TaxTMI 
TaxTMI 
2021 (11) TMI 926
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....ds of appeal raised by the assessee which reads as under: 1. That on the facts and in the circumstances of the case, the Ld. CIT(A) (NFAC) has erred in law as well as on facts in passing an order u/s 250 by dismissing appeal against disallowance of sum of Rs. 10,947/- being contribution of employees' share towards ESI, PF, Superannuation Fund or any other fund set up for the welfare of the employee u/s 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961 when the payments were made within the due dates of filing of return u/s 139 of the Income Tax Act, 1961 and hence are allowable. 2. For that on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law as well as on facts in dismissing appeal against the disallowance of expenses for earning exempt income under Section 14A of the Income Tax Act, 1961 amounting to Rs. 4,20,475/- when no dividend has been earned during the year and the investments have been made in order to gain control over the companies. 3. For that on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law as well as on facts in dismissing the appeal against the disallowance of ex....
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....on 2(24)(x) rws 36(1)(va) of the Act, the employees contribution is to be paid within the due date of payment as prescribed in the respective Acts (PF/ESI Act) to claim deduction. The AO took note of the decision of the Hon'ble Gujrat High Court in the case of CIT vs. Gujrat State Road Transport Corporation [265 CTR 64] and the case of LKP Securities Ltd. passed by the ITAT Mumbai wherein it was held that employees' contribution can be allowed only if the same is deposited within the due date prescribed under the respective Act's and not within the due date of filing return of income. And the AO cited the CBDT Circular No. 22/2015 dated 17.12.2015 for disallowing Rs. 10,946/- which was added back to the total income of the assessee. 6. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who confirmed the appeal by holding as under: "5.c) Findings:- The addition in this case involves a disallowance on account of delayed payment in respect of Employees' contribution to EPF as per the provisions of Section 36(1)(va) of the Act. The appellant has stated that the same should have been allowed as the payments were made before the due date of the filing o....
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.... before the due date of filing of return of income. On appeal, the Ld. CIT(A) has taken note of the amendment brought in by Finance Act, 2021, by virtue of it has been clarified that Section 43B does not apply to Section 36(1)(va) of the Act and it is deemed to never have been applied to a sum received by the assessee from any of his employees to which provisions of Section 2(24)(x) applies. And thus according to Ld. CIT(A), it is a clarificatory amendment and so is retrospective in operation and therefore he upheld the action of AO which action of Ld. CIT(A) has been challenged before us. 9. Assailing the action of Ld. CIT(A) the Ld. A.R. Shri Miraj D Shah submitted that the amendment brought in by the Finance Act 2021 is prospective in nature and for buttressing this submission he drew our attention to the decision of Hon'ble Supreme Court in the case of M/s M.M. Aqua Technologies Ltd. vs. CIT, Delhi and drew our attention to Para 22 wherein the Hon'ble Supreme Court has held that if the retrospectivity of a taxing statute is urged due to the expression used in the Statute is "for the removal of doubts" cannot be presumed to be retrospective, if it alters or changes the law as....
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.... operating retrospectively. 23. This being the case, Explanation 3C is clarificatory - it explains Section 43B(d) as it originally stood and does not purport to add a new condition retrospectively, as has wrongly been held by the High Court. 24. Third, any ambiguity in the language of Explanation 3C shall be resolved in favour of the assessee as per Cape Brandy Syndicate v. Inland Revenue Commissioner (supra) as followed by judgments of this Court - See Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 at paras 60 to 70 per Kapadia, C.J. and para 333, 334 per Radhakrishnan, J." 10. And according to Ld. A.R. the Ld. CIT(A) erred in holding the later amendment brought in by Finance Act, 2021 to be retrospective and for that proposition he cited the Constitution Bench decision of the Hon'ble Supreme Court in the case of CIT vs. Vatika Township Pvt. Ltd. 2015 (1) SCC 1 which decision has been taken note of by the Hon'ble Supreme Court in the case of M/s Snowtex Investment Ltd. vs. PCIT dated 30.04.2019 [Civil Appeal No(s). 4483 of 2019, Special Leave to appeal (c ) No. 20017/2017] wherein the Hon'ble Supreme Court has explained the test to be a....
