TMI Blog2022 (4) TMI 1541X X X X Extracts X X X X X X X X Extracts X X X X ..... e the addition made by the AO and confirmed by the CIT(A) on account of delay in depositing the employees contribution to PF ESI. Decided in favour of assessee. - ITA No. 101/CTK/2021 - - - Dated:- 6-4-2022 - Shri Chandra Mohan Garg, JM And Shri Arun Khodpia, AM For the Assessee : Shri S.K. Sarangi, AR. For the Revenue : Shri Manoj Kumar Goutam, CIT-DR. ORDER PER ARUN KHODPIA, AM : This appeal filed by the assessee has been directed against the order passed by the National Faceless Appeal Centre (NFAC), Delhi, dated 27.08.2021, for the assessment year 2017-2018. 2. The sole issue involved in the present appeal is with regard to confirming the addition of Rs.1,81,662/- towards late payment of employees contribution to provident fund and ESI. 3. In the instant appeal, on perusal of the assessment record, we found that the assessee has filed his return of income on 07.11.2017 declaring total income at Rs.49,58,920/-. The AO made addition on account of delay in depositing employees contribution to PF ESI, which has also been confirmed by the CIT(A). In the operating part of the appellate order in para 4.28 page 24, the CIT(A) on examination and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployee s contribution towards welfare funds is a mechanism to ensure the compliance by the employers of the labour welfare laws. Hence, it needs to be stressed that the employer s contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the employee s contribution 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 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 E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the explanation as provided in Finance Act 2021 prescribes that the amendment in both sec.36(va) as well as 43B by inserting corresponding explanation that although impugned PF comes in the form of provision and the same is applicable from 1/4/2021 onwards only. In the present case we are concerned with the asst. year 2017-18 and the amended provision could not be applied retrospectively as it is only applicable w.e.f 1/4/2021. Being so no disallowance could be made by the AO in respect of PF/ESI paid within the due date of filing return of income. Though, it was beyond the date mentioned in the respective Act. This view of ours is supported by various judgment relied on by the ld.AR. Accordingly the appeal of the assessee is allowed. iii) Adyar Ananda Bhavan Sweets India P Ltd Vs ACIT (ITAT Chennai), Appeal Number : ITA [2015 5/23 402 403/CHNY/2021, Date of Judgement/Order : 08/12/2021 HELD THAT:- There are series of decisions of various High Courts on this issue and even Hon ble Jurisdictional High Court in the case of M/s. Industrial Security Intelligence India P Ltd. [2015 - MADRAS HIGH COURT] held that the payment of employees contribution in regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1755/Del/2020, Date of Judgement/Order : 01/11/2021 HELD THAT:- Admittedly, the assessee, in the instant case, has deposited the employees contribution to PF and ESI after the relevant date prescribed under the PF and ESI Act, but, before the due date of filing the return of income. In the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd. [2018 DELHI HIGH COURT] has held that the legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. The Hon ble High Court has further held that legislative intent and objective is not to treat belated payment of Employee s Provident Fund (EPD) and Employee s State Insurance Scheme (ESI) as deemed income of the employer under the Act. Tribunal in the case of CIT v. Dee Development Engineers Ltd. [2021 ITAT DELHI] has decided the issue in favour of the assessee holding that no disallowance u/s. 36(1)(v) r.w.s. Section 2(24)(x) can be made if the employees contribution to PF and ESI are deposited after the due date prescribed under the relevant Acts, but, paid before the due date of filing of return. Since the assessee, in the instant case has, admittedly, depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide certainty about the applicability of Section 43B in respect of belated payment of employees contribution. In order to test whether the amendment brought in later is retrospective or not one has to apply the test as laid by the Hon ble Supreme Court in the case of M/s Snowtex Investment Ltd. (supra) wherein the Hon ble Supreme court took note of the law laid down on this issue by the Constitution Bench in M/s Vatika Township Ltd. and held that the intent of the Parliament/legislature need to be looked into for ascertaining whether the amendment should be retrospective or not. In Vatika Township Ltd. (supra) the Hon ble Supreme Court held that the notes on clauses appended to the Finance Bill will throw light as to the legislative intent; because it has to be borne in mind that Parliament/legislature is aware of three concepts before an amendment is brought in, which can be discerned from reading of the Notes on Clauses to the Bill which are (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. So when we adjudicate whether the view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 530/Bang/2021, order dated 06/12/2021; v) Transzone Logistics (India) Pvt. Ltd. Vs. DCIT, ITA No. 1740/Del/2020, order dated 29/10/2021; vi) Jai Enterprises Vs. DCIT, ITA No. 248/JP/2021, order dated 25/11/2021; vii) Nayrathan Jewellers Pvt. Ltd. Vs. ADIT, ITA No .470/Bang/2021, order dated 23/11/2021; viii) Abhimanyu Sharma Vs. ITO, ITA