TMI Blog2022 (6) TMI 346X X X X Extracts X X X X X X X X Extracts X X X X ..... ntribution towards PF/ESI is deposited by employer-taxpayer with the relevant fund governing PF/ESI to the credit of employee before the due date for filing of return of income prescribed u/s139(1) for the relevant assessment year, the employer-taxpayer shall be entitled for deduction in the previous year relevant to ay to which such employee contribution to PF/ESI pertain. Division Bench of Allahabad-tribunal in the case of M/s Bharat Pumps and Compressors Limited [ 2021 (10) TMI 496 - ITAT ALLAHABAD] also decided this issue in favour of the taxpayer after considering the amendment made by Finance Act, 2021, by holding that if the employee share of contribution towards PF/ESI is deposited by employer-taxpayer with the relevant fund governing PF/ESI to the credit of employee before the due date for filing of return of income prescribed u/s139(1) for the relevant assessment year, the employer-taxpayer shall be entitled for deduction in the previous year relevant to ay to which such employee contribution to PF/ESI pertains. It is also observed that several Benches of tribunal across India have consistently taken a similar view in favour of the tax-payer, even after considering am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at Rs. 13,40,36,929/- by making additions to the tune of Rs. 31,46,750/- on account of disallowance of late payment of employees contribution to PF/ESI , and later the assessee filed rectification request u/s 154 with AO on 25.11.2019 , which stood dismissed by AO , vide rectification order dated 10.12.2019 passed by AO u/s 154 of the 1961 Act. The assessee declared total income of Rs. 13,08,90,189/- and return was processed u/s 143(1) and thereafter rectification order u/s 154, dated 10.12.2019 was issued by AO in which income of the assessee was assessed at Rs. 13,40,36,930/- under regular provisions of the 1961 Act, wherein an amount of Rs. 31,46,748/- was added to income of the assessee by invoking provisions of Section 36(1)(va) read with Section 2(24)(x) of the 1961 Act, on the grounds that the assessee has not deposited employee share of PF/ESI collected/deducted by assessee from the salaries of employees , to the credit of said employees maintained with relevant fund concerning PF/ESI within the time prescribed under the relevant statute concerning PF/ESI. The said information of default/delay in depositing the said amounts within due date prescribed under the relevant st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I beyond the time provided under the relevant statute governing PF/ESI but deposited before the due date for filing of return of income as prescribed u/s 139(1) of the 1961 Act , the assessee filed second appeal with tribunal. None appeared on behalf of the assessee when this appeal was called for hearing before the Division Bench. 4.2 The ld. DR on the other hand submitted that the amendments made by Finance Act, 2021 in Section 36(1)(va) and 43B are retrospective in nature as it is merely clarificatory in nature. The ld. Sr. DR submitted that the statute is very clear as Section 36(1)(va) clearly mandates that employees share of PF/ESI collected by employer from the salary of employees is to be deposited with the relevant fund maintained for PF/ESI to the credit of employees before the due date prescribed under the relevant statute governing PF/ESI , and the extended period of time of due date prescribed u/s 139(1) for filing of return of income is not available as is enshrined in Section 43B to employee share of contribution to PF/ESI, as in the opinion of ld. Sr. DR the language of statute is very clear and unambiguous and hence so far as employee share of contribution tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2021 in Section 36(1)(va) and 43B , by holding as under: 5. We have considered rival contentions and perused the material on record including cited case laws. The only effective issue in this appeal is regarding delayed deposit of employee share of PF/ESI collected by employer from salaries of employees to the tune of Rs. 13,14,725/- which was not deposited before the due date prescribed under the statute governing PF/ESI and hence hit by provision of Section 36(1)(va) read with Section 2(24)(x) of the 1961 Act. There is a recent amendment by Finance Act , 2021 in Section 36(1)(va) and 43B of the 1961 Act. Similar issue was dealt with Division Bench of Allahabad tribunal in which both of us was part of Division Bench who pronounced the order, in the case of JCIT(OSD) , Allahabad v. Bharat Pumps and Compressors Limited, Allahabad, in ITA no. 147 and 148 /Alld/2016 for ay: 2005-06, vide orders dated 12.08.2021, wherein the tribunal considered the amendment made by Finance Act, 2021 in Section 36(1)(va) and 43B , and decided this issue in favour of the tax-payer , by holding as under: 10. We have considered rival contentions and perused the material on record. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with Explanation 1 and Section 2(24)(x) of the 1961 Act, which led AO to disallow the said amount by invoking Explanation 1 to Section 36(1)(va) of the 1961 Act but the said amount admittedly stood deposited by assessee to the credit of employee with relevant fund before the time prescribed for filing of return of income u/s 139(1) of the 1961 Act. Aggrieved by an assessment framed by AO u/s 143(3) of the Act, the assessee filed first appeal with learned CIT(A) who was pleased to delete the addition to the income to the tune of Rs. 6,31,788/- made by AO on account of delayed remission of employee's contribution towards EPF to the credit of employee with relevant fund beyond the time prescribed under relevant PF statute but admittedly the said amount stood deposited by assessee to the credit of employee with relevant fund before the due date prescribed for filing of return of income u/s 139(1) of the 1961 Act , by relying on following judicial decision(s) as stipulated hereunder:- 1. CIT v. Alom Extrusions Ltd., in 319 ITR 306(SC) 2. CIT v. Industrial Security and Intelligence India Pvt. Ltd., (Mad) Tax Case Appeal Nos.585 and 586 of 2015 and M.P No.1 of 2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have heard rival contentions through video conferencing and perused the material on record including cited case laws. We have observed that the assessee has deposited Employee's share of Provident Fund contribution amounting to Rs. 6,31,788/- to the credit of employees with respective PF fund beyond the due date prescribed under the relevant statute governing Provident Fund , but the same was admittedly deposited before the due date of filing of return of income as is prescribed u/s 139(1) of the 1961 Act . Before proceeding further, it will be profitable to reproduce the relevant provisions of the 1961 Act as were applicable for ay: 2013-14, which are reproduced hereunder: Definitions. 2. In this Act, unless the context otherwise requires,- ** ** ** (24) income includes- ** ** ** (x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees ;] Other deductions. 