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....he Parliament amended Section 43(5) with effect from 1 April 2006 in relation to the business of trading in derivatives, Parliament brought about a specific amendment in the Explanation to Section 73, insofar as trading in shares is concerned, with effect from 1 April 2015. The latter amendment was intended to take effect from the date stipulated by Parliament and we see no reason to hold either that it was clarificatory or that the intent of Parliament was to give it retrospective effect. 31. The consequence is that in A.Y. 2008-2009, the loss which occurred to the assessee as a result of its activity of trading in shares (a loss arising from the business of speculation) was not capable of being set off against the profits which it had earned against the business of futures and options since the latter did not constitute profits and gains of a speculative business. ( Emhasis given by us ) 11. Citing the aforesaid case law, Shri Miraj D Shah contended that in order to find out the legislative intent as to whether the Parliament/legislature intended the amendment/explanation brought in later to be retrospective in operation or not, then one may take the assistance of "No....
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....erwise. Section 43B specifies the list of deductions that are admissible under the Act only upon their actual payment. Employer's contribution is covered in clause (b) of section 43B. According to it, if any sum towards employer's contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees is actually paid by the assessee on or before the due date for furnishing the return of the income under subsection (1) of section 139, assessee would be entitled to deduction under section 43B and such deduction would be admissible for the accounting year. This provision does not cover employee contribution referred to in clause (va) of sub-section (1) of section 36 of the Act.. Though section 43B of the Act covers only employer's contribution and does not cover employee contribution, some courts have applied the provision of section 43B on employee contribution as well. There is a distinction between 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 l....
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....ia Ltd. in ITA 12 of 2015, M/s Akzo Nobel India Ltd. vs. CIT in ITA No. 110 of 2011 and therefore the claim of the assessee should be allowed. According to him, the jurisdictional High Court's decision on this issue is therefore binding on this Tribunal ; and since the employees' contribution was remitted by the assessee before the due date of filing of return of income u/s 139(1) of the Act it is an allowable deduction. Therefore he wants us to overturn the decisions of the lower authorities and uphold the claim of deduction on this issue. 14. Per contra, the Ld. D.R. Shri Jayanta Khanra supporting the decision of authorities below has contended that the Hon'ble Delhi High Court in the case of CIT vs. Bharat Hotel Ltd. in 410 ITR 417 has decided this issue in favour of the revenue and the Delhi Tribunal has followed the order of the Hon'ble Delhi High Court in Bharat Hotel (supra) and upheld the action of the Department disallowing the amount deposited by the assessee company in respect of the employees' contribution since it was not deposited within the due date as prescribed by PF Fund and ESI Act. So therefore the Ld. D.R. does not want us to interfere in the impugned order ....
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....ng to Ld. A.R., since the later judgment of the Division Bench of Hon'ble Delhi High Court in Bharat Hotels Ltd.(supra) did not consider the Co-ordinate Bench decision as the case of CIT vs. Aimil Ltd. (supra) it cannot be a stare-decise. And moreover it is settled position of law that when there is conflict between two decisions of the High Court of equal strength [(DB) in this case], it cannot be said that later judgment need to be followed, unless a Full Bench of the High Court settled the issue either wise. However, when it comes to fiscal statutes, according to Shri Miraj D Shah, in such circumstance [i.e, conflict of decisions/views of Benches of same strength and when there is no decision on the issue of jurisdictional High Court] then, the decision in favour of assessee should be followed as held by the Hon'ble Supreme Court in the Vegetable Products Ltd. 82 ITR 192 (SC) wherein it is settled when two views/interpretations are possible on an issue, then the view which is in favour of the assessee need to be followed. Taking note of this aspect, it was brought to our notice that the latest Delhi Tribunal order and Hyderabad Tribunal Orders have held in favour of the assessee....
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....nt has been brought in the Act to provide certainty about the applicability of Section 43B in respect of belated payment of employees' contribution. In order to test whether the amendment brought in later is retrospective or not one has to apply the test as laid by the Hon'ble Supreme Court in the case of M/s Snowtex Investment Ltd. (supra) wherein the Hon'ble Supreme court took note of the law laid down on this issue by the Constitution Bench in M/s Vatika Township Ltd. and held that the intent of the Parliament/legislature need to be looked into for ascertaining whether the amendment should be retrospective or not. In Vatika Township Ltd. (supra) the Hon'ble Supreme Court held that the notes on clauses appended to the Finance Bill will throw light as to the legislative intent; because it has to be borne in mind that Parliament/legislature is aware of three concepts before an amendment is brought in, which can be discerned from reading of the "Notes on Clauses" to the Bill which are (i) prospective amendment with effect from a fixed date; (ii) retrospective amendment with effect from a fixed anterior date; and (iii) clarificatory amendments which are retrospective in nature. So wh....
