TaxTMI 
TaxTMI 
2021 (11) TMI 1041
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.... CIT(A)") dated 27-7-2021 (hereinafter referred to as impugned appellate order) is erroneous and bad in law. 2. That the Ld. CIT(A) has erred in law and on facts of the case in confirming the assessment made by Ld. DCIT, CPC, Bangalore ('Ld. AO') in case of the Appellant at Rs. 2,06,89,560/- as against the returned income of Rs. 1,18,31,513/- without any proper basis and appreciation of the facts and circumstances of the case. 3. That the Ld. CIT(A) has erred in confirming the disallowance made by Ld. DCIT, CPC, Bangalore ("Ld. AO") under section 36(1)(va) of Rs. 88,58,042/- on account of delay in deposit of employee's contribution towards PF/ESI without considering the correct interpretation and application of latest law in this regard. 4. That the Ld. CIT(A) grossly erred in placing reliance on amended provisions of section 36(1)(va) and section 43B as per Finance Act, 2021 and applying these amended provisions retrospectively for sustaining disallowance made by Ld. DCIT, CPC, Bangalore ("Ld. AO") under section 36(1)(va) of Rs. 88,58,042/- on account of delay in deposit of employee's contribution towards PF/ESI. 5. That the Ld. CIT(....
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....erein additions have been made and disallowing Rs. 88,58,042/- u/s. 36(1)(va) for the Assessment Year 2018-19; and Rs. 2,11,28,940/- for the Assessment Year 2019-20. The assessee's case has been that firstly, all the payments have been made within due date of filing of return of income u/s. 139(1) of the Income-tax Act and as such payment has been made and deposited in the Government account within the stipulated time u/s. 139(1) then no disallowance can be made in view of the decision of the Hon'ble Apex Court in the case of CIT v. Vinay Cement Ltd. [2007] 213 CTR 268 and Hon'ble Delhi High Court in the case of CIT v. AIMIL Ltd. [2010] 188 Taxman 265/321 ITR 508. 3. In the order of National Faceless i.e. the First Appellate order, the relevant finding on this issue for the Assessment Year 2018-19 are as under: '4.3 I have examined the issue. It is matter of fact that the appellant has not paid the employee's contribution towards PF/ESI totalling to Rs. 88,58,042/- within the due date provided under the relevant law. The provisions, the Act are very clear on the issue. Clause (24) of section 2 of the Act provides an inclusive definition of the income. S....
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....o ensure that compliance by the employers of the labour welfare laws. Hence, it needs to be stressed that the employer's contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the employee's contribution towards welfare funds. Employee's contribution is employee's own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee contribution, the employers get unjustly enriched by keeping the money belonging to the employees Clause (va) of sub-section (1) of section 36 of the Act was inserted to the act vide Finance Act, 1987 as a measures of penalizing employers who misutilize employee's contributions. 4.6 Accordingly, in other to provide certainty, the Finance Act, 2021 amended clause (va) of sub-section (1) of the section 36 of the Act by inserting another explanation to the said clause to clarify that the provision of section 43B does not apply and deemed to never have been applied for the purposed of determining the "due date" under that clause; and also amended section 43B of the Act by inserting Explanation 5 to the said section to clarify that t....
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....plied for the purpose of determining the due date under these clause. Thus, the statute itself has clarified that provision of section 43B for the purpose of due date in the case of payments mentioned in section 36(1)(va) would never deemed to have been applied as due date for filing of return of income it has approved the due date provided under the respective Acts. 7. We have heard the rival submissions and also perused the finding given in the impugned orders. From the perusal of the intimation order, it is seen that disallowance has been made u/s. 36(1)(va) and assessee has clearly explained in reply to the notice issued by CPC, Bengaluru that the claim of such payment is allowable by the decision of Hon'ble Apex Court as well as by Hon'ble Jurisdictional High Court and no disallowance should be made once the factum of the claim is based on the decision of Hon'ble Apex Court and Jurisdictional High Court. Thus, making disallowance merely by issuing an intimation cannot be made as it becomes a debatable issue. Here, in this case, intimation order has been passed on 6-6-2019 and 4-1-2021, that is, before the amendment in section 36(1)(va) brought by the Finance Act, ....
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....he Division Bench of the Madras High Court in the case of CIT v. Synergy Financial Exchange Ltd.: (2007) 288 ITR 366 and that of the Division Bench of the Bombay High Court in the case of CIT v. M/s. Pamwi Tissues Ltd. (2008) Taxindiaonline.com 104 (TIOL) the issue requires consideration. According to us, in view of the dismissal of the Special Leave Petition in the case of Vinay Cement (supra) by the Supreme Court by a speaking order, the submission of the learned counsel for the Revenue has to be rejected at the very threshold. The reason for the same is as follows:-- 9. The Gauhati High Court in the case of CIT v. George Williamson (Assam) Ltd. (2006) 284 ITR 619 (Gauhati) dealt with the very same issue. In the said judgment the Division Bench of the Gauhati High Court noted a contrary view taken by the Kerala High Court in the case of CIT v. South India Corporation Ltd. (2000) 242 ITR 114. After noting the said judgment the fact that the amendments had been made to the provisions of section 43B of the Act by virtue of Finance Act, 2003 w.e.f. 1-4-2004 it agreed with the submission of the learned counsel for the assessee that by virtue of the omission of the second provi....
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....ion Bench of its own Court in Synergy Financial Exchange (supra). The Division Bench of the Madras High Court has explained the effect of the dismissal of a special leave petition by a speaking order by relying upon the judgment of the Supreme Court in the case of Kunhayammed v. State of Kerala [2000] 113 Taxman 470/245 ITR 360 at page 526 in Paragraph 40 and noted the following observations:-- "It the order refusing leave to appeal is a speaking order, i.e., gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the Court, Tribunal or authority in any proceedings subsequent thereto by way of judicial discipline the Supreme Court being the Apex Court of the country, But this does not amount to saying that the order of the Court, Tribunal or authority below has stood merged in the order of the Supreme Court rejecting specia....