribution of PF and ESI respectably without appreciating the fact that the same was deposited before due date of filing of return and by not following the binding decision of jurisdictional High Court of Rajasthan that if the employees contribution is deposited before due date, no disallowance could be made u/s 36(1)(va) of the Act. 2. That without prejudice to the ground no. (1), the ld. CIT(A), NFAC, Delhi is further wrong and has erred in law in holding that explanation 2 to section 36(1)(va) introduced by Finance Act, 2021 is prospective in nature and therefore disallowance confirmed by CIT(A) on this account is wrong and had in law. 3. That the appellant craves the right to add, delete, amend or abandon the ground of this appeal at the time or before the actual hearing of the case." 3. Brief facts of the case are that the assessee is a Private Limited Company. The only grievance of the assessee relates to the disallowance of Rs. 6,97,361/- and Rs. 3,29,492/- total Rs. 10,26,853/- made by the A.O. The AO during assessment proceedings made additions of Rs. 10,26,853/- U/s 2(24)(x) read with Section 36(1)(va) of the IT Act, 1961 on account of late d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his employees to which the provisions of the 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 -- "For the purposes of this Clause, "due date" means 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". Scope of section 43B and section 36(1)(va) are different and thus, there is no question of reading both Provisions together to consider as to whether assessee- employer is entitled to deduction in respect of sum belatedly paid towards employer contribution, and therefore, for considering such question, application of section 36(1)(va) read with section 2(24)(x) alone is Proper Course. Reliance is placed on the following High Court decisions: 1. Belated payments of employees contribution not allowable as deduction as per sec.43B [2018] 100 taxmann.com 244(Madras)[23.10.2018] 1. HC justified addition as &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.) 8. On the other hand, the ld. CIT-DR relied on the order of ld. CIT(A) and stated that ld. CIT(A) has passed exhaustive order explaining the provisions of the Act. 9. We have considered the rival contention and perused the orders of the authorities and the material available on record. Admitted facts of the present case are that the payments of PF & ESI contribution relating employee's contribution are before the due date of filing of return of income U/s 139(1) of the Act. We have noted that the issue under consideration is covered by the decision of the Coordinate Bench in case of M/s Mohanlal Khatri vs. ACIT in ITA No. 144/JP/2021 order dated 29.11.2021 (Supra) wherein it is held as under:- "7. I have considered the submissions of both the parties and perused the material available on record. In the present cases, it is noticed that an identical issue having similar facts has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ITR 306, held that the deletion was justified. Being dissatisfied, the Revenue has come up with the present appeal. After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., we find that the Supreme Court in the aforesaid case has held that the amendment to the second proviso to the Sec 43(B) of the Income Tax Act, as introduced by Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from 1st April, 1988. Such being the position, the deletion of the amount paid by the Employees' Contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act. We, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance 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 perused the material available on record. On perusal of the details submitted by the assessee as part of its return of income, it is noted that the assessee has deposited the employees's contribution towards ESI and PF well before the due date of filing of return of income u/s 139(1) and the last of such deposits were made on 16.04.2019 whereas due date of filing the return for the impugned assessment year 2019- 20 was 31.10.2019 and the return of income was also filed on the said date. Admittedly and undisputedly, the employees's contribution to ESI and PF which have been collected by the assessee from its employees have thus been deposited well before the due date of filing of return of income u/s 139(1) of the Act. 14. The issue is no more res integra in light of series of decisions rendered by the Hon'ble Rajasthan High Court starting from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion 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 respective enactments by the assessees and not under the due date of filing of return. 22. We have already observed that till this provision was brought in as the due amounts on one pretext or the other were not being deposited by the assessees though substantial benefits had been obtained by them in the shape of the amount having been claimed as a deduction but the said amounts were not deposited. It is pertinent to note that the respective Act such as PF etc. also provides that the amounts can be paid later on subject to payment of interest and other consequences and to get benefit under the Income Tax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or before the return of income under sub-section (1) of Section 139 of the IT Act. 23. Thus, we are of the view that where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 case are identical to the facts involved in the case of Mohangarh Engineers and Construction Company Vs. DCIT (supra) and in the case of Bikaner Ceramics Private Limited, Bikaner Vs. ADIT, CPC, Bangaluru (supra). So respectfully following the aforesaid referred to order, the disallowances sustained by the Ld. CIT(A) are deleted." 10. A similar issue has been decided by the Hon'ble Delhi High Court in the case of CIT vs. AIMIL Ltd., (2010) 321 ITR 508 wherein it has been held as under:- "The deletion with effect from April 1, 2004 by the Finance Act, 2003 of the second proviso to section 43B of the Income-tax Act, 1961, which stipulates that contributions to the provided fund and Employees State Insurance Fund should be made within the time mentioned in section 36(1)(va), that is, the time allowed under the Employees' Provident Fund and Miscellaneous Provisions Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions 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 any provident fund or superannuation fund or any fund set up under the provisions of ESI Act or any other fund for the welfare of such employees. Section 36 of the Act pertains to the other deductions. Sub-section (1) of the said section provides for various deductions allowed while computing the income under the head Profits and gains 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 section 2 applies. These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years." 12. After considering the above findings of CIT(A), now we have gone through ratio laid down by the Hon'ble Supreme Court in the case of CIT vs. Vatika Township Pvt. Ltd. (2014) 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 hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure, even when the legislature knew the implication thereof and took note of the reasons which led to the insertion of the proviso, that the amendment is to operate prospectively. Learned counsel appearing for the assessees sagaciously contrasted the aforesaid stipulation while effecting amendment in Section 113 of the Act, with various other provisions not only in the same Finance Act but Finance Acts pertaining to other years where the legislature specifically provided such amendment to be either retrospective or clarificatory. In so far as amendment to Section 113 is concerned, 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 circula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (Supra), there cannot be imposition of any tax without the authority of law and such law has to be unambiguous and should prescribe the liability to pay taxes in clear terms. 14. By considering various decisions passed by this Bench, that this issue is settled in favour of the assessee by the Judgments of this Hon'ble Bench: * Pratap Technocrats Pvt, Ltd. vs. ADIT in ITA No. 18/JP/2022 dated 22.02.2022. * Prahlad Narayan Bairwa vs. ADIT in ITA No. 33/JP/2022 dated 22.02.2022. * Jairaj vs. ADIT in ITA No. 24,25 & 26/JP/2022 dated 22.02.2022. * The Earth House Resorts LLP vs. ADIT in ITA No. 28/JP/2022 dated 22.02.2022. * Group Zeor vs. ITO in ITA No. 250/JP/2021 dated 01.03.2022. * Karni Kehar Security Co-operative Scoeity Ltd. vs. DCIT in ITA No. 310/JP/2021. * Devi Shanker vs. DCIT in ITO 35/JP/2022 dated 01.03.2022. 15. By considering the totality of the facts and the various judicial pronouncements, 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 Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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