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2022 (1) TMI 1060
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....me-tax Act,1961(hereinafter called " the Act") .We have heard both the parties in open Court through physical hearing mode. 2. The brief facts of the case are that the assessee filed its return of income u/s. 139(1), on 30.10.2019 declaring total income of Rs. 6,98,88,263/-, which was processed by CPC, Bengaluru u/s 143(1) of the 1961 Act and intimation vide orders dated 30.04.2020 was issued assessing total income of the assessee at Rs. 7,15,86,250/-, wherein , inter-alia, an amount of Rs. 11,20,461/- was added to income of the assessee by invoking provisions of Section 36(1)(va) read with Section 2(24)(x) of the 1961 Act, on the grounds that the assessee has not deposited employee share of PF/ESI collected/deducted by assessee from the salaries of employees , to the credit of said employees maintained with relevant fund concerning PF/ESI within the time prescribed under the relevant statute concerning PF/ESI. The said information of default/delay in depositing the said amounts within due date prescribed under the relevant statute governing PF/ESI was part of information required to be filed electronically along with return of income being expenditure indicated in the audit rep....
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....n the issue of allowability of deduction u/s 36(1)(va) read with Section 2(24)(x) of the 1961 Act on delayed deposit of employee contribution towards PF/ESI beyond the time provided under the relevant statute governing PF/ESI but deposited before the due date for filing of return of income as prescribed u/s 139(1) of the 1961 Act , the assessee filed second appeal with tribunal. The ld. Counsel for the assessee opened arguments and submitted that the employee share of PF/ESI which is collected by employer is to be allowed as deduction u/s 36(1)(va) of the 1961 Act despite the same is deposited to the credit of employee with relevant fund concerning PF/ESI beyond the due date prescribed for depositing the said amount under the relevant statute concerning PF/ESI, provided the same is deposited before the due date of filing of return of income u/s 139(1) of the 1961 Act. It was submitted by ld. Counsel for the assessee that Finance Act, 2021 made amendment in provision of Section 36(1)(va) and 43B of the 1961 Act, but the Memorandum to Finance Bill, 2021 clearly stipulates that said amendments are applicable from ay: 2021-21 and onwards and hence the same is to be prospectively applie....
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....ibed for depositing the same under relevant statute governing PF/ESI. The ld. Sr. DR submitted that it is only because of interpretation by the Constitutional Courts of the provisions of Section 36(1)(va) that the tax-payers were granted relief by the appellate authorities. It was submitted by ld. Sr. DR that now in any case with the retrospective amendment made by Parliament to Section 36(1)(va) and 43B of the 1961 Act wherein Explanation 2 and 5 respectively were added to aforesaid sections, the matter is set to rest and the authorities below have rightly decided the issue against the assessee, and prayers were made to uphold the additions as were made by authorities below. Although ld. Sr. DR was aware that in the case of assessee itself for ay: 2018-19 , the Division Bench of Allahabadtribunal has decided this issue in favour of the assessee vide recent orders dated 16.12.2021 in which both of us were part of the Division Bench who pronounced the order, after considering the amendments as were made by Finance Act, 2021 and albeit principles of res-judicata are not applicable to income-tax proceedings but we are bound to maintain consistency in view of judgment of Hon'ble Suprem....
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....ion deducted by employer from salary of the employee is first treated as income of the employer u/s 2(24)(x) of the 1961 Act, and thereafter deduction is allowed u/s 36(1)(va) of the 1961 Act , provided the same is deposited to the credit of employee with relevant fund , within time allowed by the relevant statute governing PF/ESI. It is claimed that so far as employer contribution is concerned, it stands on different footing , because the employer is liable to contribute from its own fund and hence is in the nature of direct business expenditure. c) It is also claimed by ld. Sr. DR that when the provisions of Section 36(1)(va) is very clear that employee contribution of PF/ESI as deducted by employer from salary of employee is to be deposited within due date as prescribed under relevant statute governing PF/ESI for claiming deduction under the 1961 Act, there is no need to resort to any other provision such as Section 37(1) or Section 43B of the 1961 Act. d) It is claimed that so far as employer contribution to PF/ESI is concerned, it is governed by provisions of clause (b) of Section 43B of the 1961 Act and deduction is to be allowed on actual payment basis , bu....
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....):- i) Hitech(India) Private Limited v. UOI (1997) 227 ITR 446(AP) ii) CIT v. Madras Radiators & Pressings Limited , (2003) 129 Taxman 709(Mad.) iii) Unifac Management Services India Private Limited v. DCIT, (2018) 100 taxmann.com 244(Mad.) iv) CIT v. Gujarat Road Transport Corpn (2014) 41 taxmann.com 100(Guj. HC) v) CIT v. Merchem Limited (2015) 61 taxmann.com 119(Ker.) vi) B S Patel v. DCIT , (2010) 326 ITR 457(MP) vii) Popular Vehicles & Services Private Limited v. CIT (2018) 96 taxmann.com 13(Ker.) g) It is claimed by ld. Sr. DR that despite the above clear legal position that Section 43B covers only employers contribution towards PF/ESI and does not cover employee contribution towards PF/ESI , many Courts have applied the provisions of Section 43B on employees contribution as well and allowed the deduction to employer in cases even when employees contribution is deposited beyond the due date prescribed for depositing the amount to the credit of employees with relevant fund under the statute , but deposited on or before the due date of filing of return of income u/s 139(1) of the 1961 Act. The ld. Sr. DR ha....
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....le day as per the due date mentioned in the relevant statute governing PF/ESI. The amendments made by Finance Act, 2021 is merely clarificatory in nature and hence applicable from retrospective effect. The ld. Sr. DR then relied upon various judicial decisions of the Hon'ble Superior Courts explaining rules of interpretation of statute and amendments brought in statute , to buttress his view point about retrospectivity of amendment by Finance Act, 2021, as under: i) CIT v. J.H. Gotla 1985 AIR 1698, 1985 SCR Supl. (2) 711 ii) JK Spinning & Weaving Mills Limited v. UOI [1988 SCR (1) 700] iii) R. Rajagopal Reddy(dead) by Lrs. & Ors. v. Padmini Chandrasekharan (dead) by Lrs. (1995(2)SCC630) iv) Godrej Soaps Limited & Anr. v. State of Maharashtra & Ors. ( 2006 145 STC 137 Bom.) v) CIT v. Archean Granites Private Limited (Madras High Court) vi) Vijay & State of Maharashra & Ors. vii) CIT v. Vatika Township Private Limited in Civil Appeal No. 8750 of 2014(Arising out of SLP(C) No. 540 of 2009 (i) Thus, relying upon aforesaid judicial decisions and the unambiguous wording of the existing amended provisions of Section 3....
