TMI Blog2023 (8) TMI 1456X X X X Extracts X X X X X X X X Extracts X X X X ..... n 154 of the Act, we are of the considered view that as the issue involved in the present appeal, i.e. disallowance u/s.36(1)(va) of the Act of the assessee s claim for deduction of the delayed deposit of employees share of contribution towards ESI/PF at the relevant time was not free from doubts and debate, therefore, the same could not have been brought within the realm of rectification u/s.154. Our aforesaid conviction is all the more fortified by the fact that as the assessee has assailed the order passed by the A.O u/s.154 of the Act, inter alia, on the ground that prior to the judgment of Checkmate Services (P) Ltd. [ 2022 (10) TMI 617 - SUPREME COURT] there were two school of thoughts on the issue in hand, i.e. as to whether or not the delayed deposit of the employees share of contribution towards ESI/PF was allowable as deduction u/s.43B of the Act, therefore, for the said reason no disallowance of the same could have been made u/s.143(1) of the Act. The aforesaid contention of the Ld. AR takes the case of the assessee beyond the scope and ken of Section 154 of the Act. Decided against assessee. - SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,161/-, income was determined at Rs.81,83,920/-. 4. Aggrieved the assessee filed an application u/s.154 of the Act with the A.O/CPC, Bengaluru seeking rectification of the disallowance of his claim for deduction of the delayed deposit of employee s share of contributions towards ESI/PF. However, the aforesaid application filed by the assessee seeking rectification was rejected by the CPC vide its order passed u/s.154 of the Act dated 26.06.2019. 5. The assessee being aggrieved with the order passed by the A.O/CPC, Bengaluru u/s.154 of the Act carried the matter in appeal before the CIT(Appeals) but without success. The CIT(Appeals) while affirming the view taken by the A.O/CPC, Bengaluru, had observed as under: 5.1 I have considered the statement of facts and submissions of the appellant made in course of this appeal. The appellant has assailed the order of rectification u/s 154 dated 26.06.2019 passed by the DCIT-CPC (hereinafter referred to as the AO') rejecting the appellant's request for the allowing of deduction of Rs.21,97,161/- which was earlier disallowed u/s 143(1)(a) vide order of intimation dated 18.05.2019. It appears that the appellant did not prefer an appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der, award, contract of service or otherwise ; The provisions of sub-clause (x) of clause (24) of section 2 are reproduced as under:- Any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the Provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees . 5.4 The Act is unambiguously clear that such contribution are allowed as a deduction u/s 36(1)(va) only if the employer credits the same to the employees' account in the relevant provident fund/ ESI Fund before the due date under the relevant PF/ ESI Act. However, some High Courts have allowed such deductions even if paid after the due date under the relevant Act but if paid before the due date of filing of the return of income. These Hon'ble High Courts have held that the provision of section 43B shall also apply to the provision of section 36(1)(va), that is, such deductions shall be allowed on actual payment basis. The ratio decidend in these decisions is that both the employees' and the employers' contributions are covered u/s 43B. The following are some of the quot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plained by the memorandum to the Finance Bill 2021 as below:- There is a distinction between employer contribution and employee's contribution towards welfare fund. It may be noted that employee'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 miss utilize employee's contributions . 5.7 From the above amendments, it appears that the law is now clear i.e. Employees' contribution to provident fund and ESI will not be allowed as deduction if here is delay in deposit even by a single day as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to declaratory statutes. As stated in Craies and approved by the Supreme Court. For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law or the meaning or effect of any statute. Such Acts are usually held to be retrospectives. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the word enacted', But the use of the words 'it is declared' is not conclusive that the Act is declaratory for these words may, at times, be used to introduce new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to be substance rather than to the form. If a new Act is 'to explain' an earlier act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussions clearly establish that the issue of allowability or disallowability of employees' contribution to PF/ ESI was always a debatable one at least till the clarificatory amendment brought into section 36(1)(va) referred to above. Even the appellant, though his written submissions as reproduced in the beginning, has fairly made out a case that the impugned issue of adjustment made u/s 143(1)(a) on account of section 36(1)(va) while processing the return is a debatable one. It is trite that a debatable issue of this nature cannot be brought within the ambit of section 154 which merely permits the rectification of a mistake apparent from the record. It is a settled law that powers of the AO to rectify an order u/s 154 are very limited and can be exercised only in a case where the Assessing Officer finds that a mistake apparent from the record had occurred. However, in the case of a debatable issue or where the lengthy arguments are needed to decide the issue, powers u/s 154 of the Act cannot be exercised to amend an already passed order. It is also well understood that even debatable points of law would not fall in the meaning of the expression mistake apparent for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the employees share of contributions towards ESI/PF was declined, but had preferred an application seeking rectification u/s.154 the aforesaid adjustment that was made vide the aforesaid intimation. Before adverting to the maintainability of the view taken by the CIT(Appeals) who had upheld the order passed by the A.O/CPC, Bengaluru u/s.154 of the Act, we deem it fit to look into the scope and gamut of the provisions of Section 154 of the Act and as such, the maintainability of the application filed by the assessee seeking rectification of the impugned mistake by taking recourse to the said statutory provision. Section 154 of the Act reads as under: 154. (1) With a view to rectifying any mistake apparent from the record an incometax authority referred to in section 116 may, (a) amend any order passed by it under the provisions of this Act ; (b) amend any intimation or deemed intimation under sub-section (1) of section 143; (c) amend any intimation under sub-section (1) of section 200A; (d) amend any intimation under sub-section (1) of section 206CB. (1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he collector on or after the 1st day of June, 2001 to an income-tax authority referred to in sub-section (1), the authority shall pass an order, within a period of six months from the end of the month in which the application is received by it, (a) making the amendment; or (b) refusing to allow the claim. On a careful perusal of the aforesaid statutory provision r.w. settled position of law as had been expounded in various judicial pronouncements, we find that it is only in a case where an order passed by the A.O is found to be suffering from a mistake which is glaring, patent, apparent and obvious from record that a recourse can be sought for rectification of the same u/s.154 of the Act. Our aforesaid view is supported by the landmark judgment of the Hon ble Supreme Court in the case of T.S. Balaram ITO vs. Volkart Bros (1971) 82 ITR 50 (SC), wherein the Hon ble Apex Court after deliberating at length on the scope and gamut of Section 154 of the Act had observed as under: From what has been said above, it is clear that the question whether S.17(1) of the Indian Income-tax Act, 1922 was applicable to the case of the first respondent is not free from doubt. Therefore the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , on the ground that prior to the judgment of the Hon ble Apex Court in the case of Checkmate Services (P) Ltd. Vs. Commissioner of Income Tax-1, (2022) 143 taxmann.com 178 (SC) there were two school of thoughts on the issue in hand, i.e. as to whether or not the delayed deposit of the employees share of contribution towards ESI/PF was allowable as deduction u/s.43B of the Act, therefore, for the said reason no disallowance of the same could have been made u/s.143(1) of the Act. The aforesaid contention of the Ld. AR takes the case of the assessee beyond the scope and ken of Section 154 of the Act. We, say so, for the reason that now when the issue in hand, i.e. allowability of the assessee s claim for deduction of the delayed deposit of employee s share of contributions towards ESI/PF, being a debatable issue could not have been summarily disallowed by the A.O vide his intimation issued u/s.143(1) of the Act, then the said issue admittedly being debatable in nature could not have been subjected to rectification u/s.154 of the Act. Accordingly, on the basis of our aforesaid deliberations, we are of the considered view that the application filed by the assessee before the A.O/CPC fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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