TMI Blog2022 (8) TMI 790X X X X Extracts X X X X X X X X Extracts X X X X ..... ment years. Hence, this issue raised in assessee s appeal is allowed. Decided in favour of assessee. - ITA. No. 232/JP/2022 - - - Dated:- 16-8-2022 - Dr. S. Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Miss Shivangi Samdhani (C.A.) For the Revenue : Shri A.S. Nehara (Addl.CIT) ORDER PER: DR. S. SEETHALAKSHMI, J.M. The appeal is filed by the assessee arising out of order of National Faceless Appeal Centre, Delhi [hereinafter referred to as (NFAC)] dated 29.11.2021 for the assessment year 2018-19. 2. At the outset of hearing, the Bench observed that there is delay of 125days in filing the appeal by the assessee for which the ld. AR of the assessee filed a condonation application dated 26.05.2022 along with Hon ble Supreme Court order, vide Misc. Application No. 21 of 2022 dated 10.01.2022 read with suo moto writ petition 3 of 2020 (2022) 441 ITR 722 (SC) mentioning therein that delay in filing the appeal by the assessee is occurred due to lockdown. Thus, the ld. AR of the assessee prayed that the assessee is prevented by sufficient cause in late filing the appeal before ITAT and the delay occurred may kindly be condoned. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny Vs. DCIT and in the case of Bikaner Ceramics Private Limited, Bikaner Vs. ADIT, CPC, Bangaluru, in ITA No. 60/Jodh/2021 for the A.Y. 2019-20 and in the case of Pratap Technocrats Pvt. Ltd. vs. ADIT Ors. in ITA No. 18/JP/2022 dated 22.02.2022 for the assessment year 2018-19. 9. On the other hand, the ld. CIT-DR only relied on the order of ld. CIT(A) and stated that ld. CIT(A) has passed exhaustive order explaining the provisions of the Act. 10. We have considered the rival contention and perused the orders of the authorities and the material available on record. Admitted facts of the present case are that the payments of PF ESI contribution relating employee s contribution are before the due date of filing of return of income U/s 139(1) of the Act. We have noted that the issue under consideration is covered by the decision of the Coordinate Bench in case of Pratap Technocrats Pvt. Ltd. vs. ADIT in ITA No. 18/JP/2022 order dated 22.02.2022 (Supra) wherein it is held as under:- 13. We have considered the rival contention and perused the orders of the authorities and the material available on record. Admitted facts of the present case are that the payments of PF ESI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon ble Supreme Court decision in CIT vs. Alom Extrusion Ltd. reported in 390 ITR 306. The Hon ble Calcutta High Court s decision in Vijayshree Ltd. supra is reproduced as under: This appeal is at the instance of the Revenue and is directed against an order dated 28th April, 2011 passed by the Income Tax Appellate Tribunal, A Bench, Kolkata in ITA No.1091/Kol/2010 relating to assessment year 2006-07 by which the Tribunal dismissed the appeal preferred by the Revenue against the order of CIT(A). The only issue involved in this appeal is as to whether the deletion of the addition by the AO on account of Employees Contribution to ESI and PF by invoking the provision of Section 36(1)(va) read with Section 2(24)(x) of the Act was correct or not. It appears that the Tribunal below, in view of the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., reported in 2009 Vol.390 ITR 306, held that the deletion was justified. Being dissatisfied, the Revenue has come up with the present appeal. After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be applicable only with prospective effect from 1.4.2021, I hold that the impugned disallowance is not sustainable in view of all these latest developments even if the Revenue s case is supported by the following case law. (i) CIT vs. Merchem Ltd, [2015] 378 ITR 443(Ker) (ii) CIT vs. Gujarat State Road Transport Corporation (2014) 366 ITR 170 (Guj.) (iii) CIT vs. South India Corporation Ltd. (2000) 242 ITR 114 (Ker) (iv) CIT vs. GTN Textiles Ltd. (2004) 269 ITR 282 (Ker) (v) CIT vs. Jairam Sons [2004] 269 ITR 285 (Ker) The impugned ESI/PF disallowance is directed to be deleted therefore. 