PER RAVISH SOOD, JM
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 17.06.2022 which in turn arises from the orders passed by the A.O under Sec. 154 of the Income-tax Act, 1961 (in short 'the Act') dated 30.01.2020 for the assessment year 2018-19. Before us the assessee has assailed the impugned order on the following grounds of appeal:
"1. GROUND NO.I. That the Appellate Order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre ("the Ld. CIT(A) under section 250 of the Income Tax Act, 1961 ("the Act") is highly unjustified, bad in law, erroneous and not in accordance with the provisions of law. It is prayed that the Appellate Order passed under section 250 of the Act may please be cancelled/set-aside on this ground alone.
2. GROUND NO. II
(a) On the facts and in the circumstances of the case as well as in law, the Ld. CIT(A) has grossly erred in confirming the action of the Learned Asst. Director of Income Tax (CPC) ("the Ld. CPC") in making the addition/disallowance of Rs.91,150/- invoking the provisions of section 36(1)(va) of the Act on account of delayed deposit of employees' contribution to Employees Provident Fund (EPF) & Employees State Insurance Corporation (ESIC) beyond the due dates under the respective Acts however, the appellant has duly deposited the amount well before the due dates prescribed well supported with the proof of payment of such deposit, hence, disallowance is
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highly unjustified, unwarranted and it is earnestly requested that the same may please be deleted;
3. (b) That the Ld. CIT(A) has grossly erred in ignoring various judicial precedents including that of the Hon'ble Jurisdictional Tribunal and applying the judgments of non-jurisdictional High Courts thereby making the appellate order as erroneous, bad in law and liable to be quashed;
(c) That the Ld. CIT(A) has grossly erred in holding that the employees' contribution to EPF & ESIC are allowable as a deduction only when deposited by the employer within the due dates prescribed under the relevant Acts thereby ignoring the overriding effect of section 43B of the Act which applies with equal force in respect of employer & employee contribution as interpreted by various Hon'ble High Courts and the Hon'ble Jurisdictional Tribunal;
(d) That the Ld. CIT(A) has grossly erred in placing reliance on & erroneously applying the amended provisions of sections 36(1)(va) & 43B of the Act as inserted vide the Finance Act, 2021 to the assessment year under reference which were expressly intended to be applied prospectively with effect from the Assessment Years 2021-22 & onwards and thereby fallaciously holding that the amendments brought about are retrospective, clarificatory & declaratory in nature; which is highly unjustified, unwarranted, unsustainable, not proper on facts and not in accordance with the provisions of law. Hence, it is earnestly prayed that the addition/disallowance of Rs.91,150/- may please be deleted.
GROUND NO. III
4. In any case and without prejudice to the above, the Ld. CIT(A) has grossly erred in confirming the action of the Ld. CPC in making the disallowance under the provisions of section 36(1)(va) of the Act. He has failed to appreciate that the adjustment made was beyond the purview of the adjustments specified under section 143(1)(a) of the Act and further, the impugned issue being highly debatable, contentious, in respect of which conceivably two views/opinions are possible accordingly, beyond the scope of prima facie adjustments as
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per section 143(1)(a) hence, the addition/disallowance of Rs.91,150/- is highly unjustified, palpably illegal, bad in law, unsustainable and not in accordance with the provisions of law.
Hence, it is earnestly prayed that the addition/disallowance of Rs.91,150/- may please be deleted.
5. GROUND NO. IV
That the Appellant craves leave to add, amend, alter or delete all or any of the grounds of appeal at the time of hearing of the appeal."
2. Shorn of unnecessary details, the return of income filed by the assessee for the assessment year 2018-19 was processed by the Centralized Processing Center (CPC), Bengaluru u/s.143(1) of the Act. The CPC while processing the return of income had triggered the provisions of section 36(1)(va) r.w.s. 43B of the Act and disallowed an amount of Rs.91,150/- qua the delayed deposit of the employee's share of contributions towards Provident fund (PF) and Employee's State Insurance (ESI) by the assessee.
3. Assessee holding a conviction that the aforesaid adjustment made by the A.O to its returned income was a mistake that was amenable for rectification, thus, filed an application u/s.154 of the Act which however, was rejected by the A.O vide his order dated
30.01.2020.