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....h both of us was part of Division Bench who pronounced the order, in the case of JCIT(OSD) , Allahabad v. Bharat Pumps and Compressors Limited, Allahabad, in ITA no. 147 and 148 /Alld/2016 for ay: 2005-06, vide orders dated 12.08.2021, wherein the tribunal considered the amendment made by Finance Act, 2021 in Section 36(1)(va) and 43B , and decided this issue in favour of the tax-payer , by holding as under: 10. We have considered rival contentions and perused the material on record. We have observed that the issue before us is regarding allowability of employees contribution of Rs. 1,82,98,490/- towards PF received by assessee from its employees , but which was deposited by assessee to the credit of employees with PF trust late beyond the time provided under the relevant PF Act , but albeit the same was admittedly deposited within the due date prescribed for filing of return of income u/s 139(1) of the 1961 Act. This issue was subject matter of different interpretation by different High Courts . The Hon'ble Gujarat High Court and Hon'ble Kerala High Court has decided this issue against the tax-payer and in favour of Revenue, while Hon'ble Allahabad High Court, Hon'ble Bom....
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....the time prescribed under relevant PF statute but admittedly the said amount stood deposited by assessee to the credit of employee with relevant fund before the due date prescribed for filing of return of income u/s 139(1) of the 1961 Act , by relying on following judicial decision(s) as stipulated hereunder:- 1. CIT v. Alom Extrusions Ltd., in 319 ITR 306(SC) 2. CIT v. Industrial Security and Intelligence India Pvt. Ltd., (Mad) Tax Case Appeal Nos.585 and 586 of 2015 and M.P No.1 of 2015 , dated 24.07.2015 3. ACIT v. M/s.Easun Products of India (P) Ltd., in I.T.A. No. No.182/Mds./2016 , vide order of Chennai Tribunal dated 19.05.2016, for ay: 2012- 13. 10.2 Aggrieved by an appellate order dated 30.08.2017 passed by learned CIT(A), the Revenue has now filed an appeal before the tribunal agitating against the decision of learned CIT(A) granting relief to assessee despite specific provision as is contained in Section 36(1)(va) read with Explanation 1 of the 1961 Act that deduction towards employees contribution to PF can be allowed only when the employer remits the said employee contribution to the credit of employee with relevant fund on or before....
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....nder: "Definitions. 2. In this Act, unless the context otherwise requires,- ** ** ** (24) "income " includes- ** ** ** (x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees ;] " "Other deductions. 36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- [(va) any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation.-For the purposes of this clause, "due date" means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued ....
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....any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, [or] [(c)** ** ** 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)] 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 during the previous year on or before the due date as defined in the Explanation below clause (va) of subsection (1) of sec....
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....apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under subsection (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. ** ** ** 10.3.4 It is pertinent at this stage to reproduce the decision of Hon'ble Supreme Court in the case of Alom Extrusions Limited (supra) wherein the amendments made by Finance Act, 2003 w.e.f. 01.04.2004 were held to be curative in nature and applicable retrospectively effective from 01.04.1988, which decision of Hon'ble Supreme Court is reproduced hereunder: "6. The lead matter in this batch of civil appeals is CIT v. Alom Extrusions Ltd. [Civil Appeal arising out of S.L.P. (C) No. 23851 of 2007]. Prior to the amendment of section 43B of the Act, vide Finance Act, 2003, the two provisos to section 43B of the Act read as under : "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)....
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....er(s) is maintaining his books on Accrual System of Accounting, even after collecting the contribution from his employee(s) and even without remitting the amount to the Regional Provident Fund Commissioner [R.P.F.C.], the assessee(s) would be entitled to deduction as business expense by merely making a provision to that effect in his Books of Account. The same situation arose prior to 1st April, 1984, in the context of assessees collecting sales tax and other indirect taxes from their respective customers and claiming deduction only by making provision in their Books without actually remitting the amount to the exchequer. To curb this practice, section 43B was inserted with effect from 1-4-1984, by which the Mercantile System of Accounting with regard to tax, duty and contribution to welfare funds stood discontinued and, under section 43B, it became mandatory for the assessee(s) to account for the afore- stated items not on Mercantile basis but on cash basis. This situation continued between 1-4-1984 and 1-4- 1988, when the Parliament amended section 43B and inserted first proviso to section 43B. By this first proviso, it was, inter alia, laid down, in the context of any sum payabl....
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....incide with the accounting period of R.P.F.C. For example, in many cases, the time to make contribution to R.P.F.C. ended after due date for filing of returns. Therefore, the industry once again made representation to the Ministry of Finance and, taking cognizance of this difficulty, the Parliament inserted one more amendment vide Finance Act, 2003, which, as stated above, came into force with effect from 1-4-2004. In other words, after 1-4-2004, two changes were made, namely, deletion of the second proviso and further amendment in the first proviso, quoted above. By the Finance Act, 2003, the amendment made in the first proviso equated in terms of the benefit of deduction of tax, duty, cess and fee on the one hand with contributions to Employees' Provident Fund, superannuation fund and other welfare funds on the other. However, the Finance Act, 2003, bringing about this uniformity came into force with effect from 1-4-2004. Therefore, the argument of the assessee(s) is that the Finance Act, 2003, was curative in nature, it was not amendatory and, therefore, it applied retrospectively from 1-4-1988, whereas the argument of the Department was that Finance Act, 2003, was amendator....
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.... mentioned hereinabove, and which resulted in the enactment of Finance Act, 2003, deleting the second proviso and bringing about uniformity in the first proviso by equating tax, duty, cess and fee with contributions to welfare funds. Once this uniformity is brought about in the first proviso, then, in our view, the Finance Act, 2003, which is made applicable by the Parliament only with effect from 1- 4-2004, would become curative in nature, hence, it would apply retrospectively with effect from 1-4-1988. Secondly, it may be noted that, in the case of Allied Motors (P.) Ltd. v. CIT [1997] 224 ITR 677(SC), the scheme of section 43B of the Act came to be examined. In that case, the question which arose for determination was, whether sales tax collected by the assessee and paid after the end of the relevant previous year but within the time allowed under the relevant Sales Tax law should be disallowed under section 43B of the Act while computing the business income of the previous year? That was a case which related to assessment year 1984-85. The relevant accounting period ended on 30-6-1983. The Income-tax Officer disallowed the deduction claimed by the assesseewhich was on account o....
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.... [end of accounting year] but before filing of the returns under the Income-tax Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under section 43B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right up to 1-4-2004, and who pays the contribution after 1- 4-2004, would get the benefit of deduction under section 43B of the Act. In our view, therefore, Finance Act, 2003, to the extent indicated above, should be read as retrospective. It would, therefore, operate from 1-4- 1988, when the first proviso was introduced. It is true that the Parliament has explicitly stated that Finance Act, 2003, will operate with effect from 1-4-2004. However, the matter before us involves the principle of construction to be placed on the provisions of Finance Act, 2003. 10. Before co....
