TMI Blog2022 (5) TMI 1271X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer to examine the case of the assessee with reference to date of payment and in case, the Assessing Officer finds that the assessee has remitted the employees contribution to PF ESI on or before due date for filing return of income u/s.139(1) of the Act, then the Assessing Officer is directed to delete the additions made u/s.36(1)(va) of the Act - Decided in favour of assessee. - I. T. A. Nos. 273 & 274/Chny/2022 - - - Dated:- 19-5-2022 - SHRI MAHAVIR SINGH, VICE-PRESIDENT AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER Appellant by : Mr. T.Banusekar, C.A Respondent by : Mr. G.Johnson, Addl.CIT ORDER PER G. MANJUNATHA, AM: These two appeals filed by the assessee are directed against separate, but identical orders passed by the learned Commissioner of Income Tax (Appeals)-18, Chennai, both dated 31.03.2022 25.03.2022 and pertain to assessment years 2019-20 2018-19. Since, facts are identical and issues are common, for the sake of convenience, these appeals are heard together and are being disposed off, by this consolidated order. 2. The assessee has more or less filed common grounds of appeal for both assessment years, therefore, for the sake of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd made inter-alia, disallowances u/s.40(a)(iii) towards salary paid to employees working in abroad amounting to Rs.12,79,018/-, disallowance towards delayed remittance of employees contribution to PF ESI u/s.36(1)(va) amounting to Rs.79,94,937/- and denial of tax relief claimed u/s.90/90A. The assessee preferred an appeal before the Ld.CIT(A), but could not succeed. The Ld.CIT(A) for reasons stated in his appellate order dated 31.03.2022 partly allowed appeal filed by the assessee by directing the Assessing Officer to verify belated remittances and if remitted before due dates of the respective statutes as claimed by the assessee, the same may be allowed and restrict disallowance u/s. 36(1)(va) of the Act to Rs.68,54,308/-. Aggrieved by the learned CIT(A) order, the assessee is in appeal before us. 4. The Ld. A.R for the assessee, at the time of hearing, submitted that this issue is squarely covered by the decision of the coordinate Bench of the ITAT in the case of M/s.Adyar Ananda Bhavan Sweets India Ltd., in ITA Nos.402 403/Chny/2021 dated 08.12.2022. The Tribunal has considered an identical issue in light of latest amendment to the provisions of Sec.36(1)(va) of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein it is held as under:- 5. We find that the Tribunal has rightly relied on the decision of the Supreme Court in the case of CIT V. Alom Extrusions Ltd. reported in 319 ITR 306, whereby, the Supreme Court held that omission of second proviso to Section 43B and amendment to first proviso by Finance Act, 2003 are curative in nature and are effective retrospectively, i.e., with effect from 1.4.1988 i.e., the date of insertion of first proviso. The Delhi High Court in the case of CIT V. Amil Ltd. reported in 321 ITR 508 held that if the assessee had deposited employee's contribution towards Provident Fund and ESI after due date as prescribed under the relevant Act, but before the due date of filing of return under the Income Tax Act, no disallowance could be made in view of the provisions of Section 43B as amended by Finance Act, 2003. 6. In the present case, the assessee had remitted the employees contribution beyond the due date for payment, but within the due date for filing the return of income. Hence, following the abovesaid decisions, we find no reason to differ with the findings of the Tribunal. Accordingly, we find no question of law much less any substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court by a speaking order, the submission of the learned counsel for the Revenue has to be rejected at the very threshold. The reason for the same is as follows:- 9. The Gauhati High Court in the case of CIT v. George Williamson (Assam) Ltd: (2006) 284 ITR 619 (Gauhati) dealt with the very same issue. In the said judgment the Division Bench of the Gauhati High Court noted a contrary view taken by the Kerala High Court in the case of CIT v. South India Corporation Ltd: (2000) 242 ITR 114. After noting the said judgment the fact that the amendments had been made to the provisions of Section 43B of the Act by virtue of Finance Act, 2003 w.e.f 1.4.2004 it agreed with the submission of the learned counsel for the assessee that by virtue of the omission of the second proviso and the omission of Clauses (a), (c), (d), (e) and (f) without any saving clause would mean that the provisions were never in existence. For this purpose, in the said case the assessee had placed reliance on the judgment of a Constitution Bench of the Supreme Court in the case of Kolhapur Canesugar Works Ltd v. Union of India: (2000) 2 SCC 536 and Rayala Corporation P. Ltd v. Director of Enforcement (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der refusing leave to appeal is a speaking order, ie., gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the Court, Tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex Court of the country, But, this does not amount to saying that the order of the Court, Tribunal or authority below has stood merged in the order of the Supreme Court rejecting special leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the parties. 