10. On an identical issue, this Bench of the Tribunal vide order dated 12.8.2021 in the case of Mohangarh Engineers and Construction Company, Jodhpur Others vs CPC, Banglore in ITA No. 5/Jodh/2021 and others held vide para 13 to 18 as under:- 13. We have heard the rival contentions and perused the material available on record. On perusal of the details submitted by the assessee as part of its return of income, it is noted that the assessee has deposited the employees s contribution towards ESI and PF well before the due date of filing of return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to due date of filing of return can be claimed by the assessee. In our view, the explanation appended to Section 36(1)(va) of the Act further envisage that the amount actually paid by the assessee on or before the due date admissible at the time of submitting return of the income under Section 139 of the Act in respect of the previous year can be claimed by the assessee for deduction out of their gross total income. It is also clear that Sec.43B starts with a notwithstanding clause would thus override Sec.36(1) (va) and if read in isolation Sec. 43B would become obsolete. Accordingly, contention of counsel for the revenue is not tenable for the reason aforesaid that deductions out of the gross income for payment of tax at the time of submission of return under Section 139 is permissible only if the statutory liability of payment of PF or other contribution referred to in Clause (b) are paid within the due date under the respective enactments by the assessees and not under the due date of filing of return. 22. We have already observed that till this provision was brought in as the due amounts on one pretext or the other were not being deposited by the assessees though substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ESI and PF though paid well before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted as the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act in view of the binding decisions of the Hon ble Rajasthan High Court. 11. Since the facts of the present cases are identical to the facts involved in the aforesaid referred to cases, therefore respectfully following the earlier orders as referred to herein above of the different Benches of the ITAT, the impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. 8. Since the facts involved in the present case are identical to the facts involved in the case of Mohangarh Engineers and Construction Company Vs. DCIT (supra) and in the case of Bikaner Ceramics Private Limited, Bikaner Vs. ADIT, CPC, Bangaluru (supra). So respectfully following the aforesaid referred to order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause. In our opinion, this amendment has been brought in the statute book to provide certainty about the applicability of provisions of Section 43B of the Act inspite of belated payment of employee s contribution. We also noted from the memorandum explaining the provisions to Finance Act, 2021, wherein relevant Clauses to said memorandum clearly intended that the amendment shall take effect from 01.04.2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years. The relevant Clauses 8 9 of the memorandum explaining the provisions are reproduced as under:- Rationalisation of various Provisions Payment by employer of employee contribution to a fund on or before due date Clause (24) of section 2 of the Act provides an inclusive definition of the income. Sub-clause (x) to the said clause provide that income to include any sum received by the assessee from his employees as contribution to any provident fund or superannuation fund 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employers get unjustly enriched by keeping the money belonging to the employees. Clause (va) of sub-section (1) of Section 36 of the Act was inserted to the Act vide Finance Act 1987 as a measures of penalizing employers who mis-utilize employee s contributions. Accordingly, in order to provide certainty, it is proposed to (i) amend clause (va) of sub-section (1) of section 36 of the Act by inserting another explanation to the said clause to clarify that the provision of section 43B does not apply and deemed to never have been applied for the purposes of determining the - due date under this clause; and (ii) amend section 43B of the Act by inserting Explanation 5 to the said section to clarify that the provisions of the said section do not apply and deemed to never have been applied to a sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section 2 applies. These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years. 16. The present appeal is filed by the assessee against disallowance of Rs.5,61,32,750/- per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction u/s 43B(b) of the Act which was pertaining to employers contribution PF/ESIC. Hon'ble Gujarat High Court has observed in the case of Gujarat State Road Transport Corporation (366 ITR 170) decision on the issue of delayed payment of employees contribution to PF/ESIC that there was no occasion before the Hon'ble Apex Court even in the case of Alom Extrusions Limited to consider deduction u/s 36(1)(va) of the Act with respect, to employees contribution towards EPF/ESIC. After going through the decision in the case of M/s AIMIL Ltd., it is noted that the said decision is based on the decision of Hon'ble Supreme Court in the