36. (1) The deductions provided for in the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount stood deposited by employer to the credit of employee with relevant fund on or before the due date as prescribed under relevant statute governing PF/ESI and other employees welfare funds. The Provision of Section 43B of the 1961 Act were also amended by Finance Act, 1987 w.e.f. 1.4.1988 and as it stood at that time is reproduced hereunder: Certain deductions to be only on actual payment. 43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a)** ** ** (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, [or] [(c)** ** ** shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. [Provided that nothing contained in this section shall apply in relation to any sum referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable under this Act in respect of- ** ** ** (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, [or] ** ** ** shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him : Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under subsection (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. ** ** ** 10.3.4 It is pertinent at this stage to reproduce the decision of Hon'ble Supreme Court in the case of Alom Extrusions Limited (supra) wherein the amendments made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income has been defined under section 2(24) of the Act to include profits and gains. Under section 2(24)(x), any sum received by the assessee from his employees as contributions to provident fund/superannuation fund or any fund set up under Employees' State Insurance Act, 1948, or any other fund for welfare of such employees constituted income. This is the reason why every assessee(s) [employer(s)] was entitled to deduction even prior to 1-4-1984, on Mercantile System of Accounting as a business expenditure by making provision in his Books of Account in that regard. In other words, if an assessee(s)-employer(s) is maintaining his books on Accrual System of Accounting, even after collecting the contribution from his employee(s) and even without remitting the amount to the Regional Provident Fund Commissioner [R.P.F.C.], the assessee(s) would be entitled to deduction as business expense by merely making a provision to that effect in his Books of Account. The same situation arose prior to 1st April, 1984, in the context of assessees collecting sales tax and other indirect taxes from their respective customers and claiming deduction only by making provision in their Books with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date. 8. On reading the above provisions, it becomes clear that the assessee(s)- employer(s) would be entitled to deduction only if the contribution stands credited on or before the due date given in the Provident Fund Act. However, the second proviso once again created further difficulties. In many of the companies, financial year ended on 31st March, which did not coincide with the accounting period of R.P.F.C. For example, in many cases, the time to make contribution to R.P.F.C. ended after due date for filing of returns. Therefore, the industry once again made representation to the Ministry of Finance and, taking cognizance of this difficulty, the Parliament inserted one more amendment vide Finance Act, 2003, which, as stated above, came into force with effect from 1-4-2004. In other words, after 1-4-2004, two changes were made, namely, deletion of the second proviso and further amendment in the first proviso, quoted above. By the Finance Act, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id before the date of filing of the Return under the Income-tax Act [due date], the assessee(s) then would be entitled to deduction. However, 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(s) should not sit on the collected contributions and deprive the workmen of the rightful benefits under Social Welfare legislations by delaying payment of contributions to the welfare funds. However, as stated above, the second proviso resulted in implementation problems, which have been mentioned hereinabove, and which resulted in the enactment of Finance Act, 2003, deleting the second proviso and bringing about uniformity in the first proviso by equating tax, duty, cess and fee with contributions to welfare funds. Once this uniformity is brought about in the first proviso, then, in our view, the Finance Act, 2003, which is made applicable by the Parliament only with effect from 1- 4-2004, would become curative in nature, hence, it would apply retrospectively with effect from 1-4-1988. Secondly, it may be noted that, in the case of Allied Motors (P.) Ltd. v. CIT [1997] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otors (P.) Ltd.'s case (supra) is delivered by a Bench of three learned Judges, which is binding on us. Accordingly, we hold that Finance Act, 2003, will operate retrospectively with effect from 1-4-1988 [when the first proviso stood inserted]. Lastly, we may point out the hardship and the invidious discrimination which would be caused to the assessee(s) if the contention of the Department is to be accepted that Finance Act, 2003, to the above extent, operated prospectively. Take an example - in the present case, the respondents have deposited the contributions with the R.P.F.C. after 31st March [end of accounting year] but before filing of the returns under the Income-tax Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under section 43B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) wherein Hon'ble Delhi High Court interpreted the decision of Hon'ble Supreme Court to be applicable to both employer and employees contribution and in case the said amounts were deposited by employer to the credit of employees with the respective funds before the due date as prescribed u/s 139(1) of the 1961 Act, the deduction from the income shall be allowed , by holding as under: 4. In some other appeals preferred by the assessees, the ITAT has taken contrary view and upheld the addition made by the Assessing Officers. Under these circumstances, all these appeals were admitted and heard on the following question of law : - Whether the ITAT was correct in law in deleting the addition relating to employees' contribution towards Provident Fund and ESI made by the Assessing Officer under section 36( 1)(va) of the Income-tax Act, 1961 ? 5. Section 36 of the Act deals with certain deductions which shall be allowed in respect of matters dealt with therein, in computing the income referred to in section 28 of the Act. Different types of deductions are provided therein in various clauses of section 36. Clause (iv) of subsection (1) deals with dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gratuity fund or any other fund for the welfare of employees, or, ** ** ** shall be allowed irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him : Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under subsection (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. [Emphasis supplied] 7. During the period in question with which we are concerned, section 43B contained second proviso also, which stands omitted by the Finance Act, 2003 with effect from 1 - 4-2004. Since, this provision existed at the relevant time, it also needs to be reproduced : - Provided further that no deduction shall, in respect of any sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, order or notification issued thereunder or under any standing order award contract of service or otherwise. 