ORDER
PER BEENA PILLAI, JUDICIAL MEMBER
Present appeal by the assessee has been filed by assessee against the order dated 21.10.2021 passed by the Ld.CIT(A)-11, Bangalore relating to Assessment Year 2018-19 on following grounds of appeal:
"1. The order of the learned Commissioner of Income Tax (Appeals) is opposed to the facts of the case and law applicable to it.
2. The learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs.11,05,657/- invoking the provisions of section 143(1)(a)(ii) of the act, holding that the said amount is assessable under the provisions of section 36(1)(va) of the act.
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3. The learned Commissioner of Income Tax (Appeals) erred in ignoring the fact that, the issue involved was disputed and in the light of ratios laid down by Karnataka High Court and also the Hon'ble Supreme Court, the provisions of section 143(1)(a)(ii) of the act could not have been invoked and no adjustment U/s.143(1) of the act could have been made.
4. The learned Commissioner of Income Tax (Appeals) erred in ignoring the fact that, though the amount of Rs.11,05,657/- being employees contribution to provident fund was not remitted to the respective account before the due date as per the relevant enactments, since the remittances were made within the due date of filing the return of income, the said amount could not have been disallowed in the light of the provisions of section 43B of the act.
5. The learned Commissioner of Income Tax (Appeals) erred in ignoring the ratios laid down in the following decisions.
i) Commissioner of Income Tax Vs. Alom Extrusions Ltd (2009) 185 Taxman 416 (SC)
ii) Pr.Commissioner of Income Tax, Jaipur V. Rajasthan State Beverages Corporation Ltd (2017) 84 Taxmann.com
185 (SC)
iii) Spectrum Consultants India (P) Ltd V. Commissioner of Income Tax, Bengalore-Ill (2013) 34 Taxmann.com 20 (Kar)
iv) Essae Teraoka (P) Ltd V. Deputy Commissioner of Income Tax, Circle — 11(3) (2014) 43 Taxmann.com 33 (Kar)
v) Commissioner of Income Tax V. ANZ Information Technology (P) Ltd (2010) 189 Taxman 291 (Kar)
6. The learned Commissioner of Income Tax (Appeals) erred in relying on the following decisions from various High Courts ignoring the position of law that, the ratios laid down by Karnataka High Court and Supreme Court prevail and the ratios laid down by other High Courts which have not reached finality in Supreme Court could not have been relied upon.
(i) Popular Vehicles & Services (P) Ltd Vs. CIT (2018) 96 Taxmann.com 13 (Kerala)
(ii) Gujarat State Road Transport Corporation (2014) 41 Taxmann.com 100 (Gujarat)
(iii) Unifac Management Services (India) Pvt Ltd (2018) 100 Taxmann.com (Madras)
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(iv) Merchem Ltd 61 Taxmann.com 119 (Kerala)
7. The learned Commissioner of Income Tax (Appeals) erred in relying on the Board Circular No.22/2015. dated 17.12.2015 ignoring the fact that, circular issued are not binding on the appellant and also appellate authorities, all the more so when there are contrary decisions by High Courts and also Supreme Court.
8. The learned Commissioner of Income Tax (Appeals) erred in following Explanation-2 below provisions of section 36(1)(va) of the act and also Explanation-5 below provisions of section 43B of the act ignoring the position of law that, the said explanations were introduced by Finance Act 2021 w.e.f 01.04.2021 and could not have been retrospectively applied to A. Y.2018-19.
9. The learned Commissioner of Income Tax (Appeals) erred in not following the ratio laid down by ITAT. Bangalore in its recent decision dated 13.10.2021 in the case of Gopala Krishna Ashwini Kumar V. ACIT in ITA No.359/Bang/2021, wherein it is held that, the Explanation-2 below the provisions of section 36(1)(va) of the act and also Explanation-5 below the provisions of section 43B of the act are w.e.f 01.04.2021 and cannot be applied retrospectively.
10. The learned Commissioner of Income Tax (Appeals) erred in not following the ratio laid down by ITAT. Bangalore in ITA No.376/Bang/2021 for the A.Y.2017-18 in the case of M/s.Bevelgears India (P) Ltd V. ACIT, Circle- 1(1)(2), Bangalore, wherein it is held that. the amendments to provisions of 36(1)(va) and 43B of the act by way of introduction of Explanation-2 and Explanation-5 respectively would not have retrospective application and hence cannot be applied to A.Y.2019-20.
