TMI Blog2022 (5) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... f the provisions of Section 36(1)(va) , unless the amendment made by Finance Act, 2021 is made specifically applicable retrospectively from the date of insertion of the provision or any other specified earlier date in the Finance Act, rather on the other hand , the Memorandum to Finance Bill, 2021 has specifically made this amendment applicable from 01.04.2021 and specified that the same shall be made applicable from assessment year 2021-22 and subsequent assessment years. We are presently concerned with ay: 2005-06. - Decided in favour of assessee. - ITA No. 18/LKW/2022 - - - Dated:- 17-5-2022 - SHRI. A. D. JAIN, VICE PRESIDENT Appellant by : Shri Hemant Jain, Advocate Respondent by : Shri Amit Nigam, D.R. ORDER This is assessee s appeal against the order of the ld. CIT(A), NFAC, New Delhi, dated 18.11.2021, for Assessment Year 2018-19, raising the following grounds of appeal: 1. The Ld. CIT(A) grossly erred both on facts and in law in confirming the intimation u/s 154 sent by CPC where by it processed the return of income of appellant for AY 2019-20 at Rs.36,47,045/-. 2. The Ld. CIT(A) grossly erred in facts and in law in misreading the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A), the ld. D.R. submitted that an amendment was brought in by the Finance Act, 2021, which is clarificatory or of curative nature, and has retrospective effect, and therefore, the addition sustained by the ld. CIT(A) be upheld. 6. I have heard the rival parties and have gone through the material placed on record. I find that with regard to the grievance of the assessee against the action of the ld. CIT(A) in confirming the addition made by the CPC relating to employees contribution towards PF ESI, there is no dispute between the parties regarding the date of deposit of PF ESI, which clearly is beyond the prescribed date of deposit as applicable under the relevant section of the I.T. Act. Further, there is no dispute between the parties that the deposits were made before the filing of return of income for the relevant assessment year. 7. The Hon'ble Allahabad High Court, in the case of Sagun Foundry (P.) Ltd. vs. CIT (supra) has dealt with a similar issue and after taking into account the judgment of the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusion Ltd. (supra), has decided the issue in favour of the assessee, by holding as under: 16. Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismissed appeal and confirmed order passed by CIT(A). That is how matter came before High Court in appeal. Court considered following question, posed in para 7.01, reads as under: Short question which is posed for consideration of this court is with respect to the disallowance of the amount being the employees contribution to the PF account/ESI contribution which admittedly which the concerned assessee did not deposit with the PF Department/ESI Department within due date under the PF Act and/or the ESI Act. 18. Gujarat High Court referred to Section 2(24)(x) and found that any sum received by Assessee (employer) from his employees as contributions to any provident fund or superannuation fund or any fund set up under Act, 1948, or any other fund for welfare of such employees, constitutes income. However, Section 36 of Act 1961 provides for deduction in computing income referred to in Section 28. The relevant provision of Section 36 applicable to the case before Gujarat High Court was Section 36(1)(va) with which we are also concerned. It entitles an Assessee for deduction in computing income referred to in Section 28 with respect to any sum received by Assessee (emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome- Tax Vs Hemla Embroidery Mills P. Ltd., (2014) 366 ITR 167, Himachal Pradesh High Court in Commissioner of Income Tax Vs Nipso Ployfabriks Ltd., (2013) 350 ITR 327 and Karnataka High Court in Commissioner of Income- Tax Vs Sabri Enterprises, (2008) 298 ITR 141. 21. Karnataka High Court had an occasion to consider, whether it should dissent with the view taken in the earlier judgments and follow the view taken by Gujrat High Court in Commissioner of Income Tax Vs Gujrat State Road Transport Corporation (supra) and this occasion came in Essae Teraoka P. Ltd. Vs Deputy Commissioner of Income Tax, (2014) 366 ITR 408. Dispute relates to A.Y. 2008-09. Assessee filed Return on 26.09.2008. Return was processed under Section 143(1) and thereafter on scrutiny, notice under Section 143(2) was issued. Assessing Officer completed assessment by order dated 24.12.2010 under Section 143(3) disallowing Rs.12,51,737/- under Section 36(1)(va) and also disallowing Rs.1,04,621/- under Section 14A read with Rule 8D. In appeal, CIT (A) reversed findings of Assessing Officer but on appeal preferred by Revenue, Tribunal restored Assessing Officer s order and that is how matter came to Karnataka H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax Vs Alom Extrusions Ltd. (supra) but also its own earlier judgment in Commissioner of Income Tax Vs Rai Agro Industries Ltd., (2011) 334 ITR 122, to hold that Section 43B shall apply to both 'contributions' i.e. employers' and employees'. 