11. Before we delve into this discussion, we may take note of some more provisions of the Act. Section 2(24) of the Act enumerates different components of income. It, inter alia, stipulates that income includes any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees. It is clear from the above that as soon as employees' contribution towards provident fund or ESI is received by the assessee by way of deduction or otherwise from the salary/wages of the employees, it will be treated as 'income' at the hands of the assessee. It clearly follows therefrom that if the assessee does not deposit this contribution with provident fund/ESI authorities, it will be taxed as income at the hands of the assessee. However, on making deposit with the concerned authorities, the assessee becomes entitled to deduction under the provisions of section 36(1)(va) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder 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 dismissed. 13. It is clear from the above that in Vinay Cement Ltd.'s case (supra), the SLP preferred by the Revenue against the judgment of the Guwahati High Court was dismissed making the aforequoted observations. The reasons are given and, thus, it amounts to affirmation of the view taken by the High Court of Guwahati. 14. When we keep that proposition in mind and also take into consideration various judgments where Vinay Cement Ltd.'s case (supra) is applied and followed, it will not be possible to accept the contention of the Revenue. 15. In C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the provisions of section 43B of the Act by virtue of Finance Act, 2003 with effect from 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 [1969] 2 SCC 412 and General Finance Co. v. Asstt.CIT [2002] 257 ITR 338 (SC). The said submissions found favour with the Division Bench of the Guwahati High Court and relying on earlier decisions of its own Court in CIT v. Assam Tribune [2002] 253 ITR 93 and CIT v. Bharat Bamboo Timber Suppliers [1996] 219 ITR 212 the Division Bench dismissed the appeal of the revenue. It transpires that the aforesaid matter was taken up in appeal along with other matters including Vinay Cement Ltd.'s case (supra). The order in Vinay Cement Ltd.'s case (supra) was pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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's case (supra) the Division Bench of the Madras High Court in the case of Nexus Computer (P.) Ltd. (supra) came to the conclusion that the view taken by the Supreme Court in Vinay Cement Ltd. 's case (supra) would bind the High Court as it was not declared by the Supreme Court under article 141 of the Constitution. 12. We are in respectful agreement with the reasoning of the Madras High Court in Nexus Computer (P.) Ltd.'s case (supra). Judicial discipline requires us to follow the view of the Supreme Court in Vinay Cement Ltd.'s case (supra) as also the view of the Division Bench of this Court in Dharmendra Sharma's case (supra). 13. In these circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt 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 Extrusion 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. Aimil 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 above-said decision, we find no reason to differ with the findings of the Tribunal. Accordingly, we find no question of law much less any substantial qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the tax-payer before the Division Bench of Hon'ble Madras High Court by filing writ appeal no. 2854 of 2018 and CMP No. 23727 of 2018 and the Division Bench of Hon'ble Madras High Court was pleased to grant permission to the tax-payer to withdraw the original writ petition namely WP No. 5264 of 2018 as well writ appeal no. 2854 of 2018, vide orders dated 09.01.2019. The Revenue has referred before us during the course of hearing , decision of Hon'ble Madras High Court in the case of Orchid Pharma (supra) , wherein the Hon'ble Madras High Court had noted that the assessee did not appear before tribunal and also it is an order passed by Hon'ble Madras High Court ex- parte in the absence of the tax-payer, wherein no notice was issued to the taxpayer as proceedings were pending against the tax-payer before National Company Law Tribunal as the tax-payer was in liquidation. The Hon'ble Madras High Court observed in the case of Orchid Pharma (supra) that tribunal has decided the issue in favour of tax-payer by relying on decision of Hon'ble Madras High Court in the case of Industrial Security and Intelligence Private Limited (supra). The Revenue brought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s deposited before the due date prescribed for filing of return of income u/s 139(1) of the 1961 Act, the assessee would be entitled for deduction. The aforesaid decision of Hon'ble Bombay High Court in the case of GhatgePatil Transport (supra) is reproduced hereunder: 15. In this manner, the amendment provided by Finance Act, 2003 put on par the benefit of deductions of tax, duty, cess and fee on the one hand with contributions to various Employees' Welfare Funds on the other. All this came up for consideration before the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra). The Tribunal in the case at hand relied upon the said judgment. There is no reason to fault the order passed by the Tribunal. We are of the view that the decision of the Supreme Court in Alom Extrusions Ltd. (supra) applies to employees' contribution as well as employers' contribution. Question Nos.2, 3 4 are accordingly answered in favour of the assessee and against the revenue. 10.3.9 The Hon'ble Bombay High Court has consistently held this issue in favour of the tax-payer in its other decisions also such as Geekay Security Services Private Limited v. DC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ujarat High Court held that to get deduction towards employees contribution towards PF/ESI and other welfare funds, the employer ought to have deposited the said amount to the credit of employees with the relevant Funds on or before the due date specified in PF/ESI Act or other welfare funds , keeping in view provisions of Section 36(1)(va) read with Explanation 1 and Section 2(24)(x) of the 1961 Act. Similarly, Hon'ble Kerala High Court has also decided this issue in favour of Revenue in the case of CIT v. Merchem Limited reported in (2015) 378 ITR 443(Ker. HC) and also in Popular Vehicles and Services Private Limited v. CIT (2018) 406 ITR 150 (Ker.HC). While deciding the appeal in the case of Merchem Limited (supra) in favour of Revenue on this issue, the Hon'ble Kerala High Court held that deduction on account of employees contribution towards PF/ESI can only be allowed if the said amount is deposited to the credit of employee with relevant funds within the due date as prescribed under the statute governing PF/ESI keeping in view provisions of Section 36(1)(va) read with Explanation 1 and provisions of Section 2(24)(x) of the 1961 Act, thus applying strict interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees . 