2012 (5) TMI 176 - HC - Income Tax

Finance Act 2003: Retrospective Application of Section 43-B Proviso Upheld

The Commissioner Of Income Tax. Bareilly & Another Versus Sh. Manoj Kumar Singh. Prop. M/s. Expert Industrial SS. Indi

The High Court held that the amendments to Section 43-B proviso by the Finance Act 2003 should be applied retrospectively from 1st April 1988. ... Disallowance the claim of late payment of PF, ESIC and ESI – that the assessee has paid the amounts on account of employers/ employee contribution and employees contribution in the next month of deduction - Held that:- If the amounts are deposited before the date of filing of return of income then no disallowance can be made - Amendments made in Section 43-B w.e.f. 1st April, 2004 is retrospective in nature and shall cover the deposits made towards the provident fund contribution even before 1st April 2004 - no dispute that payment were made after the due date of the employees contribution and the employers contribution, but the payment were made well before the due date for filing the return of income prescribed for the year under appeal – in favour of assessee. Issues:- Disallowance of late payment of PF, ESIC, and ESI contributions by the assessing officer.- Interpretation of Section 43-B proviso in relation to the claim of the assessee.- Retrospective application of amendments made in Section 43-B proviso by Finance Act 2003.- Dispute regarding the applicability of the amendments to deposits made before 1st April 2004.Analysis:1. The assessing officer disallowed the claim of late payment of PF, ESIC, and ESI contributions by the assessee, citing violation of provisions under Section 43B read with Section 36(1)(Va) of the Income Tax Act. The officer rejected the claim as the payments were not made by the due date, leading to disallowance of Rs.12,36,139 from the assessee's income.2. The assessee filed an appeal, which was partly allowed, granting relief for the claimed amount towards contributions in PF, ESIC, and ESI. The department then appealed to the Income Tax Appellate Tribunal, which dismissed the appeal. Subsequently, the department filed an appeal under Section 260-A of the Income Tax Act against the tribunal's order.3. The main issue revolved around the interpretation of Section 43-B proviso. The Commissioner of Income Tax noted that the payments were made after the due date for employees' and employers' contributions but before the due date for filing the income tax return. Citing a judgment in the appellant's own case, it was held that if amounts are deposited before the filing of the return, no disallowance can be made.4. The crux of the matter was the retrospective application of the amendments made in Section 43-B proviso by the Finance Act 2003. The department argued that the amendments were not retrospective, while the assessee contended that they were. The assessee relied on a Supreme Court judgment to support the retrospective nature of the amendments, emphasizing that the Finance Act 2003 should be read as retrospective from 1st April 1988.5. The High Court, after considering the submissions and referring to the Apex Court's judgment, concluded that the amendments made by the Finance Act 2003 should be applied retrospectively from 1st April 1988. Thus, the department's argument was dismissed, and the appeal was found to lack merit, resulting in its dismissal.