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4. Aggrieved, the assessee assailed the order passed by the A.O u/s.154 of the Act before the Commissioner of Income-Tax (Appeals) but without any success.
5. The assessee being aggrieved with the order of the Commissioner of Income-Tax (Appeals) has carried the matter in appeal before us.
6. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his aforesaid contentions.
7. Admittedly, it is though a matter of fact borne from record that the assessee firm had delayed deposit of an amount of Rs.91,150/- towards employee's share of contributions towards PF & ESIC i.e. beyond the stipulated time period contemplated under the respective Employees Welfare Act, but had deposited the same prior to the "due date" of filing of its return of income for the year under consideration. Backed by the aforesaid facts, it is the claim of the Ld. Authorized Representative (for short 'AR') for the assessee that now when the amount in question had been deposited by the assessee prior to the
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"due date" of filing of its return of income, therefore, no disallowance of the same was called for u/s.43B of the Act. In support of his aforesaid contentions, the Ld. AR had pressed into service certain pronouncements/orders of various judicial forums. Also, in support of his contention that the amendment vide Finance Act 2021 to Section 36(1)(va) of the Act is prospective in nature i.e. w.e.f. 01.04.2021, the Ld. AR had drawn support from the judgment of the Hon'ble High Court of Delhi in the case of Pr. CIT-7 Vs. TV Today Network Ltd., ITA No.227/2022 dated 27.07.2022.
8. Per contra, the Ld. Departmental Representative (for short 'DR') relied on the orders of the authorities below. It was vehemently submitted by the Ld. DR that pursuant to insertion of 'Explanation-5' to Section 43B a/w. 'Explanation-1' to Section 36(1)(va) of the Act, the legislature had made it abundantly clear beyond any doubt that the delayed deposit of the employee's share of contribution towards welfare funds by the assessee would not be saved by the extended time period contemplated u/s.43B(b) of the Act.
9. After giving a thoughtful consideration to the issue in hand in the backdrop of the contentions advanced by the ld. Authorized Representatives of both the parties, we find that the issue herein involved is squarely covered by the order passed by the Tribunal in
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the case of M/s Ind Synergy Limited Vs. The DCIT-1(2), Raipur, ITA No.312/RPR/2016; dated 10/03/2022 (to which one of us, the JM was a party), wherein after exhaustive deliberations it was held as under :
"Adverting to the disallowance of the assessee's claim for deduction of the employees share of contribution towards PF of Rs.2,88,976/-, we find that the same had been disallowed by the Assessing Officer u/s.2(24)(x) of the Act, for the reason that the said amount was deposited beyond the stipulated time period that was prescribed under the said Employees Welfare Fund Act. Before us, it was claimed by the Ld. AR, that now when the aforesaid amounts were deposited by the assessee before the "due date" of filing of its return of income for the year under consideration, therefore, the same were allowable as a deduction u/s.43B of the Act. It was submitted by the Ld. AR that the lower authorities had misconceived the settled position of law and disallowed the aforementioned amounts, despite the fact that the same had been deposited prior to "due date" of filing of the return of income by the assessee company.
10. In order to answer the issue as to whether or not the employees contribution to welfare funds falls within the scope and domain of Sec. 43B of the Act, we may herein draw support from the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Hindustan Organic Chemicals Ltd in ITA No. 399/12, dated 11.07.2014. In the said case, the Hon'ble High Court of Bombay was, inter alia, called upon to answer the following substantial question of law that was raised in the appeal filed by the revenue:-
"(A). Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal, in law, was right in allowing the claim of the Assessee on account of delayed payments of P.F. Of employees' contribution amounting to Rs.1,82,77,138/- by relying on the decision of the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusion Ltd. (319 ITR 306) ?"
