TMI Blog2022 (5) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... pite of issue of notice, none appeared on behalf of the assessee. As the issue in appeal is decided in a number of cases by the Tribunal this appeal is disposed off on hearing the Ld. DR. 3. Ld. DR submitted that the Deputy Commissioner of Income Tax, Central Processing Cell (CPC), Bangaluru while processing the return u/s. 143(1) of the Act disallowed the Employees Contribution towards PF ESI which was sustained by the Ld. CIT(Appeals). The Ld. DR submits that disallowance was sustained by the Ld. Commissioner NFAC in view of insertion of Explanations to Section 36(1)(va) and 43B, wherein it has been clarified that in order to claim deduction of Employees Contribution the same has to be deposited before the due date as mentioned in the Provident Fund and ESI Acts. Ld. DR submits that CIT(Appeals) observed that the insertions of Explanations 2 to Section 36(1)(va) and 43B are clarificatory in nature and, therefore, it applies to all the pending cases. He supported the orders of the Ld. CIT(Appeals). 4. Heard the Ld. DR and perused the orders of the authorities below. I find that the issue in appeal is squarely covered by the decision of the Jurisdictional High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions 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 Incometax 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 Hon'ble Supreme Court in the case of Vinay Cement Ltd. 26. The brief facts of such case are as under: 2. The case relates to the assessment year 2002-03. The respondent assessee had filed its return on 30-10-2002 declaring income at Rs. 7,95,430. During the assessment proceedings, the Assessing Officer (AO) found that the assessee had deposited employers' contribution as well as employees' contribution towards provident fund and ESI after the due date, as prescribed under the relevant Act/Rules. Accordingly, he made addition of Rs. 42,58,574 being employees' contribution under section 36(1)(va) of the Act and Rs. 30,68,583 being employers' contribution under section 43B of the Act. Felt aggrieved by this assessment order, the assessee preferred appeal before the CIT(A) who decided the same vide orders da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t an issue that the payments were not made by the assessee on the dates which have been stated to be the dates of deposits in the assessment order. If such is a factual aspect then according to latest position of law clarified by Hon'ble Supreme Court in the case of CIT v. Vinay Cement Ltd. that no disallowance could be made if the payments are made before the due date of filing the return of income. This issue came before Hon'ble Supreme Court in the case of CIT v. Vinay Cement Ltd. which was a special leave petition filed by the department against the High Court Order of 26th June, 2006 in ITA No. 2/05 and ITA No. 56/03 and ITA No. 80/03 of the High Court of Guwahati, Assam and it is order dated 7th March, 2007. A copy of the said order is placed on record. The observations of their Lordships on the issue are as under:-- 'In the present case we are concerned with the law as it stood prior to the amendment of section 43B. In the circumstances the assessee was entitled to claim the benefit in section 43B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return. The special leave petition is dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, after Explanation 4, the following Explanation shall be inserted, namely:-- Explanation 5.--For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applies. . 32. We have also perused the Memorandum Explaining the Provisions in the Finance Bill, 2021. Under the head Provision relating to Direct Taxes with to rationalization of various provisions, the issue of clause (24) of Section 2 sub-clause (x), Section 36(1) clause (va), Section 43B with regard to provisions of sub-section (1) of Section 139 have been dealt at length. The gist is as under: Rationalization 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 fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 misutilize 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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