8. Looking at the provisions we are definite that the Act treats employer's and employee's contribution distinctly. Sub-clause (v) of Section 36(1) speaks of a gratuity fund, wherein the employee does not contribute at all. Section 36(1)(va) speaks of the employee's contribution to a welfare fund for the benefit of employees alone, by virtue of the specific reference to Section 2 (24). Section 2 (24) includes as income, any contribution received by the employer from the employee for the purpose of remittance to a fund created for the welfare of the employees; including inter alia a provident fund and that under the ESI Act. When the same is remitted on the due date as prescribed in the statute or order creating such fund, then it is eligible for deduction under Section 36. Section 43B(b) refers to a sum payable by the assessee as an employer , to an employees welfare fund which is the employer's contribution. 9. We have carefully gone through the decisions of the Hon'ble Supreme Court as also of the Division Bench. The primary question to be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Alom Extrusions Ltd.'s case (supra) as was noticed, was specifically considering the issue with respect to the employer's contribution. The Hon'ble Supreme Court noticed that prior to 1983 even a book entry made with respect to an assessee following the mercantile system of accounting, making a provision for the payment of contributions towards EPF and ESI could be claimed as a deduction. By introduction of Section 43B in the Finance Act, 1983, the object was to disallow deductions claimed merely by making a book entry based on the mercantile system of accounting (sic - para 16). Section 43B made it mandatory for the department to grant deduction in computing the income under Section 28 in the year in which the tax, duty, cess, etc. were paid. However, the due dates under the various enactments, i.e.; the welfare and tax legislation would not have the due date before the date of filing of return as provided in the Income Tax Act. On account of this the first proviso was introduced to grant a relief by way of deduction insofar as the tax, duties, cess or fee paid before the filing of the return under the IT Act though after the previous year; the liabilities having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion clause of 'income' including the employee's contribution received by the employer and providing a deduction by sub-clause (va) and permitting the deduction only if that contribution is paid in accordance with the statute, which created the fund. The 2nd proviso to Section 43B then underwent a cosmetic change and later was deleted. There was also a new proviso added under Section 43B for permitting deduction on contributions paid before the returns are filed. This took in only the employer's contribution especially since Section 2(24) and subclause (va) were retained. The employee's contributions, as Merchem Ltd.'s case (supra) noticed, stands on a different footing, since it is collected from the employee as a deduction in their salary itself. This would in effect be income of the assessee, as has been specifically indicated in the definition of income under Section 2(24)(x), which provision was introduced w.e.f 01.04.1988 as per Finance Act, 1987. 14. We are of the opinion that the question with respect to employee's contribution is regulated by clause (x) of Section 2(24) and sub-clause (va) of Section 36(1) and would not be affected by S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ields i.e. the former takes care of employee's contribution and the latter employer's contribution. The assessee was entitled to get the benefit of deduction under Sec. 43B(b) as provided under the proviso thereto only with regard to the portion of the amount paid by the employer to the contributory fund. Such an understanding of Sec. 43B is further exemplified by the phraseology used in the proviso, which reads thus: Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under Subsection (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. Further, in Explanation 1 to Sec. 43B also, the phraseology used persuade us to think that Sec. 43B can be applied to the contribution payable by the assessee as an employer, which reads thus: For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally paid by the assessee on or before the due date applicable in his case for furnishing the return of income, under sub-section (1) of Section 139, then the same would be enabled deduction. Hence, in the present case if the employer's contribution under the EPF or ESI for the financial year 2007- 08 is paid after the said year but before the date of filing of the return for that year, then necessarily it would be allowable as a deduction in the assessment year, de hors the fact that it was paid in the subsequent year. 18. Sub-clause (va) of Section 36(1) takes care of the employee's contribution, which stands unaffected by Section 43B as the restriction available in Section 43B is already available under the Explanation to the said clause, with a qualification of the payment being before the due date, as stipulated by the statute or order creating the fund. We would also observe that, as the Hon'ble Supreme Court noticed, the legislature took a different approach with respect to the contributions deducted from the salary of the employees which had to be paid to the welfare fund within the due date; as provided under the statute which created the welfare fund. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit of employee with relevant fund on or before the due date as is prescribed under relevant statute governing PF/ESI and other employees welfare funds. The provisions of Section 43B of the 1961 Act has a heading that certain deductions to be allowed only on actual payment basis and it starts with a non obstante clause that 'notwithstanding anything contained in any other provisions of this Act, a deduction otherwise allowable under this Act in respect of...'