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....hese appeals were admitted and heard on the following question of law : - "Whether the ITAT was correct in law in deleting the addition relating to employees' contribution towards Provident Fund and ESI made by the Assessing Officer under section 36( 1)(va) of the Income-tax Act, 1961 ?" 5. Section 36 of the Act deals with certain deductions which shall be allowed in respect of matters dealt with therein, in computing the income referred to in section 28 of the Act. Different types of deductions are provided therein in various clauses of section 36. Clause (iv) of subsection (1) deals with deductions on account of contribution towards a recognized provident fund or an approved superannuation fund made by the assessee as an employer, subject to certain limits and also subject to certain conditions as the CBDT may think fit to specify. Clause (v) of subsection (1) of section 36 enables the assessee to seek deduction in respect of sum paid by it as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust. Then comes clause (va) which deals about employees' contrib....
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.... for furnishing the return of income under subsection (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." [Emphasis supplied] 7. During the period in question with which we are concerned, section 43B contained second proviso also, which stands omitted by the Finance Act, 2003 with effect from 1 - 4-2004. Since, this provision existed at the relevant time, it also needs to be reproduced : - "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." 8. As per the first proviso, if the payment is actually made on or before the due date applicable in his case for filing the return, it would be admissible as deduction. Thus, the &....
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....r fund for the welfare of such employees. It is clear from the above that as soon as employees' contribution towards provident fund or ESI is received by the assessee by way of deduction or otherwise from the salary/wages of the employees, it will be treated as 'income' at the hands of the assessee. It clearly follows therefrom that if the assessee does not deposit this contribution with provident fund/ESI authorities, it will be taxed as income at the hands of the assessee. However, on making deposit with the concerned authorities, the assessee becomes entitled to deduction under the provisions of section 36(1)(va) of the Act. Section 43B(b), however, stipulates that such deduction would be permissible only on actual payment. This is the scheme of the Act for making an assessee entitled to get deduction from income insofar as employees' contribution is concerned. It is in this backdrop we have to determine as to at what point of time this payment is to be actually made. 12. Since the ITAT while holding that the amount would qualify for deduction even if paid after the due dates prescribed under the Provident Fund/ESI Act but before the filing of the income....
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....efore filing of the return. The special leave petition is dismissed." 13. It is clear from the above that in Vinay Cement Ltd.'s case (supra), the SLP preferred by the Revenue against the judgment of the Guwahati High Court was dismissed making the aforequoted observations. The reasons are given and, thus, it amounts to affirmation of the view taken by the High Court of Guwahati. 14. When we keep that proposition in mind and also take into consideration various judgments where Vinay Cement Ltd.'s case (supra) is applied and followed, it will not be possible to accept the contention of the Revenue. 15. In CIT v. Dharmendra Sharma [2008] 297ITR 320, this Court specifically dealt with this issue and relying upon the aforesaid judgment of the Guwahati High Court, as affirmed by the Supreme Court in Vinay Cement Ltd.'s case (supra), the appeal of the Revenue was dismissed. More detailed discussion is contained in another judgment of this Court in CIT v. P.M. Electronics Ltd. [2009] 177 Taxman 1 . Specific questions of law which were proposed by the Revenue in that case were as under : - "(a) Whether amounts paid on account of PF/ESI ....
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..... Union of India [2000] 2 SCC 536 and Rayala Corporation (P.) Ltd. v. Director of Enforcement [1969] 2 SCC 412 and General Finance Co. v. Asstt.CIT [2002] 257 ITR 338 (SC). The said submissions found favour with the Division Bench of the Guwahati High Court and relying on earlier decisions of its own Court in CIT v. Assam Tribune [2002] 253 ITR 93 and CIT v. Bharat Bamboo & Timber Suppliers [1996] 219 ITR 212 the Division Bench dismissed the appeal of the revenue. It transpires that the aforesaid matter was taken up in appeal along with other matters including Vinay Cement Ltd.'s case (supra). The order in Vinay Cement Ltd.'s case (supra) was passed by the Supreme Court on 7-3-2007 wherein it observed as follows:- 'Delay condoned. In the present case we are concerned with the law as it stood prior to the amendment of section 43B. In the circumstances, the assessee was entitled to claim the benefit in section 43B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return. Special leave petition is dismissed'. 10. In view of the above, it is quite evident that the special leave petition was dismissed....
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....on Bench of the Madras High Court in the case of Nexus Computer (P.) Ltd. (supra) came to the conclusion that the view taken by the Supreme Court in Vinay Cement Ltd. 's case (supra) would bind the High Court as it was not declared by the Supreme Court under article 141 of the Constitution. 12. We are in respectful agreement with the reasoning of the Madras High Court in Nexus Computer (P.) Ltd.'s case (supra). Judicial discipline requires us to follow the view of the Supreme Court in Vinay Cement Ltd.'s case (supra) as also the view of the Division Bench of this Court in Dharmendra Sharma's case (supra). 13. In these circumstances, we respectfully disagree with the approach adopted by a Division Bench of the Bombay High Court in Pamwi Tissues Ltd.'s case (supra). 14. In these circumstances indicated above, we are of the opinion that no substantial question of law arises for our consideration in the present appeal. The appeal is, thus, dismissed." (p. 3) It also becomes clear that deletion of the 2nd proviso is treated as retrospective in nature and would not apply at all. The case is to be governed with the application of the....
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.... 508 held that if the assessee had deposited employee's contribution towards Provident Fund and ESI after due date as prescribed under the relevant Act, but before the due date of filing of return under the Income Tax Act, no disallowance could be made in view of the provisions of Section 43B as amended by Finance Act, 2003. 6. In the present case, the assessee had remitted the employees contribution beyond the due date for payment, but within the due date for filing the return of income. Hence, following the above-said decision, we find no reason to differ with the findings of the Tribunal. Accordingly, we find no question of law much less any substantial question of law arises for consideration in these appeals. Accordingly, both the Tax Case(Appeals) stand dismissed. No Costs. Consequently, M. P. N. 1 of 2015 is also dismissed." 10.3.7 We have also observed that Co-ordinate Division Bench of Chennai Tribunal in ACIT v. SPEL Semiconductor Limited in I.T.A. No. 3263/Chny/2018 for ay:2013-14 has decided this issue in favour of the tax-payer as in that case the employee contribution of the Provident Fund was deposited by employer to the credit of employees with....