11. The learned Commissioner of Income Tax (Appeals) has erred in not following the ratio laid down in ITAT. Bangalore in the case of Continental Restaurant and Café Co., V. Income Tax Officer. in ITA No.388/Bang/2021, dated 11.10.2021 for the A.Y.2019-20, wherein it is held that. the amendments to provisions of 36(1)(va) and 43B of the act by way of introduction of Explanation-2 and Explanation-5 respectively would not have retrospective application and hence cannot be applied to A.Y.2019-20.
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12. The learned Commissioner of Income Tax (Appeals) has erred in not following the ratio laid down by Delhi Tribunal in the case of Maksat Technologies (P) Ltd V. Deputy Commissioner of Income Tax, Circle — 16(1), New Delhi (2021) 130 Taxmann.com 454 (Delhi-Trib), wherein it is held that, the disallowance U/s.36(1)(va) of the act cannot be made under the provisions of section 143(1) of the act for the reason that, the contributions were not remitted within the due date of the relevant enactments, but before the due date for filing the return of income.
PRAYER
The appellant prays that the Hon'ble Tribunal to kindly delete the addition of Rs.11,05,657/- being disallowance U/s.36(1)(va) of the act made under the provisions of section 143(1)(a) of the act."
2. The brief facts of the case are as follows:
The assessee is in the business of trading in shares, futures and options, real estate development and Coffee trading. For the assessment year 2018-2019, return of income was filed on 25.10.2018 declaring total income of Rs. 55,83,182/-. The return was processed u/s 143(1) of the I.T.Act. In the intimation issued u/s 143(1) of the I.T.Act, the CPC disallowed the employees' contribution to PF and ESI to the tune of Rs.11,05,657/-. The reason for making the disallowance was that the assessee did not remit the employees' contribution to PF and ESI within the due date specified under the respective Acts.
3. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), it was submitted that the assessee remitted the employees contribution to PF and ESI before the due date of filing of the return u/s 139(1) of the I.T.Act and in view of the judgment of the Hon'ble jurisdictional High Court Pr.CIT vs. Hind Filter Ltd. in ITA No. 662 of 2015. The assessee is entitled to deduction of the same. The Ld.CIT(A), however, dismissed the appeal of the assessee by relying on decision of Hon'ble Gujarat High Court in case of Gujarat Road Transport Corporation reported in (2014) 41 taxmann.com 100. The CIT(A) noticed the difference between the employees' contribution and
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the employer's contribution and held insofar as the employees' contribution to ESI and PF, the same need to be remitted within the due date as mentioned in the respective Acts. The CIT(A) also relied on the amendment brought about to section 36(1)(va) and 43B of the I.T.Act.
4. Aggrieved, the assessee has filed this appeal before the Tribunal.
4.1 The Ld.AR submitted that an identical issue is decided in favour of the assessee by the coordinate Bench of this Tribunal in following cases:
M/s.The Continental Restaurant & Café Co. v. ITO in ITA No.388/Bang/2021 (order dated 11.10.2021) M/s. Nirmal Enviro Solutions Pvt. Ltd. vs. DCIT in ITA No. 315/Bang/2021 (order dated 12.10.2021)
Shri Gopalkrishna Aswini Kumar vs. ACIT in ITA No. 359/Bang/2021 (order dated 13.10.2021)
5. The learned Departmental Representative supported the orders of the Income Tax Authorities.
6. We have heard rival submissions and perused the material on record. An identical issue was considered by the Tribunal in the case of The Continental Restaurant & Café Co. v. ITO (supra). The relevant finding of the Tribunal reads as follows:-
"7. I have heard rival submissions and perused the material on record. Admittedly, the assessee has not remitted the employees' contribution of PF of Rs.1,06,190 and ESI of Rs.16,055 totaling to Rs.1,22,245 before the due date specified under the respective Act. However, the assessee had paid the same before the due date of filing of the return u/s 139(1) of the I.T.Act. The Hon'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. v. DCIT reported in 366 ITR 408 (Kar.) has categorically held that the assessee would be entitled to deduction of employees' contribution to PF and ESI provided the payment was made prior to the due date of filing of return of income u/s 139(1) of the I.T.Act. The Hon'ble jurisdictional High Court differed with the judgment of the Hon'ble Gujarat High Court in the case of CIT v. Gujarat State Road Transport Corporation reported in 366 ITR 170 (Guj.). In holding so, the Hon'ble High Court was considering following substantial question of law:-
"Whether in law, the Tribunal was justified in affirming the finding of Assessing Officer in denying the appellant's claim of deductions
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of the employees contribution to PF/ESI alleging that the payment was not made by the appellant in accordance with the provisions u/s 36(1)(va) of the I.T.Act?"