24. Kerala High Court in recent judgment in Commissioner of Income Tax Vs Merchem Ltd., (2015) 378 ITR 443, has followed the decision of Gujarat High Court in Commissioner of Income Tax Vs Gujarat State Road Transport Corporation (supra) and dissented with the otherwise judgments of Rajasthan High Court in Commissioner of Income Tax Vs State Bank of Bikaner and Jaipur, (2014) 363 ITR 70, Karnataka High Court in Commissioner of Income Tax Vs Spectrum Consultants India P. Ltd. (supra) and Bombay High Court in Commissioner of Income Tax Vs Ghatge Patil Transports Ltd., (2014) 368 ITR 749. 25. Before following a particular view when there is divergence in views of different High Courts, we find it appropriate to examine Supreme Court judgment in Commissioner of Income Tax Vs Alom Extrusions Ltd. (supra) to find out whether it can be confined only in respect to employers' contribution or is applicable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 43B, when enacted in 1984, commences with a non obstante clause. The underlying object being to disallow deductions claimed merely by making a book entry based on the mercantile system of accounting. At the same time, Section 43B made it mandatory for the Department to grant deduction in computing income under Section 28 in the year in which tax, duty, cess etc. is actually paid. Parliament took cognizance of the fact that accounting year of a company did not always tally with the due dates under Provident Fund Act, Municipal Corporation Act (Octroi) and other Tax laws. Therefore, by way of First Proviso, an incentive/relaxation was sought to be given in respect of tax, duty, cess or fee by explicitly stating that if such tax duty cess or fee is paid before the date of filing of the return under Act 1961, Assessee would then be entitled to deduction.This relaxation/incentive was restricted only to tax, duty, cess and fee. It did not apply to contributions to labour welfare funds. The reason appears to be that the employer should not sit on the collected contributions and deprive workmen of the rightful benefits under social welfare legislations by delaying payment of contributi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 36(1)(va) of the Act, I find that the said amendment is applicable w.e.f. 1.4.2021 and is prospective in nature and not retrospective. 11. The Allahabad Bench of the Tribunal, in the case of JCIT, Circle-2, Allahabad vs. Bharat Pumps and Compressors Ltd. in I.T.A. No.147 148/Alld/2016, vide order dated 12.8.2021, after taking into account the aforesaid amendment brought in by the Finance Act, 2021, has decided the issue in favour of the assessee by holding the amendment to be applicable from April 2021 only. The relevant portion of the findings of the Tribunal is reproduced below: There is a recent amendment to Section 36(1)(va) by Finance Act, 2021, wherein Explanation 2 was inserted, which reads as under: 36(1)(va) .. Explanation 2- 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; Correspondingly, there was an amendment to Section 43B of the 1961 Act by Finance Act, 2021, wherein Explanation 5 was inserted , which reads as under: 43B .. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Kerala , and such other States where Hon'ble jurisdictional High Court has decided this issue in favour of Revenue) situated in the States where Hon'ble Jurisdictional High Court has decided this issue in favour of tax-payers, have already been allowed the deduction towards employee contribution received by employer which was deposited late by employer beyond the time stipulated u/s 36(1)(va) , but before the due date as prescribed for filing of return of income u/s 139(1) of the 1961 Act, and there cannot be a class different now at this stage where the deduction is to be denied on the ground of strict interpretation of the provisions of Section 36(1)(va) , unless the amendment made by Finance Act, 2021 is made specifically applicable retrospectively from the date of insertion of the provision or any other specified earlier date in the Finance Act, rather on the other hand , the Memorandum to Finance Bill, 2021 has specifically made this amendment applicable from 01.04.2021 and specified that the same shall be made applicable from assessment year 2021-22 and subsequent assessment years. We are presently concerned with ay: 2005-06. The relevant clause to Memorandum to Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employee contribution as well. There is a distinction between contribution and employee's contribution towards welfare fund. It may be noted that employee's contribution towards welfare funds is a mechanism to ensure the 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 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 - (1) 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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