case of M/s Vinay Cement Ltd. I find that the decision in the case of Vinay Cements Ltd. by the Hon'ble Gauhati High Court was on the issue of section 43B(b) i.e. pertaining to employers contribution and not the employee's contribution toward PF/ESIC. The Hon'ble Gauhati High Court has also taken note of the deletion of second Proviso to section 43B of the Act brought by finance Act 2003 with effect from 01/04/2004. Prior to this Amendment by Finance Act 2003, even the employers contribution as per clause (b) of section 43B was to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyee's contribution as per section 36(1)(va) of the Act. It is relevant here to refer to the decision of Hon'ble Supreme Court in the case of CIT vs Sun Engineering Works Pt. Ltd. (198 ITR 297) wherein the Hon'ble Court held that while applying the decision to a later case, the court must carefully try to ascertain the true principle laid down by the decision and not to pick out words or sentences from the ^judgments divorced from the context of question under consideration by the Court to support their reasoning. In the current discussion herein above, it is noted that most of the later decisions applying the Apex Court's decision in the case of Vinay Cements Ltd. or Alom Extrusions Ltd. fall in the category of sub- silentio which have no binding force as held in the case of A-One granite vs. State of UP (2001 AIR SCW 848). Even the provision of Section 36(1)(va) was amended vide Finance Act, 2021 by inserting Explanation 2, which reads as under :- 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, the addition of Rs. 5,61,32,750/- by way of disallowance u/s 36(1)(va) is hereby confirmed. In the result, grounds of appeal raised by the appellant are hereby dismissed. 18. After considering the above findings of CIT(A), now we have gone through ratio laid down by the Hon ble Supreme Court in the case of CIT vs. Vatika Township Pvt. Ltd. (2014) 367 ITR 466, wherein the Hon ble Supreme Court held that unless contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. The law passed today cannot be applied to the events of the past. The Hon ble Supreme Court held that if somebody does something today, he do it keeping in view the law of today and in force and not tomorrow s backward adjustment of it. According to Hon ble Apex court every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit, which means law looks forward not backward. In the case of Vatika Township Pvt. Ltd., (Supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aforesaid stipulation while effecting amendment in Section 113 of the Act, with various other provisions not only in the same Finance Act but Finance Acts pertaining to other years where the legislature specifically provided such amendment to be either retrospective or clarificatory. In so far as amendment to Section 113 is concerned, there is no such language used and on the contrary, specific stipulation is added making the provision effective from 1st June, 2002. (e) There is yet another very interesting piece of evidence that clarifies the provision beyond any pale of doubt, viz. understanding of CBDT itself regarding this provision. It is contained in CBDT circular No.8 of 2002 dated 27th August, 2002, with the subject Finance Act, 2002 Explanatory Notes on provision relating to Direct Taxes . This circular has been issued after the passing of the Finance Act, 2002, by which amendment to Section 113 was made. In this circular, various amendments to the Income Tax Act are discussed amply demonstrating as to which amendments are clarificatory/retrospective in operation and which amendments are prospective. For example, explanation to Section 158BB is stated to be clari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious judicial pronouncements, we are of the view that the amendment brought in the statue 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 under consideration i.e. 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue raised in assessee s appeal is allowed. 21. In other appeal also the facts are identical to the facts involved, in ITA No. 18/JP/2022 for the assessment year 2018-19, the only difference is in the amount of disallowance made by the A.O. and sustained by the ld. CIT(A). Therefore my findings given in the former part of this order shall apply mutatis and mutandis for other appeal also. In the result, all these appeals of the assessees are allowed. 11. By considering the totality of the facts and the various judicial pronouncements, we are of the view that the amendment brought in the statue i.e., by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the Act amended ..... X X X X Extracts X X X X X X X X Extracts X X X X
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