TMI Blog2022 (9) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2020-21. 2. The assessee has raised following grounds of appeal:- ESI and PF Disallowance of Rs. 10,88,270/-: 1. The brief' facts of the case is that the appellant is a private limited company engaged in the business of rendering services in the field of human resource, manpower suppy pay roll and other related services. The company has filed its return of income for the A Y 2020-21 on 26-01-2021 admitting a total income of Rs.9,00,860/-. 2. The Ld. Assessing Officer made a disallowance of Rs. 10,88,270/- for belated payment of PF/ESI and the Ld. CIT(CA) NFAC upheld the order of AO. 3. The Ld. CIT (A) has failed to consider the provisions of Section 36(1) (va) of the Act, which states that 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 or before the due date . 4. During the year under consideration. there has been delay in depositing the employee's contribution of ESI EPF of Rs.10,88,270- as detailed in point number 20(b) of Form- 3CD. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. The learned CIT(A), for reasons stated in his appellate order dated 26.05.2022, dismissed the appeal filed by the assessee and sustained the additions made by the Assessing Officer towards disallowance of employees contribution to PF ESI. 4. The learned 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, Chennai 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, by the Finance Act, 2021 w.e.f. 01.04.2021 and after considering the relevant facts held that amendment inserted to the provisions of Sec.36(1)(va) of the Act, is prospective in nature, which is applicable from the AY 2021-22 onwards. Therefore, from the above, it is very clear that the employees contribution to PF ESI, is deductible, in case, such payments have been made on or before due date of filing of return of income u/s.139(1) of the Act. 5. The learned D.R, on the other hand, supporting the order of the Ld.CIT(A), submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 substantial question of law arises for consideration in these appeals. Accordingly, both the Tax Case (Appeals) stand dismissed. No costs. Consequently, M.P.No.1 of 2015 is also dismissed. 6.1 Further, we noted that a similar case law of Hon ble Delhi High Court in the case of CIT vs. Aimil Ltd., (2009) 321 ITR 508 has considered this issue and held in Para 14 to 19 as under:- 14. When we keep that proposition in mind and also take into consideration various judgments where Vinay Cement (supra) is applied and followed, it will not be poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (1969) 2 SCC 412 and General Finance Co. v. Asst. CIT: (2002) 257 ITR 338 (SC). The said submissions found favour with the Division Bench of the Guahati 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 and Tiber 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 alongwith other matters including Vinay Cement (supra). The order in Vinay Cement (supra) was passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial 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) would bind the High Court as it was non 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 Pvt Ltd (supra). Judicial discipline requires us to follow the view of the Supreme Court in Vinay Cement (supra) as also the view of the Division Bench of this Court in Dharmendra Sharma (supra). 13. In these circumstances, we respectfully disagree with the approach adopted by a Division Bench of the Bombay High Court in M/s Pamwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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. Subsection (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 subsection provides for deduction of any sum received by the assessee from any of his employees to which the provisions of sub-clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 6.4 In this regard, we have gone through observation of CIT(A), which are recorded in Para 7.17 to 7.19 and the same reads as under:- 7.17 From above observations of the Apex Court, it is clear that if a statute is curative in nature or merely declaratory of the previous law, retrospective operation is generally intended. If the objective of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 contribution to the employee's account in the relevant fund as per the Employee Provident Fund Scheme/ ESI Act, is liable to be added to the income of appellant. 6.5 In view of the above findings of CIT(A), now we have gone through the decision of Hon ble Supreme Court in the case of CIT vs. Vatika Township Pvt. Ltd., 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 curre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture 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 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 prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 favour of Revenue: 1. Popular Vehicles Services (P) Ltd. Vs. CIT [2018] 96 taxmann.com 13 (Kerala), 2. CIT v. Gujarat State Road Transport Corporation [2014] 41 taxmann.com 100 (Gujarat) 3. CIT v. Merchem Ltd. [2015] 378 ITR 443 (Kerala). The CIT(A) himself noted the ambiguity in para 7.4 of his order, which reads as under: 7.4 While rendering above decisions the Hon ble High Courts had the occasion to examine and distinguish a catena of judgements which are usually relied upon by appellants to advance the proposition that the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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