7.1 In deciding the above substantial question of law, the Hon'ble High Court rendered the following findings:-
"20. Paragraph-38 of the PF Scheme provides for Mode of payment of contributions. As provided in sub para (1), the employer shall, before paying the member, his wages, deduct his contribution from his wages and deposit the same together with his own contribution and other charges as stipulated therein with the provident fund or the fund under the ESI Act within fifteen days of the closure of every month pay. It is clear that the word "contribution" used in Clause (b) of Section 43B of the IT Act means the contribution of the employer and the employee. That being so, if the contribution is made on or before the due date for furnishing the return of income under sub- section (1) of Section 139 of the IT Act is made, the employer is entitled for deduction.
21. The submission of Mr.Aravind, learned counsel for the revenue that if the employer fails to deduct the employees' contribution on or before the due date, contemplated under the provisions of the PF Act and the PF Scheme, that would have to be treated as income within the meaning of Section 2(24)(x) of the IT Act and in which case, the assessee is liable to pay tax on the said amount treating that as his income, deserves to be rejected.
22. With respect, we find it difficult to endorse the view taken by the Gujarat High Court. WE agree with the view taken by this Court in W.A.No.4077/2013.
23. In the result, the appeal is allowed and the substantial question of law framed by us is answered in favour of the appellant-assessee and against the respondent-revenue. There shall be no order as to costs."
7.2 The further question is whether the amendment to section 36(1)(va) and 43B of the I.T.Act by Finance Act, 2021 is clarificatory and declaratory in nature. The Hon'ble Supreme Court in the recent judgment in the case of M.M.Aqua Technologies Limited v. CIT reported in (2021) 436 ITR 582 (SC) had held that retrospective provision in a taxing Act which is "for the removal of doubts" cannot be presumed to be retrospective, if it alters or changes the law as it earlier stood (page 597). In this case, in view of the judgment of the Hon'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. v. DCIT (supra) the assessee would have been entitled to deduction of employees' contribution of PF and ESI if the payment was made prior to due date of filing of the return of income u/s 139(1) of the I.T.Act. Therefore, the amendment brought about by the Finance Act, 2021 to section 36(1)(va) and 43B of the I.T.Act, alters the position of law adversely to the assessee. Therefore, such amendment cannot be held to be retrospective in nature. Even otherwise, the amendment has been mentioned to be effective from 01.04.2021 and will apply for and from assessment year 2021-2022 onwards. The following orders of the Tribunal had categorically held
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that the amendment to section 36(1)(va) and 43B of the I.T.Act by Finance Act, 2021 is only prospective in nature and not retrospective.
(i) Dhabriya Polywood Limited v. ACIT reported in (2021) 63 CCH 0030 Jaipur Trib.
ii) NCC Limited v. ACIT reported in (2021) 63 CCH 0060 Hyd Tribunal.
(iii) Indian Geotechnical Services v. ACIT in ITA No.622/Del/2018 (order dated 27.08.2021).
(iv) M/s.Jana Urban Services for Transformation Private Limited v. DCIT in ITA No.307/Bang/2021 (order dated 11th October, 2021)
7.3 In view of the aforesaid reasoning and the judicial pronouncements cited supra, the amendment to section 36(1)(va) and 43B of the I.T.Act by Finance Act, 2021 will not have application for the relevant assessment year, namely A.Y. 2019-2020. Accordingly, I direct the A.O. to grant deduction in respect of employees' contribution to PF and ESI since the assessee has made payment before the due date of filing of the return of income u/s 139(1) of the I.T.Act, It is ordered accordingly.
8. In the result, the appeal filed by the assessee is allowed."
6.1 In view of the judicial pronouncements cited supra, we hold that the amendment to section 36(1)(va) and 43B of the I.T.Act will not have application for the relevant assessment year, namely assessment year 2018-2019. Accordingly, we direct the A.O. to grant deduction in respect of employees' contribution to PF and ESI since the assessee has made the payment before the due date of filing of return u/s 139(1) of the I.T.Act. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 07th February, 2022.
Sd/- Sd/-
(CHANDRA POOJARI) (BEENA PILLAI)
Accountant Member Judicial Member Bangalore,
Dated, the 07thFebruary, 2022. /MS /
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Copy to:
1. Appellant 4. CIT(A)
2. Respondent 5. DR, ITAT, Bangalore
3. CIT 6. Guard file By order
Assistant Registrar, ITAT, Bangalore