A.M Sapre, J.:— The decision rendered in this appeal shall also govern disposal of other connected appeals being I.T.A Nos. 39 and 40 of 2005, because all the three appeals involve a common question of law and, secondly, relate to the same assessee except the difference being that each appeal arises out of a different assessment year.
2. This is an appeal filed under section 260A of the Income-tax Act (for brevity called “the Act”) by the assessee against an order dated September 24, 2004, passed by the I.T.A.T in I.T.A No. 930.Ind/1998. It was admitted for final hearing on the following substantial question of law by this court:
“1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that disallowance of provident fund for the assessment year 1995-96 and the amount deposited towards provident fund and ESI can be allowed to be deducted by taking recourse to the provisions of section 43B of the Income-tax Act?”
3. The question involved in these appeals arises out of the assessment year 1992-93 (I.T.A No. 67 of 2004), the assessment year 1994-95 (I.T.A No. 40 of 2005) and the assessment year 1995-96 (I.T.A No. 39 of 2005). In all the three aforementioned assessment years, the assessee (appellant) claimed deduction of amount/contribution deposited by them towards PF and ESI as specified in section 43B(b) ibid. So far as the assessment year which is the subject-matter of appeal in question was concerned, the assessee claimed deduction of Rs. 7,65,571 deposited towards PF and Rs. 96,789 deposited towards ESI. The Assessing Officer was of the view that since these payments were made by the assessee subsequent to the due date as specified in the second proviso to section 43B read with the Explanation to clause (va) of section 36(1) of the Act and, hence, the assessee was not entitled to get the benefit of section 43B ibid in relation to these deposits. In other words, the deduction claimed by the assessee was disallowed by the Assessing Officer on the ground that it was not deposited in conformity with the requirement of section 43B(b) read with its second proviso and the Explanation appended to section 36(1)(va) ibid. In appeal, filed by assessee, challenging this order of the Assessing Officer, the Commissioner of Income-tax (Appeals) set aside the order of the Assessing Officer on this issue and held that the assessee was entitled to claim deductions in respect of the aforementioned payments by taking recourse to section 43B read with section 36(1)(va) ibid. The Revenue felt aggrieved and, hence, filed appeal to the Tribunal. By the impugned order, the Tribunal allowed the appeal filed by the Revenue in so far as the aforesaid issue was concerned and while setting aside the order passed by the Commissioner of Income-tax (Appeals) restored that of the Assessing Officer. It was held that since admittedly the assessee did not make the payment before the due date as specified in the second proviso to section 43B read with section 36(1)(va) Explanation ibid and, hence, they (assessee) were not entitled to claim any deduction of the payments made in question in the assessment year in question. It is against this order of the Tribunal the assessee has come up in appeal. As stated supra, the appeal was admitted for final hearing on a aforementioned substantial question of law. So far as other two appeals are concerned, they were also admitted for final hearing on the same substantial question of law.
4. Heard Shri G.M Chafekar, learned senior counsel with Shri D.S Kale, learned counsel for the appellant and Shri R.L Jain, senior counsel with Ku. Veena Mandlik, learned counsel for the respondent.
5. Learned counsel for the appellant (assessee) in substance urged only one contention. According to him, since the second proviso to section 43B has been omitted from the statute book (i.e, from section 43B) though with effect from April 1, 2004, by the Finance Act, 2003, but the said omission will have its retrospective effect from the date of insertion of section 43B ibid as has been interpreted by the Supreme Court in Allied Motors' case, [1997] 224 ITR 677. Learned counsel contended that it is for this reason, the second proviso could not have been made basis for denying the benefit to an assessee for claiming deduction under section 43B ibid because the same was not on the statute book on the date when the assessee made the deposits of contribution. In other words, the submission was that when the Supreme Court in the case of Allied Motors, [1997] 224 ITR 677 has held that the proviso appended to section 43B has retrospective operation from the date of enactment of section 43B ibid though inserted in the section at a later date then its omission by the Finance Act, 2003, too will have retrospective effect, i.e, as if it was not a part of section 43B since inception and, hence, the assessee could not have been denied the benefit of claiming deduction of payments made in question by placing reliance on the second proviso which is no longer on the statute book. Learned counsel while elaborating his submission contended that if the proviso is deemed to have been brought on the statute book retrospectively then its omission too is deemed to have been done with retrospective date and not prospectively. According to learned counsel, both, i.e, applicability of the proviso and its omission has to be with effect from the same date as in this case retrospectively.