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....a the Ld. D.R could not controvert the fact that the assessee is not in receipt of any exempt income and we note that the AO has acknowledged that the assessee in not in receipt of exempt income. Therefore since there is no dispute that assessee did not earn any exempt income, we are of the view that no disallowance u/s 14A of the Act was warranted. For taking such a view, we rely on the decision of the Hon'ble Delhi High Court in Chem Investments (supra). Therefore we direct the deletion of the addition /disallowance made by the AO in this regard. 22. Ground No. 3 is against the action of the Ld. CIT(A) in confirming the action of the AO in disallowing expenditure incurred on educational sponsorship of Mr. Jay Goel amounting to Rs. 48,54,000/-. 23. Brief facts of the case as noted by the AO are as under: "5. During the course of proceedings it is observed that the assessee has debited an amount of Rs. 48,54,000/- under the head "Education Sponsorship". 5.1. Pursuant to specific query in this regard the assessee submitted that a "sum of Rs. 6,38,574/- has been paid to Mr. Joy Gael directly for meeting his day to day requirement. Further, payments have also b....
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.... he was son of the Managing Director of the company, cannot be allowed as deduction in computing business income of the assessee company. 5.4. In view of the discussion made as above, the amount of Rs. 48,54,000/- is disallowed and added with business income." 24. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to confirm the same by holding as under: "4.(c) Findings: The issue in this ground relates to an addition of Rs. 48,54,000/- being educational sponsorship of Jay Goel, one of the directors of the company. The AO has clearly, in para 5 of the assessment order, brought on record how it cannot be considered to be a business expenditure and that it is merely a colourable device to give the shape of business expenditure when actually it was a personal expenses. The appellant has not been able to rebut the said findings in relation to the said assessment year of the AO. Hence, the addition is confirmed." 25. Aggrieved, the assessee is in appeal before us. 26. Assailing the action of the Ld. CIT(A)/AO the Ld. AR of the assessee contended that Mr. Jay Goel is the son of one of the Director Shri Debendra ....
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.....R. submitted that in the subsequent assessment year on this issue the AO has allowed the educational expenses for the AY 2017-18 which order we find placed at page 169 to 172 of PB wherein we note that AO has not made any disallowance in respect of educational expenses. Moreover, we note that the facts of the case is similar to the case decided by the Hon'ble Karnataka High Court in CIT vs. Raj Information Technology Ltd. (supra) and since in the present case there is a nexus with expenses incurred for the higher education of Shri Jay Goel with the business of the assessee company and the recipient of sponsorship has later joined the services of assessee company and is discharging the duties as CEO of the assessee company, the expenditure incurred should be allowed since it has nexus with the business of the assessee. This ground of the assessee stands allowed. 28. Ground no. 4 is against the action of the Ld. CIT(A) in upholding the action of the AO that the retention money retained by the debtors during the relevant previous year should be taken into account while computing the profits and gains of the assessee's business for the assessment year under consideration and thereb....
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....ation as income for the year under consideration. And the assessee undertook to offer to tax the same on receipt or when it is accured. However, the AO did not agree on the reason that the Hon'ble Supreme court in the case of M/s Goetz India Ltd. (2006) 284 ITR 323 (SC) has held that since the claim of the assessee has not been made through filing of return of income/revised return of income, there is no provision in the Act to make amendment in the return of income by modifying an application at the assessment stage without revising return of income and, therefore, he disallowed the same. The Ld. CIT(A) has towed the same line and has taken reliance on the Hon'ble Supreme Court decision in Goetz India Ltd. (supra) and has not considered the contention of the assessee at all. We find that the Ld. CIT(A) erred in doing so. The Hon'ble Supreme Court in Goetz India Ltd. (supra) while agreeing to the stand of the AO in that case to have disallowed the claim of deduction by way of letter (without filing revised return of income) since there was no provision in the Act for allowing an amendment in the return without a revised return, however, the Hon'ble Supreme Court has made it very cl....