. Thus, it stipulates that deduction shall be allowed only on actual payment basis in the year of payment of deduction which otherwise is allowable under the 1961 Act. Thus, if the deduction is not otherwise allowable under the 1961 Act owing to provision in statute, then recourse to Section 43B of the 1961 Act cannot be made at threshold. Section 43B of the 1961 Act creates further embargo on deductions which are otherwise allowable under the provision of the 1961 Act, but owing to Section 43B it can only be allowed only on actual payment basis and not otherwise . Then Section 43B of the 1961 Act , by a proviso stipulates that nothing contained in this section shall apply in relation to any sum which is actually pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rners of the statute. There is no equity in tax laws and exemption/deduction provisions are to be strictly construed. The decision of Constitution Bench of Hon'ble Supreme Court in the case of Commissioner of Customs (Imports) v. Dilip Kumar Co. reported in (2018) 9 SCC 1 and decision of Hon'ble Supreme Court in the case of Ramnath Co. v. CIT reported in (2020) 116 taxmann.com 885(SC)(refer para 17 to 20) are relavant . Admittedly , in the instant case the aforesaid sum of Rs. 6,31,788/- being employee contribution towards PF was not deposited by assessee to the credit of employees with PF Funds within due date prescribed under statute governing PF which at threshold was hit by provisions of Section 36(1)(va) read with Explanation 1 and Section 2(24)(x) of the 1961 Act and deduction is not allowable going by strict and literal interpretation of provisions of the statute. Thus, once the deduction is found to be not allowable otherwise under the 1961 Act being hit by infringement of Section 36(1)(va) of the 1961 Act on account of employees share of PF contribution being deposited to the credit of employee with relevant fund by assessee-employer beyond the time stipulated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court found that in Wood Papers Ltd. (supra), some of the observations in an earlier decision in the case of CCE v. Parle Exports (P) Ltd.: [1989] 1 SCC 345 were also explained with all clarity. This Court noted the enunciations in Wood Paper Ltd. with total approval as could be noticed in the following:- 46. In the judgment of the two learned Judges in Union of India v. Wood Papers Ltd.: [1990] 4 SCC 256 (hereinafter referred to as Wood Papers Ltd. case , for brevity), a distinction between stage of finding out the eligibility to seek exemption and stage of applying the nature of exemption was made. Relying on the decision in CCE v. Parle Exports (P) Ltd. :[1989] 1 SCC 345, it was held: (Wood Papers Ltd. case, SCC p. 262, para 6) 6. ... Do not extend or widen the ambit at the stage of applicability. But once that hurdle is crossed, construe it liberally. The reasoning for arriving at such conclusion is found in para 4 of Wood Papers Ltd. case, which reads: (SCC p. 260) 4. ... Literally exemption is freedom from liability, tax or duty. Fiscally, it may assume varying shapes, specially, in a growing economy. For instance tax holiday to new units, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alcoholic beverage basis under the notification in question'. Rationale or ratio is same. Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed construe it liberally. Since the respondent did not fall in the first clause of the notification there was no question of giving the clause a liberal construction and hold that production of goods by respondent mentioned in the notification were entitled to benefit. 59. The above decision, which is also a decision of a two- Judge Bench of this Court, for the first time took a view that liberal and strict construction of exemption provisions are to be invoked at different stages of interpreting it. The question whether a subject falls in the notification or in the exemption clause, has to be strictly construed. When once the ambiguity or doubt is resolved by interpreting the applicability of exemption clause strictly, the Court may construe the notification by giving full play bestowing wider and liberal construction. The ratio of Parle Exports case deduced as follows: (Wood Papers Ltd. case, SCC p. 262, para 6) 6. ... Do not extend or widen the ambit at stage of applicability. But on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. ** ** ** (emphasis in bold supplied) 17.3. In view of above and with reference to several other decisions, in Dilip Kumar Co., the Constitution Bench summed up the principles as follows:- 66. To sum up, we answer the reference holding as under: 66.1. Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition in the taxing statutes for exemption, deduction, rebate et al., which all are essentially the form of tax incentives given by the Government to incite or encourage or support any particular activity 16 . 20. The principles laid down by the Constitution Bench, when applied to incentive provisions like those for deduction, would also be that the burden lies on the assessee to prove its applicability to his case; and if there be any ambiguity in the deduction clause, the same is subject to strict interpretation with the result that the benefit of such ambiguity cannot be claimed by the assessee, rather it would be interpreted in favour of the revenue. In view of the Constitution Bench decision in Dilip Kumar Co. (supra), the generalised observations in Baby Marine Exports (supra) with reference to a few other decisions, that a tax incentive provision must receive liberal interpretation, cannot be considered to be a sound statement of law; rather the applicable principles would be those enunciated in Wood Papers Ltd. (supra), which have been precisely approved by the Constitution Bench. Thus, at and until the stage of finding out eligibility to claim deduction, the ambit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due date of filing of return of income u/s 139(1) of the 1961 Act, the deduction shall be allowed , even if the same is deposited beyond the time stipulated as due date as prescribed under the provisions of Statute governing PF/ESI Act. Thus, the applicable provision as is contained in Section 36(1)(va) is read down by most of the Constitutional Courts including our Jurisdictional High Court (barring Hon'ble Gujarat High Court and Hon'ble Kerala High Court) to make it workable as otherwise the tax-payer will lose the deduction for ever if the employee contribution is not deposited within due date as prescribed under relevant statute , although the said contribution stood deposited by employer belatedly before the due date for filing of return of income u/s 139(1) of the 1961 Act and the amount will stood brought to tax as income keeping in view provisions of Section 2(24)(x) of the 1961 Act so far employee share of contribution towards PF ,ESI and other employees welfare funds is concerned. No doubt it is well cherished objective that there should not be an unjust enrichment of the employer of the amount which it collects from its employees towards employees share of PF , E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment dated 21.12.2016 has decided this issue in favour of the tax-payer, by holding that Section 43B is applicable to both employer and employee contribution and thus in case employee contribution towards PF received by employer is deposited to the credit of employees with the PF trust prior to due date of filing of return of income u/s 139(1), the tax-employer shall be entitled for deduction u/s 36(1)(va) read with Section 2(24)(x) and 43B of the 1961 Act. The Hon ble Jurisdictional High Court has in para 29 has taken a view that the law laid down by Hon ble High Court of Karnataka , Hon ble High Court of Rajasthan, Hon ble High Court of Punjab and Haryana , Hon ble High Court of Delhi, Hon ble High Court of Bombay and Hon ble High Court of Himachal Pradesh have rightly applied Section 43B in respect of both contributions i.e. employers and employees . The Hon ble Jurisdictional High Court