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....rma (supra) , wherein the Hon'ble Madras High Court had noted that the assessee did not appear before tribunal and also it is an order passed by Hon'ble Madras High Court ex- parte in the absence of the tax-payer, wherein no notice was issued to the taxpayer as proceedings were pending against the tax-payer before National Company Law Tribunal as the tax-payer was in liquidation. The Hon'ble Madras High Court observed in the case of Orchid Pharma (supra) that tribunal has decided the issue in favour of tax-payer by relying on decision of Hon'ble Madras High Court in the case of Industrial Security and Intelligence Private Limited (supra). The Revenue brought to the notice of the Hon'ble Madras High Court , decision(s) of Hon'ble Kerala High Court in the case of CIT v. Merchem Limited reported in (2015) 378 ITR 443(Ker.) and also decision in the case of Popular Vehicles and Services Private Limited v. CIT reported in (2018) 96 taxmann.com 13(Ker.), wherein this issue is decided by Hon'ble Kerala High Court in favour of Revenue and with this background, Hon'ble Madras High Court remanded the matter back to the file of learned CIT(A) for fresh adjudicat....
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....p for consideration before the Hon'ble Supreme Court in the case of Alom Extrusions Ltd. (supra). The Tribunal in the case at hand relied upon the said judgment. There is no reason to fault the order passed by the Tribunal. We are of the view that the decision of the Supreme Court in Alom Extrusions Ltd. (supra) applies to employees' contribution as well as employers' contribution. Question Nos.2, 3 & 4 are accordingly answered in favour of the assessee and against the revenue." 10.3.9 The Hon'ble Bombay High Court has consistently held this issue in favour of the tax-payer in its other decisions also such as Geekay Security Services Private Limited v. DCIT reported in (2019) 101 taxmann.com 192(Bom.), CIT v. Hindustan Organics Chemicals Limited (2014) 366 ITR 1(Bom.). The Hon'ble Delhi High Court in AIMIL Limited (supra) held that if employees contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payments but can incur penalties also , for which specific provisions are made in the Provident Fund Act as well as the ESI Act. It further held that the statutes ....
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....T v. Merchem Limited reported in (2015) 378 ITR 443(Ker. HC) and also in Popular Vehicles and Services Private Limited v. CIT (2018) 406 ITR 150 (Ker.HC). While deciding the appeal in the case of Merchem Limited (supra) in favour of Revenue on this issue, the Hon'ble Kerala High Court held that deduction on account of employees contribution towards PF/ESI can only be allowed if the said amount is deposited to the credit of employee with relevant funds within the due date as prescribed under the statute governing PF/ESI keeping in view provisions of Section 36(1)(va) read with Explanation 1 and provisions of Section 2(24)(x) of the 1961 Act, thus applying strict interpretation and holding that otherwise Section 36(1)(va) read with Explanation 1 will become otiose which was not the intention of legislature. It further went on to hold that the issue before Hon'ble Supreme Court while adjudicating appeal in the case of Alom Extrusion (supra) was never with respect of employees contribution to PF/ESI and it was only in context of employers contribution to PF/ESI , wherein amendments brought in by Finance Act, 2003 were held to be retrospective by Hon'ble Supreme Court in the....
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....ce to Section 2 (24). Section 2 (24) includes as income, any contribution received by the employer from the employee for the purpose of remittance to a fund created for the welfare of the employees; including inter alia a provident fund and that under the ESI Act. When the same is remitted on the due date as prescribed in the statute or order creating such fund, then it is eligible for deduction under Section 36. Section 43B(b) refers to "a sum payable by the assessee as an employer", to an employees welfare fund which is the employer's contribution. 9. We have carefully gone through the decisions of the Hon'ble Supreme Court as also of the Division Bench. The primary question to be considered is whether there should be a reconsideration of Merchem Ltd.'s case (supra). Alom Extrusions Ltd.'s case (supra)and Merchem Ltd.'s case (supra) applied in two different fields; the former with reference to Section 43B(b), being employer's contribution and the latter dealing with employee's contribution as covered by Section 36(1)(va). We would first deal with Alom Extrusions Ltd.'s case (supra)which has dilated upon the history of the legislation and t....
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...."disallow deductions claimed merely by making a book entry based on the mercantile system of accounting" (sic - para 16). Section 43B made it mandatory for the department to grant deduction in computing the income under Section 28 in the year in which the tax, duty, cess, etc. were paid. However, the due dates under the various enactments, i.e.; the welfare and tax legislation would not have the due date before the date of filing of return as provided in the Income Tax Act. On account of this the first proviso was introduced to grant a relief by way of deduction insofar as the tax, duties, cess or fee paid before the filing of the return under the IT Act though after the previous year; the liabilities having accrued in that previous year. This relaxation, however, was restricted to tax, duties, cess and fee and not applied to contributions to labour welfare funds. The reason also stated by the Hon'ble Supreme Court "to be that the employer(s) should not sit on the collected contributions and deprive the workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the welfare funds" (sic - para 16). It is this declaration by the Hon&....
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.... This took in only the employer's contribution especially since Section 2(24) and subclause (va) were retained. The employee's contributions, as Merchem Ltd.'s case (supra) noticed, stands on a different footing, since it is collected from the employee as a deduction in their salary itself. This would in effect be income of the assessee, as has been specifically indicated in the definition of "income" under Section 2(24)(x), which provision was introduced w.e.f 01.04.1988 as per Finance Act, 1987. 14. We are of the opinion that the question with respect to employee's contribution is regulated by clause (x) of Section 2(24) and sub-clause (va) of Section 36(1) and would not be affected by Section 43B. Section 43B though a non-obstante clause, makes deductions to be allowable only on actual payment; when such deductions are otherwise allowable. Primarily it is to be noticed that it is a restrictive clause, the amendments to which or the deletion of a proviso in which cannot lead to it being converted as an enabling provision permitting deduction even when there was no deduction permissible by the other provisions of the Act. The nonobstante clause has no effe....
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.... this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under Subsection (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. " Further, in Explanation 1 to Sec. 43B also, the phraseology used persuade us to think that Sec. 43B can be applied to the contribution payable by the assessee as an employer, which reads thus: "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 actual....
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....ent year, de hors the fact that it was paid in the subsequent year. 18. Sub-clause (va) of Section 36(1) takes care of the employee's contribution, which stands unaffected by Section 43B as the restriction available in Section 43B is already available under the Explanation to the said clause, with a qualification of the payment being before the due date, as stipulated by the statute or order creating the fund. We would also observe that, as the Hon'ble Supreme Court noticed, the legislature took a different approach with respect to the contributions deducted from the salary of the employees which had to be paid to the welfare fund within the due date; as provided under the statute which created the welfare fund. The contributions which are deducted at the time of payment of salary is received by the employer- Company and is treated as income under Section 2(24). On remittance of this contribution, within the due date, it is allowed as a deduction under Section 36. If it is not paid to the welfare fund within the due date provided under the relevant statute, it remains as an income in the books of accounts of the assessee/employer Company. The said contribution havi....
