TMI Blog2022 (5) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 285/JP/2021 - - - Dated:- 6-4-2022 - Dr. S. Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : None For the Revenue : Ms Runi Pal (Addl.CIT) 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 20.09.2021for the AY 2018-19. 2. At the outset of hearing, the Bench observed that there is delay of 12 days in filing the appeal by the assessee for which the ld. AR of the assessee filed an application dated 01.12.2021 for condonation of delay with following prayers:- 1. That the appeal filed by the appellant before CIT(A)-III, Jaipur was rejected /dismissed vide order dated 20.09.202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant reserves his right to add, amend, alter or withdraw any ground of appeal on or before hearing of this appeal. 6. None has appeared on behalf of the assessee, however Bench has decided to dispose of the appeal ex-parte based on the material available on record. The only grievance of the assessee relates to the disallowance of Rs. 2,06,688/- made by the A.O on account of late payments towards EPF and ESI under section 36(1)(va) of the Income Tax Act, 1961 (for short the Act ), however, before furnishing the return of income under section 139(1) of the Act. When the matter was taken to the Ld. CIT(A) the said disallowance was sustained. 7. Being aggrieved by the impugned order issued U/s 143(1) of the IT Act, the assessee is preferred an appeal before the ld. CIT(A). The assessee filed complete details of the entire payments i.e. employee s PF ESI contribution paid before the due date of filing of return of income which are produced in CIT(A) order. 8. The assessee before the ld. CIT(A) contended that when the amount of employee s contribution to ESI PF is deposited before the due date of filing of return of income, no disallowance U/s 36(1)(va) can be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn 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. 13. 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.) 14. 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 exhaustive order explaining t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ITR 306, held that the deleti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 perused the material available on record. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red 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 respective enactments by the assessees an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, the addition by way of adjustment while processing the return of income u/s 143(1) amounting to Rs 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 case are identical to the facts involved in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 any provident fund or superannuation fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 section 2 applies. These amendments will ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 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 under challenge 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. Hon ble Supreme Court noted that though provision for surcharge under the Finance Acts have been in existence since 1995, the charge of surcharge with respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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