11. Upon noting the observations of the Supreme Court in Kunhayammed and Others (supra) the Division Bench of the Madras High Court in the case of Nexus Computer Pvt Ltd (supra) came to the conclusion that the view taken by the Supreme Court in Vinay Cement (supra) wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of Section 36(1)(va) 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. This amendment has brought in the statute book to provide certainty about the applicability of provisions of Section 43B of the Act inspite of belated payment of employees 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 con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered the clarificatory amendment in the Finance Act 2021 and decided the issue in favour of Revenue. 7.19 Thus, the aforesaid Explanations inserted by Finance Act, 2021 have clarified that definition of due date as per Sec 43B is deemed never to have been applied for the purpose of employee's contribution. As discussed above, the said amendments are clarificatory in nature and are retrospective in operation. Hence, I am of the view that this provision is retrospective applies to the current AY under consideration as the law is now clear i.e employees' contribution to specified fund will not be allowed as deduction if there is delay in deposit even by a single day as per the due dates mentioned in the respective legislation and any adjustment to the income on the impugned count is in order. The case laws relied on by the appellant including that of the Hon ble High Court of Madras in the case of CIT Vs. Industrial Security and Intelligence India Ltd.(supra) were rendered prior to the above amendment. Therefore, the payment of employee's contribution made after the due date, by which the appellant is required as an employer to credit an employee's contribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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) of S.92F is amended so as to clarify that the activities mentioned in the said clause include the carrying out of any work in pursuance of a contract. This amendment takes effect retrospectively from 01.04.2002. Various other amendments also take place retrospectively. The Notes on Clauses show that the legislature is fully aware of 3 concepts: (i) prospective amendment with effect from a fixed date; (ii) retrospective amendment with effect from a fixed anterior date; and (iii) clarificatory amendments which are retrospective in nature. Thus, it was a conscious decision of the legislature, 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 vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harge 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 hence is to be construed prospective in operation. The amendment neither purports to be merely clarificatory nor is there any material to suggest that it was intended by Parliament. Furthermore, an amendment made to a taxing statute can be said to be intended to remove 'hardships' only of the assessee, not of the Department. On the contrary, imposing a retrospective levy on the assessee would have caused undue hardship and for that reason Parliament specifically chose to make the proviso effective from June 1, 2002. 6.7 We noted from the judgment of Hon ble Supreme Court in Vatika Township P. Ltd., supra, that 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. In present case before us, as noted by CIT(A) that their exists divergent judgements of various High Courts. The CIT(A) has noted the case laws in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case also, the amendment brought out by Finance Act, 2021 w.e.f. 01.04.2021 i.e. for and from assessment year 2021-22 of Explanation-2 to s. 36(1)(va) of the Act and not retrospectively. 6.9 Thus, from the above, it is clear that the amendment brought in the statute 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 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue of assessee s appeal is allowed. 7. In this view of the matter and consistent with view taken by the coordinate Bench, we are of the considered view that payments made to employees contribution to PF ESI beyond due date specified under the respective Acts, but within due date for filing of return of income u/s.139(1) of the Act, is an allowable deduction u/s.36(1)(va) of the Act and thus, we direct the Assessing Officer to examine the case of the assessee with reference to date of payment and in case, the Assessing Officer finds that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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