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....respect of...'. Thus, it stipulates that deduction shall be allowed only on actual payment basis in the year of payment of deduction which otherwise is allowable under the 1961 Act. Thus, if the deduction is not otherwise allowable under the 1961 Act owing to provision in statute, then recourse to Section 43B of the 1961 Act cannot be made at threshold. Section 43B of the 1961 Act creates further embargo on deductions which are otherwise allowable under the provision of the 1961 Act, but owing to Section 43B it can only be allowed only on actual payment basis and not otherwise . Then Section 43B of the 1961 Act , by a proviso stipulates that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income u/s 139(1) of the 1961 Act . So , what is important for entering into provisions of Section 43B of the 1961 Act is that the deduction ought to be firstly allowable under the provision of the 1961 Act before recourse to Section 43B of the 1961 Act can be taken. Provisions of Section 36(1)(va) allows deduction towards employees contribution to PF/ESI an....
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....nstant case the aforesaid sum of Rs. 6,31,788/- being employee contribution towards PF was not deposited by assessee to the credit of employees with PF Funds within due date prescribed under statute governing PF which at threshold was hit by provisions of Section 36(1)(va) read with Explanation 1 and Section 2(24)(x) of the 1961 Act and deduction is not allowable going by strict and literal interpretation of provisions of the statute. Thus, once the deduction is found to be not allowable otherwise under the 1961 Act being hit by infringement of Section 36(1)(va) of the 1961 Act on account of employees share of PF contribution being deposited to the credit of employee with relevant fund by assesseeemployer beyond the time stipulated as due date under PF Act , there is no question of entering into provisions of Section 43B of the 1961 Act which deals with allowing deduction on payment basis provided the deduction is otherwise allowable under the provisions of the 1961 Act. Section 36(1)(va) of the 1961 Act is a provision which entitles taxpayer to claim deduction from the income and hence the provision is to be strictly construed and the onus is on the assessee to prove that it fulfi....
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....Ltd. case", for brevity), a distinction between stage of finding out the eligibility to seek exemption and stage of applying the nature of exemption was made. Relying on the decision in CCE v. Parle Exports (P) Ltd. :[1989] 1 SCC 345, it was held: (Wood Papers Ltd. case, SCC p. 262, para 6) "6. ... Do not extend or widen the ambit at the stage of applicability. But once that hurdle is crossed, construe it liberally." The reasoning for arriving at such conclusion is found in para 4 of Wood Papers Ltd. case, which reads: (SCC p. 260) "4. ... Literally exemption is freedom from liability, tax or duty. Fiscally, it may assume varying shapes, specially, in a growing economy. For instance tax holiday to new units, concessional rate of tax to goods or persons for limited period or with the specific objective, etc. That is why its construction, unlike charging provision, has to be tested on different touchstone. In fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive a....
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....enefit." 59. The above decision, which is also a decision of a two- Judge Bench of this Court, for the first time took a view that liberal and strict construction of exemption provisions are to be invoked at different stages of interpreting it. The question whether a subject falls in the notification or in the exemption clause, has to be strictly construed. When once the ambiguity or doubt is resolved by interpreting the applicability of exemption clause strictly, the Court may construe the notification by giving full play bestowing wider and liberal construction. The ratio of Parle Exports case deduced as follows: (Wood Papers Ltd. case, SCC p. 262, para 6) "6. ... Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed, construe it liberally." 60. We do not find any strong and compelling reasons to differ, taking a contra view, from this. We respectfully record our concurrence to this view which has been subsequently, elaborated by the Constitution Bench in Hari Chand case " (emphasis in bold supplied) 17.2. The Constitution Bench decision in Hari Chand Shri Gopal (supra) was also taken note of, inte....
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....yed or fulfilled exactly, though at times, some latitude can be shown, if there is failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. ** ** **" (emphasis in bold supplied) 17.3. In view of above and with reference to several other decisions, in Dilip Kumar & Co., the Constitution Bench summed up the principles as follows:- "66. To sum up, we answer the reference holding as under: 66.1. Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. 66.2. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. 66.3. The ratio in Sun Export case is not correct and all the decisions which took similar view as in Sun Export case stand overruled." (emphasis in bold supplied) ....
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....o his case; and if there be any ambiguity in the deduction clause, the same is subject to strict interpretation with the result that the benefit of such ambiguity cannot be claimed by the assessee, rather it would be interpreted in favour of the revenue. In view of the Constitution Bench decision in Dilip Kumar & Co. (supra), the generalised observations in Baby Marine Exports (supra) with reference to a few other decisions, that a tax incentive provision must receive liberal interpretation, cannot be considered to be a sound statement of law; rather the applicable principles would be those enunciated in Wood Papers Ltd. (supra), which have been precisely approved by the Constitution Bench. Thus, at and until the stage of finding out eligibility to claim deduction, the ambit and scope of the provision for the purpose of its applicability cannot be expanded or widened and remains subject to strict interpretation but, once eligibility is decided in favour of the person claiming such deduction, it could be construed liberally in regard to other requirements, which may be formal or directory in nature. 10.3.11 Thus, keeping in view strict and literal interpretation of provisio....
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....le Gujarat High Court and Hon'ble Kerala High Court) to make it workable as otherwise the tax-payer will lose the deduction for ever if the employee contribution is not deposited within due date as prescribed under relevant statute , although the said contribution stood deposited by employer belatedly before the due date for filing of return of income u/s 139(1) of the 1961 Act and the amount will stood brought to tax as income keeping in view provisions of Section 2(24)(x) of the 1961 Act so far employee share of contribution towards PF ,ESI and other employees welfare funds is concerned. No doubt it is well cherished objective that there should not be an unjust enrichment of the employer of the amount which it collects from its employees towards employees share of PF , ESI and other employees welfare funds and in the ideal situation , the said amounts ought to have been deposited by employer which it collected from its employees, to the credit of employee with relevant funds within time stipulated as due date by respective statute governing PF/ESI etc. but at the same time if the employer does not deposit the contribution towards PF/ESI etc within due date as prescribed under....
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....va) read with Section 2(24)(x) and 43B of the 1961 Act. The Hon'ble Jurisdictional High Court has in para 29 has taken a view that the law laid down by Hon'ble High Court of Karnataka , Hon'ble High Court of Rajasthan, Hon'ble High Court of Punjab and Haryana , Hon'ble High Court of Delhi, Hon'ble High Court of Bombay and Hon'ble High Court of Himachal Pradesh have rightly applied Section 43B in respect of both contributions i.e. employers and employees . The Hon'ble Jurisdictional High Court has with great respect dissented with the view taken by Hon'ble Gujarat High Court and Hon'ble High Court of Kerala, which view on the issue was decided by Hon'ble Gujarat High Court and Hon'ble High Court of Kerala in favour of Revenue. It will be relevant to refer at this stage to the Constitution Bench decision of Hon'ble Supreme Court in the case of Commissioner of Customs (Imports) v. Dilip Kumar & Co. reported in (2018) 9 SCC 1 , in which Constitution Bench of Hon'ble Supreme Court has held that Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause o....