has with great respect dissented with the view taken by Hon ble Gujarat High Court and Hon ble High Court of Kerala, which view on the issue was decided by Hon ble Gujarat High Court and Hon ble High Court of Kerala in favour of Revenue. It will be relevant to refer at this stage to the Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of CCE v. Parle Exports (P) Ltd.: [1989] 1 SCC 345 were also explained with all clarity. This Court noted the enunciations in Wood Paper Ltd. with total approval as could be noticed in the following:- 46. In the judgment of the two learned Judges in Union of India v. Wood Papers Ltd.: [1990] 4 SCC 256 (hereinafter referred to as Wood Papers Ltd. case , for brevity), a distinction between stage of finding out the eligibility to seek exemption and stage of applying the nature of exemption was made. Relying on the decision in CCE v. Parle Exports (P) Ltd. : [1989] 1 SCC 345, it was held: (Wood Papers Ltd. case, SCC p. 262, para 6) 6. ... Do not extend or widen the ambit at the stage of applicability. But once that hurdle is crossed, construe it liberally. The reasoning for arriving at such conclusion is found in para 4 of Wood Papers Ltd. case, which reads: (SCC p. 260) 4. ... Literally exemption is freedom from liability, tax or duty. Fiscally, it may assume varying shapes, specially, in a growing economy. For instance tax holiday to new units, concessional rate of tax to goods or persons for limited period or with the specific objective, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot extend or widen the ambit at stage of applicability. But once that hurdle is crossed construe it liberally. Since the respondent did not fall in the first clause of the notification there was no question of giving the clause a liberal construction and hold that production of goods by respondent mentioned in the notification were entitled to benefit. 59. The above decision, which is also a decision of a two- Judge Bench of this Court, for the first time took a view that liberal and strict construction of exemption provisions are to be invoked at different stages of interpreting it. The question whether a subject falls in the notification or in the exemption clause, has to be strictly construed. When once the ambiguity or doubt is resolved by interpreting the applicability of exemption clause strictly, the Court may construe the notification by giving full play bestowing wider and liberal construction. The ratio of Parle Exports case deduced as follows: (Wood Papers Ltd. case, SCC p. 262, para 6) 6. ... Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed, construe it liberally. 60. We do not find any strong and compel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. ** ** ** (emphasis in bold supplied) 17.3. In view of above and with reference to several other decisions, in Dilip Kumar Co., the Constitution Bench summed up the principles as follows:- 66. To sum up, we answer the reference holding as under: 66.1. Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. 66.2. When there is ambiguity in exemption notification which is subject to strict int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e form of tax incentives given by the Government to incite or encourage or support any particular activity16. 20. The principles laid down by the Constitution Bench, when applied to incentive provisions like those for deduction, would also be that the burden lies on the assessee to prove its applicability to his case; and if there be any ambiguity in the deduction clause, the same is subject to strict interpretation with the result that the benefit of such ambiguity cannot be claimed by the assessee, rather it would be interpreted in favour of the revenue. In view of the Constitution Bench decision in Dilip Kumar Co. (supra), the generalised observations in Baby Marine Exports (supra) with reference to a few other decisions, that a tax incentive provision must receive liberal interpretation, cannot be considered to be a sound statement of law; rather the applicable principles would be those enunciated in Wood Papers Ltd. (supra), which have been precisely approved by the Constitution Bench. Thus, at and until the stage of finding out eligibility to claim deduction, the ambit and scope of the provision for the purpose of its applicability cannot be expanded or widened and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is deposited beyond the time stipulated as due date as prescribed under the provisions of Statute governing PF/ESI Act. The Hon ble jurisdictional High Court in the case of Sagun Foundry Private Limited v. CIT, Kanpur in ITA No. 87 of 2006, vide judgment dated 21.12.2016 has decided this issue in favour of the tax-payer, by holding that Section 43B is applicable to both employer and employee contribution and thus in case employee contribution towards PF received by employer is deposited to the credit of employees with the PF trust prior to due date of filing of return of income u/s 139(1), the tax-employer shall be entitled for deduction u/s 36(1)(va) read with Section 2(24)(x) and 43B of the 1961 Act. The Hon ble Jurisdictional High Court has in para 29 has taken a view that the law laid down by Hon ble High Court of Karnataka , Hon ble High Court of Rajasthan, Hon ble High Court of Punjab and Haryana , Hon ble High Court of Delhi, Hon ble High Court of Bombay and Hon ble High Court of Himachal Pradesh have rightly applied Section 43B in respect of both contributions i.e. employers and employees . The Hon ble Jurisdictional High Court has with great respect dissented wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment to Section 43B of the 1961 Act by Finance Act, 2021, wherein Explanation 5 was inserted , which reads as under: 43B**** **** Explanation5- 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 assesse from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applied. Although, on perusal of the above amendment by Finance Act, 2021 , it transpires that the said explanation was inserted by way of removal of doubt to clarify the law as existed on the statute so far as employee contribution received by employer from employee which is to be deposited to the credit of employee with PF fund on or before the due date as provided in statute governing PF, to enable the employer to claim deduction u/s 36(1)(va) of the 1961 Act read with Section 2(24)(x) of the Act, and no deduction shall be allowed by virtue of Section 43B in case of delayed deposit beyond the time stipulated for deposit under relevant statute governing PF by virtue of being hit by Section u/s 36(1)(va) of the Act as it is stated in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21-22 and subsequent assessment years. We are presently concerned with ay: 2005-06. The relevant clause to Memorandum to Finance Bill , 2021 is reproduced hereunder: 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years. [Clauses 8 and 9] We have also noted that Hyderabad Bench(SMC Bench) of tribunal has decided this issue in favour of tax-payer in the case of Salzgitter Hydraulics Private Limited v. ITO reported in (2021) 128 taxmann.com 192(Hyd. Trib.) after considering the amendment made in Section 36(1)(va) and 43B by Finance Act, 2021, by holding as under: 2. Coming to the sole substantive issue of ESI/PF disallowance of Rs. 1,09,343/- and Rs. 3,52,622/-, the assessee's and revenue's st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verning PF , but the same stood deposited to the credit of employees with relevant fund before the due date for filing of return of income as prescribed u/s 139(1) of the 1961 Act. The assesse has , however, itself conceded that the assesse has not deposited Rs. 49,96,680/- received towards employee contribution to PF before the due date for filing of return of income u/s 139(1) of the 1961 Act and hence the said amount was rightly disallowed by authorities below. The Revenue fails on this issue for the reasons cited above . We order accordingly. 