6. In reply, learned counsel for the Revenue supported the impugned order of the Tribunal.
7. Having heard learned counsel for the parties and having perused record of the case, we find no merit in these appeals. As a result, the appeals are liable to be dismissed.
8. Section 43B, which is the subject-matter of these appeals (only relevant part), reads as under:
“43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of —
(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or
(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or
(c) any sum referred to in clause (ii) of sub-section (1) of section 36, or
(d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution (or a State Financial Corporation or a State Industrial Investment Corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing, or
(e) any sum payable by the assessee as interest on any term loan from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan, or
(f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee,
shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him:
Provided that nothing contained in this section shall apply in relation to any sum referred to in clause (a) or clause (c) or clause (d) or clause (e) or clause (f) which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return:
Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realized within fifteen days from the due date.
Explanation 1.—For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or clause (b) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1983, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.”
(emphasis1 supplied)
9. So far as the legislative history of section 43B is concerned, the same need not to be mentioned because it is not really necessary for disposal of these appeals. In these appeals, we are primarily concerned with the second proviso to section 43B. So far as the second proviso is concerned, it was, to begin with, inserted on April 1, 1986. It was then amended on April 1, 1989, and then omitted by the Finance Act, 2003, with effect from April 1, 2004.
10. Their Lordships of the Supreme Court had the occasion to consider the true interpretation and scope of the first proviso to section 43B in Allied Motors' case, [1997] 224 ITR 677 (SC). After examining the entire scheme of section 43B and the legislative history of the first proviso, their Lordships held the first proviso to be retrospective in operation. This is what their Lordships held (page 686):
“This view has been accepted by a number of High Courts. In the case of CTT v. Chandulal Venichand, [1994] 209 ITR 7, the Gujarat High Court has held that the first proviso to section 43B is retrospective and sales tax for the last quarter paid before the filing of the return for the assessment year is deductible. This decision deals with the assessment year 1984-85. The Calcutta High Court in the case of Commissioner Of Income-Tax v. Sri Jagannath Steel Corporation., [1991] 191 ITR 676, has taken a similar view holding that the statutory liability for sales tax actually discharged after the expiry of the accounting year in compliance with the relevant statute is entitled to deduction under section 43B. The High Court has held the amendment to be clarificatory and, therefore, retrospective. The Gujarat High Court in the above case held the amendment to be curative and explanatory and, hence, retrospective. The Patna High Court has also held the amendment inserting the first proviso to be explanatory in the case of Jamshedpur Motor Accessories Stores v. Union of India, [1991] 189 ITR 70 (Patna). It has held the amendment inserting the first proviso to be retrospective. The special leave petition from this decision of the Patna High Court was dismissed (see [1991] 191 ITR (St.) 8). The view of the Delhi High Court, therefore, that the first proviso to section 43B will be available only prospectively does not appear to be correct. As observed by G.P Singh in his Principles of Statutory Interpretation, 4th Edn., page 291, ‘it is well-settled that if a statute is curative or merely declaratory of the previous law, retrospective operation is generally intended’. In fact the amendment would not serve its object in such a situation, unless it is construed as retrospective. The view, therefore, taken by the Delhi High Court cannot be sustained.”