After referring to the amendments that were made available to Section 43B of the Act, the Hon'ble High Court answered the aforesaid question in the affirmative and upholding the order of the tribunal qua the aforesaid aspect dismissed the appeal filed by the revenue. Also,
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we find that a similar view had been arrived at by various Hon'ble High Courts, as under :-
i. CIT Vs. Amil Ltd reported (2010) 321 ITR 508 (Delhi High Court)
ii. CIT Vs. Hemla Embroidery Mills (P) Ltd. (2014) 366 ITR 167 (P&H)
iii. Bihar State Warehousing Corporation Ltd.Vs. CIT 386 ITR 410 (Patna)
iv. Sagun Foundary Pvt. Ltd Vs. CIT 145 DTR 265 (All)
v. CIT Vs. Mark Auto Industries (2008) 358 ITR 43 (P&H)
vi. CIT Vs. Jaipur Vidyut Vitran Nigam Ltd (2014) 363 ITR 307 (Raj)
vii. Essae Teraoka Pvt. Ltd Vs. DCIT (2014)366 ITR 408 (Kar)
viii. CIT Vs. Vijay Shree Ltd (2014) 43 Taxmann.com 396 (Cal)
ix. CIT Vs. Kichha Sugar Co Ltd (2013) 356 ITR 351 (Uttarakhand)
In the backdrop of the aforesaid settled position of law, we are of the considered view that no distinction is to be drawn between the employers as well as employees contribution to PF and ESI, as both are covered u/s 43B of the Act.
11. Before parting qua the aforesaid issue in hand, we think it apt to deal with the scope of applicability of the amendments that have been made available on the statue vide the Finance Act, 2021, i.e,
"Explanation 5" to Section 43B and "Explanation 2" to Section 36(1)(va), i.e, as to whether those are applicable prospectively w.e.f A.Y 2021-22 onwards, or, are to be given a retrospective effect. Issue in hand is squarely covered by the order of a coordinate bench of the tribunal, i.e, ITAT, Amritsar in the case of Vinko Auto Industries Ltd. Vs. DCIT 2021 (12) TMI 636. In its aforesaid order, the Tribunal had after drawing support from the order of the ITAT, Hyderabad Bench in the case of the Value Momentum Software Services Pvt Ltd. Vs. DCIT in ITA No. 2197/Hyd/2017, dated 19.05.2021, had observed, that the amendments in section 36(1)(va) and section 43B of the Act, vide respective explanations that had been made available on the statue by the Finance Act, 2021, are applicable only from 01.04.2021 i.e. w.e.f A.Y 2021-22 onwards. For the sake of clarity the observations of the tribunal in its aforesaid order are culled out as under:-
"5.1 We may observe that the ld. CIT(A) in its order at para no. 7.15 itself has observed that the issue has been highly contentious and different High Courts have taken divergent views on the same issue,
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out of which some are in favour of the assessee and some are against the assessee. The ld. CIT(A) further observed that the judgments and orders relied upon by the assessee have been rendered before the clarificatory amendments made in the Finance Act, 2021 and the Finance Act, 2021 has put an end to this controversy.
5.2 Admittedly there is plethora of judgments in favour of the Assessee's contention and of the Revenue. The controversy with regard to divergent views of different High Courts, has been settled by the Hon'ble Apex Court in the case of CIT Vs. M/s. Vegetables Products Ltd. (88 ITR 192) by laying the dictum that if two reasonable constructions of a taxing provision are possible that construction which favours the Assessee must be adopted. The Hon'ble jurisdictional High Court in the case of CIT Vs. M/s Hemla Embroidery Mills (P) Ltd. (366 ITR 167) (P&H HC) and in the case of CIT Vs. M/s Mark Auto Industries Ltd. (358 ITR 43) (P&H HC) clearly held that the assessee is entitled to claim deduction of employee's share of ESI & PF u/s.43B of the Act, if the same has been deposited prior to the filing of return of income u/s.139(1) of the Act. From the above judgments of the Hon'ble jurisdictional High Court, it is clear that the Hon'ble Court has not drawn any distinction between the employee's and employer's share qua PF & ESI contributions. Admittedly there are no contrary judgements of the jurisdictional High Court against the assessee on the aspect under consideration hence, first determination of the Ld. CIT(A) qua non- applicability of the provisions of Section 43B of the Act to the employee's share qua PF & ESI, is unsustainable.