11. In the result, the appeal filed by Revenue in ITA no. 147/Alld/2016, for ay: 2005-06 stood partly allowed for statistical purposes. We order accordingly. Respectfully following the aforesaid decision in the case of Bharat Pumps and Compressors Limited(supra) , in which both of us were part of the Division Bench who pronounced the order, we hold that in the instant appeal for ay: 2018-19 if the employee share of PF/ESI is deposited by employer to the credit of employee with the relevant fund maintained for PF/ESI before the due date of filing of return of income u/s 139(1) of the 1961 Act, then the assessee shall be entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he previous year relevant to ay to which such employee contribution to PF/ESI pertains. It is also observed that several Benches of tribunal across India have consistently taken a similar view in favour of the tax-payer, even after considering amendment made by Finance Act, 2021 to Section 36(1)(va) and 43B of the 1961 Act, and few of the decisions of tribunal all decided in favour of tax-payer on this issue, are cited below: a) Delhi-tribunal order in the case of Flying Fabrication v. DCIT , CPC, Bengaluru , in ITA no. 1049/Del/2021 for ay: 2018-19 and 1407/Del/2021 for ay:2019-20, vide common order dated 17.11.2021 b) Delhi-tribunal order in the case of Adama Solution Private Limited v. ADIT,CPC, Bengaluru, SMC Bench in ITA no. 1800/Del/2020 , vide orders dated 13.10.2021 c) Delhi-tribunal order in the case of Insta Exhibitions Private Limited v. Addl. CIT , in ITA No. 6941/Del/2017, vide orders dated 03.08.2021 d) Delhi-tribunal decision in the case of Aroon Facilitation Management Services Private Limited , SMC Bench in ITA no. 1824/Del/2020, vide order dated 13.10.2021 e) Jaipur-tribunal decision in the case of Bhivaram Pannalal Kumawat v. DCIT in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year prior to ay:2021-22. While adjudicating the appeal in Commercial Auto Sales Private Limited(supra) for ay:2018-19, the Division Bench of Allahabad tribunal (both of us were part of the Division Bench which pronounced the order) have already adjudicated this issue in favour of the assesse, which was an appeal in ITA No. 13/All/2021, vide orders dated 16.12.2021, by following the Hon ble Jurisdictional High Court judgment in the case of Sagun Foundry Private Limited v. CIT, in ITA No. 87 of 2006, vide judgment dated 17.08.2016, as the said decision holds the field , as it was also held that the amendment by Finance Act, 2021 in Section 36(1)(va) and 43B is prospective and is applicable to ay: 2021-22 and subsequent assessment years. There is no contrary decision of Hon ble Allahabad High Court or of Hon ble Apex Court is brought to our notice by Revenue. Since, the facts in the present appeal are similar to the facts in the case of Commercial Auto Sales Private Limited(supra), which was decided by us in favour of the tax-payer on this issue , vide orders dated 16.12.2021 , thus keeping in view of principles of consistency, we decide this appeal in favour of the assessee . A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund is delayed, by way of providing for interest for delayed payments, damages/penalties in case payments are delayed and also providing for punishment/prosecution for failure to comply with the provisions of these special statute governing PF/ESI. Reference is drawn Section 7Q , 14, 14A, 14AA, 14AB, 14AC, 14B and 14C of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. Stringent provisions also found place in ESI Act. Thus , to say that these are benevolent statute and thus the provision u/s 36(1)(va) read with Section 2(24)(x) is to be strictly construed even under the 1961 Act , wherein for a single day delay in deposit of employee share of PF/ESI by employer to the credit of employee with relevant fund, beyond the time provided under these special statute for deposit of PF/ESI which is fifteen days from the end of the month to which such contribution pertain in case of PF , the same is to be held chargeable to tax and denying the deduction u/s 36(1)(va) forever does not hold merit in the teeth of binding decision of Hon ble jurisdictional High Court in the case of Sagun Foundries(supra). The Revenue is not able to place on record any contrary decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... literal construction. The Hon ble jurisdictional High Court in the case of Sagun Foundry Private Limited v. CIT, Kanpur in ITA No. 87 of 2006, vide judgment dated 21.12.2016 has decided this issue in favour of the tax-payer, by holding that Section 43B is applicable to both employer and employee contribution and thus in case employee contribution towards PF received by employer is deposited to the credit of employees with the PF trust prior to due date of filing of return of income u/s 139(1), the employer shall be entitled for deduction u/s 36(1)(va) read with Section 2(24)(x) and 43B of the 1961 Act. The Hon ble Jurisdictional High Court while deciding Sagun Foundry(Supra) has discussed the decision of Hon ble Supreme Court in para 25 to 28 and then adjudicated this issue in favour of the tax-payer. The Hon ble Jurisdictional High Court has in para 29 has taken a view that the law laid down by Hon ble High Court of Karnataka , Hon ble High Court of Rajasthan, Hon ble High Court of Punjab and Haryana , Hon ble High Court of Delhi, Hon ble High Court of Bombay and Hon ble High Court of Himachal Pradesh have rightly applied Section 43B in respect of both contributions i.e. employers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act . There is an 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**** **** Explanation5- 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 assesse from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applied. Although, on perusal of the above amendment by Finance Act, 2021, it transpires that the said Explanations were inserted in Section 36(1)(va) and 43B by way of removal of doubt to clarify the law as existed on the statute so far as employee contribution received by employer from employee which is to be depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. Section 43B specifies the list of deductions that are admissible under the Act only upon their actual payment. Employer's contribution is covered