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....ing out the eligibility to seek exemption and stage of applying the nature of exemption was made. Relying on the decision in CCE v. Parle Exports (P) Ltd. : [1989] 1 SCC 345, it was held: (Wood Papers Ltd. case, SCC p. 262, para 6) "6. ... Do not extend or widen the ambit at the stage of applicability. But once that hurdle is crossed, construe it liberally." The reasoning for arriving at such conclusion is found in para 4 of Wood Papers Ltd. case, which reads: (SCC p. 260) "4. ... Literally exemption is freedom from liability, tax or duty. Fiscally, it may assume varying shapes, specially, in a growing economy. For instance tax holiday to new units, concessional rate of tax to goods or persons for limited period or with the specific objective, etc. That is why its construction, unlike charging provision, has to be tested on different touchstone. In fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment State reven....
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....cision of a two- Judge Bench of this Court, for the first time took a view that liberal and strict construction of exemption provisions are to be invoked at different stages of interpreting it. The question whether a subject falls in the notification or in the exemption clause, has to be strictly construed. When once the ambiguity or doubt is resolved by interpreting the applicability of exemption clause strictly, the Court may construe the notification by giving full play bestowing wider and liberal construction. The ratio of Parle Exports case deduced as follows: (Wood Papers Ltd. case, SCC p. 262, para 6) "6. ... Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed, construe it liberally." 60. We do not find any strong and compelling reasons to differ, taking a contra view, from this. We respectfully record our concurrence to this view which has been subsequently, elaborated by the Constitution Bench in Hari Chand case " (emphasis in bold supplied) 17.2. The Constitution Bench decision in Hari Chand Shri Gopal (supra) was also taken note of, inter alia, in the following:- "50. We will now conside....
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.... be shown, if there is failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. ** ** **" (emphasis in bold supplied) 17.3. In view of above and with reference to several other decisions, in Dilip Kumar & Co., the Constitution Bench summed up the principles as follows:- "66. To sum up, we answer the reference holding as under: 66.1. Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. 66.2. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. 66.3. The ratio in Sun Export case is not correct and all the decisions which took similar view as in Sun Export case stand overruled." (emphasis in bold supplied) 17.4. Obviously, the generalised, rather sweeping, propositi....
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....lause, the same is subject to strict interpretation with the result that the benefit of such ambiguity cannot be claimed by the assessee, rather it would be interpreted in favour of the revenue. In view of the Constitution Bench decision in Dilip Kumar & Co. (supra), the generalised observations in Baby Marine Exports (supra) with reference to a few other decisions, that a tax incentive provision must receive liberal interpretation, cannot be considered to be a sound statement of law; rather the applicable principles would be those enunciated in Wood Papers Ltd. (supra), which have been precisely approved by the Constitution Bench. Thus, at and until the stage of finding out eligibility to claim deduction, the ambit and scope of the provision for the purpose of its applicability cannot be expanded or widened and remains subject to strict interpretation but, once eligibility is decided in favour of the person claiming such deduction, it could be construed liberally in regard to other requirements, which may be formal or directory in nature." Thus, keeping in view strict and literal interpretation of provisions of Section 36(1)(va) of the 1961 Act read with Explanation 1 and....
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....e to both employer and employee contribution and thus in case employee contribution towards PF received by employer is deposited to the credit of employees with the PF trust prior to due date of filing of return of income u/s 139(1), the taxemployer shall be entitled for deduction u/s 36(1)(va) read with Section 2(24)(x) and 43B of the 1961 Act. The Hon'ble Jurisdictional High Court has in para 29 has taken a view that the law laid down by Hon'ble High Court of Karnataka , Hon'ble High Court of Rajasthan, Hon'ble High Court of Punjab and Haryana , Hon'ble High Court of Delhi, Hon'ble High Court of Bombay and Hon'ble High Court of Himachal Pradesh have rightly applied Section 43B in respect of both contributions i.e. employers and employees . The Hon'ble Jurisdictional High Court has with great respect dissented with the view taken by Hon'ble Gujarat High Court and Hon'ble High Court of Kerala, which view on the issue was decided by Hon'ble Gujarat High Court and Hon'ble High Court of Kerala in favour of Revenue. Thus, the applicable provision as is contained in Section 36(1)(va) is read down by most of the Constitutional Courts including our Jurisdictional High Court (barring Hon&#....
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....of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applied." Although, on perusal of the above amendment by Finance Act, 2021 , it transpires that the said explanation was inserted by way of removal of doubt to clarify the law as existed on the statute so far as employee contribution received by employer from employee which is to be deposited to the credit of employee with PF fund on or before the due date as provided in statute governing PF, to enable the employer to claim deduction u/s 36(1)(va) of the 1961 Act read with Section 2(24)(x) of the Act, and no deduction shall be allowed by virtue of Section 43B in case of delayed deposit beyond the time stipulated for deposit under relevant statute governing PF by virtue of being hit by Section u/s 36(1)(va) of the Act as it is stated in the explanation that provisions of section 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the 'due date' under this clause , although the said amounts were deposited before the due date as prescribed for filing of return of income u/s 139(1) of the 1961 Act. The above amendment from the plain reading of t....
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.... inclusive definition of the income. Sub-clause (x) to the said clause provide that income to include any sum received by the assessee from his employees as contribution to any provident fund or superannuation fund or any fund set up under the provisions of ESI Act or any other fund for the welfare of such employees. Section 36 of the Act pertains to the other deductions. Sub-section (1) of the said section provides for various deductions allowed while computing the income under the head "Profits and gains of business or profession'. Clause (va) of the said sub-section provides for deduction of any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation to the said clause provides that, for the purposes of this clause, "due date" to mean the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued there-under or unde....
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....isions of the said section do not apply and deemed to never have been applied to a sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section 2 applies. These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years. [Clauses 8 and 9]" We have also noted that Hyderabad Bench(SMC Bench) of tribunal has decided this issue in favour of tax-payer in the case of Salzgitter Hydraulics Private Limited v. ITO reported in (2021) 128 taxmann.com 192(Hyd. Trib.) after considering the amendment made in Section 36(1)(va) and 43B by Finance Act, 2021, by holding as under: "2. Coming to the sole substantive issue of ESI/PF disallowance of Rs. 1,09,343/- and Rs. 3,52,622/-, the assessee's and revenue's stand is that the same has been paid before the due date of filing sec. 139(1) return and after the due date prescribed in the corresponding statutes; respectively. I notice in this factual backdrop that the legislature has not only incorporated necessary amendments in Sections 36(va) as well as 43B vide Finance Act, 2021 to ....