No .175/JP/2021, order dated 23/11/2021; ix) Nikhil Mohine Vs. DCIT, ITA No. 37 38/Jab/2021, order dated 18/11/2021; x) DCIT Vs. Kesoram Industries Ltd., ITA No. 1777/Kol/2019, order dated 28/10/2021; xi) Suba Singh Vs. ITO, ITA No. 85/ASR/2021, order dated 10/11/2021; xii) Citi Centre Developers Vs. CPC, ITA No. 126/Chd/2021, order dated 28/11/2021; xiii) Pee Tee Turners Vs. ADCPC, ITA No. 105/JP/2021, order dated 28/11/2021; xiv) Amandeep Singh Khurana Vs. ITO, ITA No. 1822/Del/2020, order dated 27/10/2021; xv) Aroon Facilitation Management Services Pvt. Vs. DCIT, ITA No. 1824/Del/2020, order dated 13/10/2021; xvi) Worldwide Facility Management Services Pvt. Ltd.Vs. DCIT, ITA No. 1823/Del/2020, order dated 13/10/2021; xvii) Rukmini Polytubes Pvt. Ltd. Vs. DCIT, ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 (SC) it has held that provisions for deduction, exemption and relief should be interpreted liberally, reasonably and in favour of the assessee. 7.15 In CIT vs. Vegetable Products Ltd., 88 ITR 192 (SC): if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted . 7.16 The Hon ble Supreme Court in the case of CIT Vs. Vatika Township Private Limited, (2014) 367 ITR 466 (SC) has held that the intention of the legislature regarding amendment in the Finance Act, was to make it prospective in nature, which cannot be treated as declaratory/statutory or curative in nature. The relevant observations of the Hon ble Apex Court in this regard in para 38 are as under :- 38. When we examine the insertion of proviso in Section 113 of the Act, keeping in view the aforesaid principles, our irresistible conclusion is that the intention of the legislature was to make it prospective in nature. This proviso cannot be treated as declaratory/statutory or curative in nature. 7.17 Keeping in sight of the above discussion, in the present case which is for the asst. year 2013-14, it is an undisputed fact that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the due date of filing of return of income stipulated under section 139(1) of the Act. 7. We find that the identical issue has been decided in favour of the assessee by the Hon'ble Delhi High Court in the case of Pro Interactive Service (India) (P.) Ltd. (supra). The extract of the judgment is reproduced as under : In view of the judgment of the Division Bench of Delhi High Court in Commissioner of Income-Tax versus Aimil Limited, (2010) 321 ITR 508 (Del) the issue is covered against the Revenue and, therefore, no substantial question of law arises for consideration in this appeal. The legislative intent was /is to ensure that the amount paid is allowed as 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 (EPF) and Employee's State Insurance Scheme (ESI) as deemed income of the employer under Section 2(24)(x) of the Act. 8. Respectfully following the binding precedents of Hon'ble Delhi High Court, we direct the Assessing Officer to allow the claim of the assessee and delete the addition. Hence, the grounds of appeal raised by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein it is held that :- INCOME TAX : Where for assessment year 2019-20, employee's contribution to ESI/PF was deposited by assessee - employer before due date of filing return under section 139(1) but after due date prescribed in amended section 36(1)(va), no disallowance could be made for said assessment year as per amendment to section 36(1)(va) brought by Finance Act, 2021 which came into effect from 1-4-2021 as same has no retrospective applicability INCOME TAX : Where it was manifest from return of income along with computation of income so filed by assessee that provision for gratuity which had been debited in profit/loss account had been disallowed by assessee itself and no claim for provision for gratuity had been made by assessee while filing its return of income, addition made towards provision for gratuity was to be deleted 5. [2022] 136 taxmann.com 86 (Chandigarh - Trib.) IN THE ITAT CHANDIGARH BENCH 'B' Shakti Apifoods (P.) Ltd. v. Assessing Officer *IT APPEAL NO. 272 (CHD.) OF 2021, [ASSESSMENT YEAR 2019-20], JANUARY 11, 2022, wherein it is held that :- Section 36(1)(va), read with section 43B, of the Income-tax Act, 1961 - Employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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 or before the due date. Explanation to the said clause provides that, 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 admissib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees 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] 8. On perusal of the above take out from Finance bill 2021 and explanatory Memorandum on the same issued by the Ministry of Finance, it is apparent as per Chapter 1 section 1(2)(a) of Finance Act, 2021 wherein it has specifically mentioned that Save as otherwise provided in this Act- (a) Section 2 to 88 shall come into force on the first day of April 2021 , hence section 36 and 43 shall governed by this direction of the finance Act. Further, the clarification rendered in clause 8 and 9 of the Memorandum Explaining the provisions in the finance bill 2021 regarding amendment in section 43B and 36 that These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years. On perusal of the above amendment in the act and explanation, it is explicitly clear that these changes will be effective from 01.04.2021 and are prospective. Therefore, respect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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