in clause (b) of section 43B. According to it, if any sum towards employer's contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date for furnishing the return of the income under sub-section (1) of section 139, assessee would be entitled to deduction under section 43B and such deduction would be admissible for the accounting year. This provision does not cover employee contribution referred to in clause (va) of sub-section (1) of section 36 of the Act. Though section 43B of the Act covers only employer s contribution and does not cover employee contribution, some cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have applied the provision of section 43B on employee contribution as well and have decided this issue in favour of taxpayer. Thus, the Parliament was fully aware that some courts have interpreted the provisions of Section 36(1)(va) by allowing the extended period as provided u/s 43B , in favour of the tax-payer, but still the Parliament chose to make the amendments to Section 36(1)(va) and 43B to be applied w.e.f .01.04.2021 and made applicable to assessment year 2021-22 and subsequent assessment years . This clearly shows intention of Parliament to accept the interpretation provided by Constitutional Courts in reading down provision of Section 36(1)(va) wherein extended period allowed u/s 43B was applied even to employee contribution to PF/ESI, until assessment year 2020-21 and the Parliament chose to apply the said amendments w.e.f. 01st April , 2021 and made applicable effective from assessment year 2021-22 and subsequent assessment years. Thus, it is clear that the Parliament chose not to litigate this issue prior to assessment year 2021-22 and to close all disputes on this issue , prior to assessment year 2021-22 , and made these stringent provisions applicable to employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vel, besides ensuring timely submission of replies, Counter replies and necessary documents to the advocates. The Central Board of Direct Taxes (CBDT) and the Central Board of Indirect Taxes and Customs (CBIC) under the Department of Revenue, have issued a slew of instructions and brought in several measures, for reducing litigations and the resultant burden on Courts. While the CBDT has issued circulars directing the field Officers that pending appeals before Income Tax Appellate Tribunals/High Courts/Supreme Court with tax effect below the specified limits may be withdrawn/not pressed, and in the process facilitating a better and concerted focus on high demand litigations. CBDT has also clarified to the field officers that appeals should not be filed merely because the tax effect in a particular case exceeds the prescribed monetary limits and the filing of an appeal should be decided strictly on the merits of the case. Similarly, the field formations under the CBIC have been instructed to withdraw appeals pending in High Courts/Customs Excise and Service Tax Appellate Tribunal, where the Supreme Court has decided on identical matter. Besides, CBIC has also instructed it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Courts, except High Court of Delhi, have been integrated with LIMBS Ver.2 to facilitate monitoring of cases pending in these High Courts. In addition, the linkage of database with the Hon ble Supreme Court is envisaged as part of LIMBS implementation. Law Secretary, vide DO letter dated 20.11.2020, followed by reminders dated 16.03.2021 and 09.07.2021 has taken up the case for grant permission for data of various Tribunals and with LIMBS Ver.2 through API with the Chairperson/President of the Tribunals and Secretaries of the respective Ministries/Departments. At present, Central Administrative Tribunal, The Telecom Dispute Settlement Appellate Tribunal and Appellate Tribunal for Electricity have provided API linkage to their database with LIMBS Ver.2. Further, the fast track integration of database of cases of Railway Claims Tribunal, Income Tax Appellate Tribunal, National Green Tribunal, National Company Law Tribunal and National Company Law Appellate Tribunal with LIMBS is envisioned. The alternative mechanism for the resolution of Inter-Ministerial/Departmental disputes also provide for an institutionalized mechanism for resolution of such disputes, namely, Administrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt 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 taxpayers, 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. Thus, the Parliament was fully aware that Some courts have decided this issue in favour of tax-payers by reading down the existing provisions of Section 36(1)(va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DCIT , CPC, Bengaluru , in ITA no. 1049/Del/2021 for ay: 2018-19 and 1407/Del/2021 for ay:2019-20, vide common order dated 17.11.2021 b) Delhi-tribunal order in the case of Adama Solution Private Limited v. ADIT,CPC, Bengaluru, SMC Bench in ITA no. 1800/Del/2020 , vide orders dated 13.10.2021 c) Delhi-tribunal order in the case of Insta Exhibitions Private Limited v. Addl. CIT , in ITA No. 6941/Del/2017, vide orders dated 03.08.2021 d) Delhi-tribunal decision in the case of Aroon Facilitation Management Services Private Limited , SMC Bench in ITA no. 1824/Del/2020, vide order dated 13.10.2021 e) Jaipur-tribunal decision in the case of Bhivaram Pannalal Kumawat v. DCIT in ITA no. 76/JP/2021, order dated 12.10.2021 f) Hyderabad-tribunal decision in the case of Value Momentum Software Services Private Limited v. DCIT, in ITA no. 2197/Hyd/2017, order dated 19.05.2021 g) Hyderabad-tribunal decision in the case of Vijay Electricals Limited v. DCIT, in ITA no. 1533 1534/Hyd/2017, order dated 27.05.2021 h) Hyderabad-tribunal SMC decision in the case of Salzgitter Hydraulics Private Limited v. ITO, reported in (2021) 128 taxmann.com 192(hyd.-trib.SMC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of Sagun Foundry (supra) as a cardinal principles of judicial discipline and to instill certainty among tax-payers. We also hold that the amendments made by Finance Act, 2021 in Section 36(1)(va) and 43B are prospective in nature and shall be applicable from ay: 2021-22 and subsequent assessment years and shall not have retrospective effect. Thus, Respectfully following the aforesaid decision of Allahabad-tribunal in the case of Commercial Auto Sales Private Limited for ay:2018-19 in ITA no. 13/Alld/2021 , vide orders dated 16.12.2021 and also in the case of Commercial Auto Sales Private Limited for ay:2019-20 in ITA no. 15/Alld/2021 , vide orders dated 20.01.2022 in which both of us were part of the Division Bench who pronounced the order, we hold that in the instant appeal for ay: 2018-19, if the employee share of PF/ESI is deposited by employer to the credit of employee with the relevant fund maintained for PF/ESI before the due date of filing of return of income u/s 139(1) of the 1961 Act, then the assessee shall be entitled for deduction u/s 36(1)(va) of the 1961 Act. However, whether this amount of Rs. 31,46,748/- towards employees share of PF/ESI was actuall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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