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....tion to PF before the due date for filing of return of income u/s 139(1) of the 1961 Act and hence the said amount was rightly disallowed by authorities below. The Revenue fails on this issue for the reasons cited above . We order accordingly. 11. In the result, the appeal filed by Revenue in ITA no. 147/Alld/2016, for ay: 2005-06 stood partly allowed for statistical purposes. We order accordingly." Respectfully following the aforesaid decision in the case of Bharat Pumps and Compressors Limited(supra) , in which both of us were part of the Division Bench who pronounced the order, we hold that in the instant appeal for ay: 2018-19 if the employee share of PF/ESI is deposited by employer to the credit of employee with the relevant fund maintained for PF/ESI before the due date of filing of return of income u/s 139(1) of the 1961 Act, then the assessee shall be entitled for deduction u/s 36(1)(va) of the 1961 Act. The assessee's counsel has filed tax-audit report in which detail/ bifurcations of employee share of PF/ESI along with date of payment is mentioned, but challans are not filed. The said tax-audit report is placed on record in file. Thus for limited purpose....
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....0.2021 e) Jaipur-tribunal decision in the case of Bhivaram Pannalal Kumawat v. DCIT in ITA no. 76/JP/2021, order dated 12.10.2021 f) Hyderabad-tribunal decision in the case of Value Momentum Software Services Private Limited v. DCIT, in ITA no. 2197/Hyd/2017, order dated 19.05.2021 g) Hyderabad-tribunal decision in the case of Vijay Electricals Limited v. DCIT, in ITA no. 1533 & 1534/Hyd/2017, order dated 27.05.2021 h) Hyderabad-tribunal SMC decision in the case of Salzgitter Hydraulics Private Limited v. ITO, reported in (2021) 128 taxmann.com 192(hyd.-trib.SMC) i) Jaipur-tribunal decision in the case of Dhabryia Plywood Limited v. ADIT, CPC, reported in (2021) 133 taxmann. com 135(Jp-trib.) j) Bangalore-tribunal decision in the case of Shakuntala Agarbathi Company v. The DCIT, in ITA no. 385/ Bang/2021, vide orders dated 21.10.2021 k) Hyderabad-tribunal in the case of NCC Limited v. ACIT in ITA no. 595 & 596/Hyd/2020, vide common order dated 27.09.2021 l) Delhi-tribunal decision in the case of Indian Geotechnical Services v. ACIT, in ITA No. 622/Del/2018, vide order dated 27.08.2021(in which one of us, being ....
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....vide orders dated 16.12.2021 , are bound by the principles of consistency. We are aware that principles of res-judicata are not applicable to incometax proceedings, but at the same time in income-tax proceedings principles of consistency is to be followed. Reference is drawn to the decision of Hon'ble Supreme Court in the case of Radhasoami Satsang(supra). Thus, we are bound by principles of consistency and to follow our earlier year order in assessee's own case on the same issue and decide this appeal in favour of assesse as the facts are similar in the impugned ay: 2019-20 vis-à-vis facts in ay:2018- 19. But, during the course of hearing before the Division Bench, the Revenue has strenuously argued / insisted that this issue is to be decided in favour of Revenue more-so Revenue having been armed with the amendments made by Finance Act, 2021 to Section 36(1)(va) and 43B albeit said amendment was also considered by us while adjudicating appeal for ay: 2018-19 , because as per Revenue these amendments are merely clarificatory in nature and shall have retrospective effect, and as per Revenue the decisions rendered by Hon'ble High Court(s) in favour of tax-payers prior to afore....
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....le of res judicata but because of theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi-judicial or judicial can generally be permitted to take a different view. This mandate is subject to only to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incuriam. However, these are fetters only on a co-ordinate Bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed an refer the matter to a Bench of superior strength or in some cases to a Bench of superior jurisdiction. **** **** ....But in tax cases relating to a subsequent year involving the same issue as an earlier year, the court can differ from the view expressed if the case is distinguishable or per incuriam...... " We have already extracted in preceding para's the crux/gist of Revenues contention to support its stand. Most of the contentions of the Revenue were already considered by us , while adjudicating appeal of the assesse for ay: 2018-19, vide orders dated 16.12.2021, which is a ....
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....ding for interest for delayed payments, damages/penalties in case payments are delayed and also providing for punishment/prosecution for failure to comply with the provisions of these special statute governing PF/ESI. Reference is drawn Section 7Q , 14, 14A, 14AA, 14AB, 14AC, 14B and 14C of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. Stringent provisions also found place in ESI Act. Thus , to say that these are benevolent statute and thus the provision u/s 36(1)(va) read with Section 2(24)(x) is to be strictly construed even under the 1961 Act , wherein for a single day delay in deposit of employee share of PF/ESI by employer to the credit of employee with relevant fund, beyond the time provided under these special statute for deposit of PF/ESI which is fifteen days from the end of the month to which such contribution pertain in case of PF , the same is to be held chargeable to tax and denying the deduction u/s 36(1)(va) forever does not hold merit in the teeth of binding decision of Hon'ble jurisdictional High Court in the case of Sagun Foundries(supra). The Revenue is not able to place on record any contrary decision of Hon'ble Apex court and/or Hon....
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.... jurisdictional High Court in the case of Sagun Foundry Private Limited v. CIT, Kanpur in ITA No. 87 of 2006, vide judgment dated 21.12.2016 has decided this issue in favour of the tax-payer, by holding that Section 43B is applicable to both employer and employee contribution and thus in case employee contribution towards PF received by employer is deposited to the credit of employees with the PF trust prior to due date of filing of return of income u/s 139(1), the employer shall be entitled for deduction u/s 36(1)(va) read with Section 2(24)(x) and 43B of the 1961 Act. The Hon'ble Jurisdictional High Court while deciding Sagun Foundry(Supra) has discussed the decision of Hon'ble Supreme Court in para 25 to 28 and then adjudicated this issue in favour of the tax-payer. The Hon'ble Jurisdictional High Court has in para 29 has taken a view that the law laid down by Hon'ble High Court of Karnataka , Hon'ble High Court of Rajasthan, Hon'ble High Court of Punjab and Haryana , Hon'ble High Court of Delhi, Hon'ble High Court of Bombay and Hon'ble High Court of Himachal Pradesh have rightly applied Section 43B in respect of both contributions i.e. employers and employees . The Hon'ble Juri....
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....nt to Section 36(1)(va) by Finance Act, 2021, wherein Explanation 2 was inserted, which reads as under: " 36(1)(va)**** **** Explanation 2-For the removal of doubts , it is hereby clarified that the provisions of section 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the 'due date' under this clause;" Correspondingly, there was an amendment to Section 43B of the 1961 Act by Finance Act, 2021, wherein Explanation 5 was inserted , which reads as under: "43B**** **** Explanation5- For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the assesse from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applied." Although, on perusal of the above amendment by Finance Act, 2021, it transpires that the said Explanations were inserted in Section 36(1)(va) and 43B by way of removal of doubt to clarify the law as existed on the statute so far as employee contribution received by employer from employee which is to be deposit....