11. So far as the present case is concerned, it does no relate to the first proviso but relates to the second proviso. In this view of the matter the submission of learned counsel for the appellant (assessee) that the second proviso was held by the Supreme Court to be retrospective in operation in Allied Motors' case, [1997] 224 ITR 677 has no substance. In other words, the question, as to whether the second proviso to section 43B of the Act is retrospective in operation or prospective, did not fall for consideration before the Supreme Court in Allied Motors' case, [1997] 224 ITR 677 and hence this court cannot accept the submission of learned counsel for the appellant and hold the second proviso also to be retrospective in operation. It is not the submission of learned counsel for the appellant that since the Supreme Court has construed the first proviso to be retrospective in operation and, hence, on that basis, this court should also hold the second proviso too to be retrospective in operation. Mere perusal of the first proviso would show that it has application to the cases falling in clauses (a), (c), (d), (e) and (f) of section 43B whereas the second proviso applies only to cases falling in clause (b) of section 43B ibid. In this view of the matter, merely because the first proviso has been construed to be retrospective in operation that by itself would not make the second proviso retrospective in operation. Since, no attempt was made by learned counsel for the appellant (assessee) to argue on these lines, we do not consider it necessary to examine the issue on these lines.
12. In view of the foregoing discussion, we are of the considered opinion that no reliance can be placed by the appellant on the ratio of the decision rendered in Allied Motors' case, [1997] 224 ITR 677 (SC) in support of his contention that the second proviso was held retrospective in operation by the Supreme Court. As held supra, this question did not fall for consideration before the Supreme Court in Allied Motors' case, [1997] 224 ITR 677 and, hence, this court cannot accept this submission.
13. In our considered view, since the second proviso to section 43B was omitted by the Finance Act, 2003, with effect from April 1, 2004, and, hence, it is prospective in operation. When the Legislature has specifically brought the omission in force with effect from April 1, 2004, then it is difficult to hold that it has taken effect prior to April 1, 2004. It is a settled rule of interpretation that every legislation is prospective in nature unless by specific provision made in the statute itself the provision is made retrospective. In this case,/it is specifically provided in the Finance Act, 2003, itself that omission of the second proviso shall come into effect from April 1, 2004. In the light of; such specific date being mentioned in the Act itself, it is difficult to hold that omission will be retrospective in operation, i.e, it shall come into operation prior to April 1, 2004. If the intention of legislation had been to omit the provision retrospectively then it would have been so specified in the Act itself. It was not done. Instead, a specific date (April 1, 2004) was mentioned for bringing the omission in force from that date, i.e, April 1, 2004. In our opinion, therefore, the legislative intent is clear. The omission is prospective in operation and not retrospective as urged. As a necessary corollary, any action taken prior to April 1, 2004, on the basis of the second proviso would be legal and proper. In other words, it was incumbent upon the assessee to have ensured compliance with the second proviso while making payment as an employer by way of contribution to any provident fund scheme, or superannuation fund or gratuity fund or any other fund for the welfare of employees before due date as specified in Explanation appended below clause (va) of sub-section (1) of section 36 ibid for claiming the benefit under section 43B ibid. Non-com-pliance with the second proviso to section 43B would result in disallowance so far as these payments are concerned.
14. It is not in dispute that the appellant's (assessee's) case was governed by the second proviso to section 43B, because at the relevant time the second proviso was holding the field and was a part of section 43B of the Act. In these circumstances, it was obligatory upon the assessee to have complied with the requirement of the second proviso to section 43B ibid. Since admittedly, the assessee failed to ensure compliance by not depositing the amount before the due date and, hence, they were rightly denied the benefit of section 43B by the Assessing Officer and later by the Tribunal by restoring the order of the Assessing Officer.
15. In view of the foregoing discussion, we concur with the view taken by the Tribunal on the issue in question and find no merit in the appeal. As a consequence, the appeal fails and is accordingly dismissed by answering the substantial question of law against the appellant (assessee) and in favour of the respondent (Revenue). No costs.
S.R Waghmare, J.:— I agree.