TMI Blog2022 (10) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... o ESI and PF - HELD THAT:-This issue is no more res integra. The Hon ble jurisdictional High Court of Delhi in various judgements including the recent judgement in the case of PCIT vs. TV Today Network Ltd. [ 2021 (8) TMI 26 - ITAT DELHI] held that as per the Memorandum to Finance Act, 2021, the amendment to section 36(1)(va) of the Act and section 43B of the Act will take effect from 1st April, 2021 and it cannot apply to previous assessment years. In the present case also, it is not in dispute that the assessee made payment of employer s contribution to ESI and PF before due date of filing the return u/s 139(1) of the Act and there is no dispute that the amount stands deposited before the filing of the return. So far as the applicability of amendment to section 36(1)(va) and section 43B is concerned, this issue is covered in favour of the assessee by the judgement of the Hon ble jurisdictional High Court of Delhi in the case of PCIT vs. TV Today Network Ltd. and various other judgements. Decided in favour of assessee. - ITA No.450/Del/2022 - - - Dated:- 30-9-2022 - Shri C.M. Garg, Judicial Member And Shri Pradip Kumar Kedia, Accountant Member For the Assessee : Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel submitted that the assessee was not allowed due opportunity to explain its case before the AO as the assessee found that the disallowance has been made under intimation/order u/s 143(1) of the Act. The ld. Counsel further submitted that the AO, in the order u/s 143(3) of the Act, added back the impugned amount without considering the fact that the appellant had already disallowed in ITR filed for previous year, i.e., AY 2017-18 u/s 43B of the Act due to non-payment of impugned amount on account of service tax, labour fund, welfare cess and WCT by the due date u/s 139(1) of the Act of the respective assessment year and the same was actually paid during AY 2018-19, hence, claimed as deduction u/s 43B of the Act on payment basis in the assessment year 2018-19 as per the provisions of section 43B of the Act. The ld. Counsel also submitted that these facts are clearly discernible from the return of income filed by the assessee for AY 2017-18 and 2018-19 which were also produced before the ld.CIT(A) which clearly prove and substantiate the explanation of the assessee. 4. Replying to the above, the ld. Sr. DR submitted that the AO as well as the ld.CIT(A) was right in making disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Sr. DR strongly supported the assessment as well as the first appellate order and submitted that the amendment made by Finance Act, 2021 is of retrospective in nature, therefore, the AO was right in making the disallowance and the ld.CIT(A) was also correct in upholding the same. 8. On careful consideration of the above rival submissions, we are of the considered view that the controversy regarding payment of employees contribution to ESI and PF is no more res integra. The Hon ble jurisdictional High Court of Delhi in various judgements including the recent judgement in the case of PCIT vs. TV Today Network Ltd. (supra) held that as per the Memorandum to Finance Act, 2021, the amendment to section 36(1)(va) of the Act and section 43B of the Act will take effect from 1st April, 2021 and it cannot apply to previous assessment years. The relevant paras of the judgement reads as follows:- 34. In fact, in CIT vs. SPL Industries Limited (supra) the court took note of another judgment of this court in CIT vs. P.M. Electronics Ltd. reported in 313 ITR 161 (Del.) on the same proposition. This court in ITA No. 794/2010 in its order dated 7th July, 2010 in CIT vs. SPL Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision rendered by the Gauhati High Court was assailed before the Apex Court in Vinay Cement Ltd. (supra). In the said case, their Lordships have held thus: 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. 7. It is apt to note that the Division Bench has taken note of the submission advanced by the revenue that the distinction between employers‟ contribution on the one hand and the employees contribution on the other. On the foundation that when employees contribution was recovered from their salaries / wages that is the trust money in the hands of the assessee and, therefore, recourse of law providing for treating the same as income that the assessee received as the employees contribution would only enable the assessee to claim deduction only on actual payment made by due date specified under the provisions of the Act. The Bench while dealing with the same has opined thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstantial question of law arises for consideration in this appeal. ...The legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee's Provident Fund (EPD) and Employee's State Insurance Scheme (ESI) as deemed income of the employer under Section 2(24)(x) of the Act... 36. In this regard it would be relevant to note that the Division Bench of this Court in AIMIL Ltd.(supra) at paragraph 2, duly deliberated over the issue of delay by assessee in deposit of employee contribution in the context of section 36(1)(va) of the Act and concluded that if the amount is deposited by the assessee before the due date for filing the return, it shall be entitled to the disallowance. In this regard the relevant paragraphs of the judgement are as follows: 2. The case relates to the assessment year 2002 03. The respondent-assessee had filed its return on October 30, 2002, declaring income at Rs. 7,95,430. During the assessment proceedings, the Assessing Officer (AO) found that the assessee had deposited the employers' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. In so far as the Income-tax 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 Supreme Court in Vinay Cement, [2009] 313 ITR (St.) 1. 37. It is therefore evident that the enunciation of law by this court on the issue of 'due date' in case of delay by the assessee in depositing the employee contribution under section 36(1)(va) of the Act is to be reckoned as the date for filing the return under Section 139 (1) of the Act and not the due date of the relevant Labour statute. This law has been settled by this Court in CIT vs. P.M. Electronics Ltd (supra), AIMIL Ltd. (supra), CIT vs. SPL Industries Ltd and PR. Commissioner of Income Tax-7 vs. PRO Interactive Service (India) Pvt. Ltd. (supra) and consistently followed thereafter. 38. The learned counsel for the respondent has further relied upon the newly inserted 'Explanation 2' to Section 36(1)(va) of the Act and 'Explanation 5' to Section 43B of the Act, by the Finance Act, 2021 w.e.f. 1st April, 2021, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf 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 subsection (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. (Emphasis supplied) 41. The M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same on 25th April, 2012. There is no dispute that the amount stands deposited before the filing of the return. We, therefore, find that there is no ground for taking a view different from the view consistently held by this court since AIMIL Ltd.(supra). 46. In view of the aforesaid, we find that no substantial question of law arises in this matter and there is no infirmity in the impugned order dated 29th July, 2021 passed by the ITAT in the ITA No. 5204/DEL/2017 for the assessment year 2012-13 and accordingly, the present appeal is dismissed. 9. In the present case also, it is not in dispute that the assessee made payment of employer s contribution to ESI and PF before due date of filing the return u/s 139(1) of the Act and there is no dispute that the amount stands deposited before the filing of the return. So far as the applicability of amendment to section 36(1)(va) and section 43B is concerned, this issue is covered in favour of the assessee by the judgement of the Hon ble jurisdictional High Court of Delhi in the case of PCIT vs. TV Today Network Ltd. and various other judgements. Therefore, respectfully following the same, ground No.2 of the assessee is allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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