5.3 Now, coming to the second aspect/determination made by the CIT(A) to the effect that the amendment made in Section 36(1)(va) and 43B of the Act by Finance Act 2021 has to be considered as clarificatory in nature and having retrospective effects, therefore would be applicable to the previous assessment years as well. We may observe that various benches of the ITAT including Hyderabad Bench in the case of Value Momentum Software Services Pvt. Ltd. (ITA No.2197/Hyd/2017 decided on 19.05.2021), have taken into consideration the identical issue qua applicability of the amendment to Section 36(1)(va) and Section 43B of the Act, by inserting Explanations by the Finance Act, 2021 and clearly held that the amendment shall be applicable from 1st April, 2021 onwards . It is also relevant to note that the CBDT has also issued Memorandum of Explanation qua applicability of the amended provisions of Section 36(1)(va) & 43B of the Act w.e.f. 1st April, 2021, and Assessment Year 2021-21 onwards, hence there is no doubt qua applicability of the amended provisions referred above, prospectively.
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On the aforesaid discussion, the second aspect as considered/determined by the ld. CIT(A) qua retrospective application of the amended provisions of Section 36(1)(va) and 43B of the Act wherein Explanations have been inserted by Finance Act, 2021 qua employees' share in respect of PF & ESI Act, is also unsustainable .
5.4 In view of the above discussions, the disallowances of Rs.5,88,203/- for A.Y.2018-2019 and Rs.60,540/- for A.Y.2019-2020 made by the A.O. and confirmed by the CIT(A) are not sustainable and, hence, the same stands deleted."
On the basis of our aforesaid deliberations, we are of the considered view, that as the amendments made available on the statue vide the Finance Act, 2021 i.e "Explanation 5" to Section 43B and
"Explanation 2" to Section 36(1)(va) are applicable w.e.f 01.04.2021, i.e, from A.Y 2021-22 onwards, therefore, the same would not have any bearing on the case of the assessee before us, i.e, for A.Y 2011-
12. Accordingly, drawing support from the aforementioned judicial pronouncements, we, herein conclude, that as the employees contributions to PF and ESI of Rs.2,88,976/-was deposited by the assessee before the "due date" of filing of its return of income for the year under consideration, therefore, the same being saved by the provisions of Sec. 43B of the Act could not have been disallowed by the A.O. We, thus, in the backdrop of our aforesaid deliberations set- aside the order of the CIT(A) and vacate the disallowance of Rs.2,88,976/- made by the A.O. Thus, the Ground of appeal No. 1 is allowed in terms of our aforesaid observations."
As the facts and the issue involved in the aforesaid order of the Tribunal in the case of Ind Synergy Lyd. (supra) remains the same as are there before us in the case of the present assessee, therefore, we respectfully follow the same. Before parting, we may herein observe that as stated by the Ld. AR and, rightly so, the insertion of
"Explanation-2" to Section 36(1)(va) of the Act as had been made available on the statute vide Finance Act, 2021 would not assist the case of the revenue as the same is applicable w.e.f. 01.04.2021 and,
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thus, would not be applicable to the case of the assessee before us. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Delhi in the case of Pr. CIT-7 Vs. TV Today Network Ltd. (supra). We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) and direct the AO to vacate the disallowance of Rs.91,150/- made by him u/s.36(1)(va) of the Act qua the delayed deposit of the employees share of contribution of EPF/ESIC. The Ground of appeal No.1 to 4 are allowed in terms of our aforesaid observations.
10. Ground of appeal No. 5 being general in nature is dismissed as not pressed.
11. In the result, appeal of the assessee in ITA No.150/RPR/2022 for the assessment year 2018-19 is allowed in terms of our aforesaid observations.
Order pronounced in open court on 05thday of September 2022. Sd/-
(रवीश सूद /RAVISH SOOD)
या यक सद य/JUDICIAL MEMBER
रायपुर / Raipur; दनांक / Dated : 05thSeptember, 2022
SB
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आदेश क त ल प अ े षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. The CIT(Appeals), Raipur (C.G.)
4. The Pr. CIT-1, Raipur.
5. वभागीय त न ध, आयकर अपील य अ धकरण, "एक-सद य" बच, रायपुर / DR, ITAT, "SMC" Bench, Raipur.
6. गाड फ़ाइल / Guard File.
आदेशानुसार / BY ORDER, // True Copy //
नजी स चव /Private Secretary आयकर अपील य अ धकरण, रायपुर / ITAT, Raipur
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