TMI Blog2022 (9) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, the CPC, Bangalore/Assessing Officer is directed to delete the disallowance made in respect of interest paid on delayed remittances of TDS while passing the return under section 143(1) of the Act. Grounds raised by the assessee are allowed. - I.T.A No. 257/Del/2022 - - - Dated:- 23-8-2022 - SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER Assessee by: Shri Ruchesh Sinha, Advocate Department by: Shri Abheshek Kumar, Sr. D. R. ORDER PER C. N. PRASAD, J. M. : 1. This appeal is filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-26, New Delhi [hereinafter referred to CIT (Appeals)] dated 6.12.2021 for assessment year 2019-20. 2. The assessee has raised the following grounds of appeal:- 1) That CIT (A) is erred under the law while confirming the order as framed by CPC u/s 143(1) of the Act after making adjustment of impugned prima facie adjustments u/s 143(1) (a) of the Act in the returned income of the appellant. 2) That the CIT (A) is not justified in law and facts while confirming the adjustment of Rs. 13,86,415/- u/s 36(l)(va) of the Act as made by CPC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uarely applies to the facts of the assessee s cases. Reliance was also placed on the decision of Hon ble Supreme Court in the case of CIT Vs. M/s. Alom Extrusions Limited (2009) 319 ITR 306 (SC). 5. The Hon ble Supreme Court in the case of M.M. Aqua Technologies Ltd. Vs. CIT Civil appeal Nos. 4742-4743 of 2021 dated 11.08.2021 held that retrospective provision in a Tax Act which is for the removal of doubts cannot be presumed to be retrospective even where such language is used if it alters or changes the law as it earlier stood. The Hon ble Supreme Court also observed that this was the position as held by the apex court in the case of Sedco Forex International Drill. Inc Vs. CIT (2005) 12 SCC 717. The Amendments were made to Section 36 and Section 43B by insertion of Explanations 2 and 5 respectively. In the Explanations inserted it is clarified that for the removal of doubts the provisions of these sections were amended. Therefore, the ratio of the decision of the Hon ble Supreme Court in the case of M.M. Aqua Technologies Ltd. Vs. CIT (supra) squarely applies and the insertion of Explanation 2 and 5 in the provisions of sections 36 and 43B respectively cannot be held to be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Incometax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Hon ble Supreme Court in the case of Vinay Cement Ltd. 26. The brief facts of such case are as under: 2. The case relates to the assessment year 2002-03. The respondent assessee had filed its return on 30-102002 declaring income at Rs. 7,95,430. During the assessment proceedings, the Assessing Officer (AO) found that the assessee had deposited employers' contribution as well as employees' contribution towards provident fund and ESI after the due date, as prescribed under the relevant Act/Rules. Accordingly, he made addition of Rs. 42,58,574 being employees' contribution under section 36(1)(va) of the Act and Rs. 30,68,583 being employers' contribution under section 43B of the Act. Felt aggrieved by this assessment order, the assessee preferred appeal before the CIT(A) who decided the same vide orders dated 15-7-2005. Though the CIT(A) accepted the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee on the dates which have been stated to be the dates of deposits in the assessment order. If such is a factual aspect then according to latest position of law clarified by Hon'ble Supreme Court in the case of CIT v. Vinay Cement Ltd. that no disallowance could be made if the payments are made before the due date of filing the return of income. This issue came before Hon'ble Supreme Court in the case of CIT v. Vinay Cement Ltd. which was a special leave petition filed by the department against the High Court Order 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. 29. Thus, we find that the Co-ordinat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter Explanation4, the following Explanation shall be inserted, namely:- 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 assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applies. . 32. We have also perused the Memorandum Explaining the Provisions in the Finance Bill, 2021. Under the head Provision relating to Direct Taxes with to rationalization of various provisions, the issue of clause (24) of Section 2 sub-clause (x), Section 36(1) clause (va), Section 43B with regard to provisions of subSection (1) of Section 139 have been dealt at length. The gist is as under: Rationalization 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion towards welfare funds. Employee s contribution is employee own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee contribution, the employers get unjustly enriched by keeping the money belonging to the employees. Clause (va) of sub-section (1) of Section 36 of the Act was inserted to the Act vide Finance Act 1987 as a measures of penalizing employers who misutilize employee s contributions. Accordingly, in order to provide certainty, it is proposed to (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 ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure and strongly placed reliance on the orders of the authorities below. 8. Heard the parties perused the orders of the authorities below. On perusal of the order of the ld. CIT (Appeals) it is noticed that the disallowance made by the CPC, Bangalore in respect of interest paid by the assessee on delayed remittance of TDS placing reliance on the decision of the Jaipur Bench in the case of M/s. Govindam Clearing Agencies Pvt. Ltd. Vs. DCIT in ITA. No. 70/JP/2019 dated 1.09.2020. On the other hand, we observe that the assessee placed reliance on the decision of the Kolkata Bench in the case of DCIT Vs. M/s. Narayani Ispat Pvt. Ltd., Kolkata (supra). On perusal of both the decisions of the Tribunal, we observe that there are divergent views on the issue. In our opinion, whether interest paid by the assessee on delayed remittances of TDS is allowable expenditure or not is certainly a debatable issue and, therefore, is outside the scope of purview of the provisions of section 143(1) of the Act. Thus, the CPC, Bangalore/Assessing Officer is directed to delete the disallowance made in respect of interest paid on delayed remittances of TDS while passing the return under section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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