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....rovides that, for the purposes of this clause, "due date" to mean the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued there-under or under any standing order, award, contract of service or otherwise. 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 sub-section (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 ....
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....he said Memorandum that some courts have applied the provision of section 43B on employee contribution as well and have decided this issue in favour of taxpayer. Thus, the Parliament was fully aware that some courts have interpreted the provisions of Section 36(1)(va) by allowing the extended period as provided u/s 43B , in favour of the tax-payer, but still the Parliament chose to make the amendments to Section 36(1)(va) and 43B to be applied w.e.f .01.04.2021 and made applicable to assessment year 2021-22 and subsequent assessment years . This clearly shows intention of Parliament to accept the interpretation provided by Constitutional Courts in reading down provision of Section 36(1)(va) wherein extended period allowed u/s 43B was applied even to employee contribution to PF/ESI, until assessment year 2020-21 and the Parliament chose to apply the said amendments w.e.f. 01st April , 2021 and made applicable effective from assessment year 2021-22 and subsequent assessment years. Thus, it is clear that the Parliament chose not to litigate this issue prior to assessment year 2021-22 and to close all disputes on this issue , prior to assessment year 2021-22 , and made these stringent ....
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....ctions to be given at the highest level, besides ensuring timely submission of replies, Counter replies and necessary documents to the advocates. The Central Board of Direct Taxes (CBDT) and the Central Board of Indirect Taxes and Customs (CBIC) under the Department of Revenue, have issued a slew of instructions and brought in several measures, for reducing litigations and the resultant burden on Courts. While the CBDT has issued circulars directing the field Officers that pending appeals before Income Tax Appellate Tribunals/High Courts/Supreme Court with tax effect below the specified limits may be withdrawn/not pressed, and in the process facilitating a better and concerted focus on high demand litigations. CBDT has also clarified to the field officers that appeals should not be filed merely because the tax effect in a particular case exceeds the prescribed monetary limits and the filing of an appeal should be decided strictly on the merits of the case. Similarly, the field formations under the CBIC have been instructed to withdraw appeals pending in High Courts/Customs Excise and Service Tax Appellate Tribunal, where the Supreme Court has decided on identical ....
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....03.2021 and 09.07.2021 has taken up the case for grant permission for data of various Tribunals and with LIMBS Ver.2 through API with the Chairperson/President of the Tribunals and Secretaries of the respective Ministries/Departments. At present, Central Administrative Tribunal, The Telecom Dispute Settlement & Appellate Tribunal and Appellate Tribunal for Electricity have provided API linkage to their database with LIMBS Ver.2. Further, the fast track integration of database of cases of Railway Claims Tribunal, Income Tax Appellate Tribunal, National Green Tribunal, National Company Law Tribunal and National Company Law Appellate Tribunal with LIMBS is envisioned. The alternative mechanism for the resolution of Inter-Ministerial/Departmental disputes also provide for an institutionalized mechanism for resolution of such disputes, namely, Administrative Mechanism for Resolution of Disputes (AMRD). This was framed by the Department of Legal Affairs and circulated vide O.M. dated 31.03.2020. This mechanism, applicable to disputes other than taxation disputes, will reduce litigations in courts and resolve the cases outside the court system, where both parties are Govt. Depart....
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..../s 36(1)(va) , but before the due date as prescribed for filing of return of income u/s 139(1) of the 1961 Act , and there cannot be a class different now at this stage where the deduction is to be denied on the ground of strict interpretation of the provisions of Section 36(1)(va) , unless the amendment made by Finance Act, 2021 is made specifically applicable retrospectively from the date of insertion of the provision or any other specified earlier date in the Finance Act, rather on the other hand , the Memorandum to Finance Bill, 2021 has specifically made this amendment applicable from 01.04.2021 and specified that the same shall be made applicable from assessment year 2021-22 and subsequent assessment years. Thus, the Parliament was fully aware that Some courts have decided this issue in favour of tax-payers by reading down the existing provisions of Section 36(1)(va) read with Section 2(24)(x) by applying provisions of Section 43B of the 1961 Act , but still the Parliament has made amendments to Section 36(1)(va) and 43B and made it applicable from ay: 2021-22 and subsequent assessment years, which we have already discussed in this order earlier that it was with an object to ....
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....c) Delhi-tribunal order in the case of Insta Exhibitions Private Limited v. Addl. CIT , in ITA No. 6941/Del/2017, vide orders dated 03.08.2021 d) Delhi-tribunal decision in the case of Aroon Facilitation Management Services Private Limited , SMC Bench in ITA no. 1824/Del/2020, vide order dated 13.10.2021 e) Jaipur-tribunal decision in the case of Bhivaram Pannalal Kumawat v. DCIT in ITA no. 76/JP/2021, order dated 12.10.2021 f) Hyderabad-tribunal decision in the case of Value Momentum Software Services Private Limited v. DCIT, in ITA no. 2197/Hyd/2017, order dated 19.05.2021 g) Hyderabad-tribunal decision in the case of Vijay Electricals Limited v. DCIT, in ITA no. 1533 & 1534/Hyd/2017, order dated 27.05.2021 h) Hyderabad-tribunal SMC decision in the case of Salzgitter Hydraulics Private Limited v. ITO, reported in (2021) 128 taxmann.com 192(hyd.-trib.SMC) i) Jaipur-tribunal decision in the case of Dhabryia Plywood Limited v. ADIT, CPC, reported in (2021) 133 taxmann. com 135(Jp-trib.) j) Bangalore-tribunal decision in the case of Shakuntala Agarbathi Company v. The DCIT, in ITA no. 385/ Bang/2021, vide orders dated 21.....
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....and shall be applicable from ay: 2021-22 and subsequent assessment years and shall not have retrospective effect. We also hold that Revenue is not able to establish that view taken by Division Bench of Allahabad-tribunal in assessee's own case for ay: 2018-19 was a view which was perincuriam or was suffering from manifest error or patent illegality . Thus, Respectfully following the aforesaid decision of Allahabadtribunal in assessee's own case for ay:2018-19 in ITA no. 13/Alld/2021 , vide orders dated 16.12.2021 in which both of us were part of the Division Bench who pronounced the order, we hold that in the instant appeal for ay: 2019-20 if the employee share of PF/ESI is deposited by employer to the credit of employee with the relevant fund maintained for PF/ESI before the due date of filing of return of income u/s 139(1) of the 1961 Act, then the assessee shall be entitled for deduction u/s 36(1)(va) of the 1961 Act. The assessee's counsel has filed tax-audit report in which detail/ bifurcations of employee share of PF/ESI along with date of payment is mentioned(page 66/pb), but challans are not filed. The said tax-audit report is placed on record in file. Thus for limited purp....