TaxTMI 
TaxTMI 
2022 (5) TMI 897
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....has moved an application for seeking the condonation of delay vide their application dated 10.01.2022. The contentions raised in the petition are that the order was passed by NFAC, Delhi on 17.05.2021. Due to pandemic Covid-19, offices of the counsels remained closed from mid-March till 31.05.2021. That on 27.04.2021, owing to the new surge of cases, the Supreme Court vide miscellaneous Application no. 665/2021 in SMW (C) No. 03/2020, restored its order dated 23.03.2020 and 08.03.2021 (whereby limitations were extended originally) and further suspended limitation under general or special laws in respect of all judicial or quasi-judicial proceedings till further orders under article 142 read with article 141 and listed the matter for 19.07.2021. Thereby, effectively, limitation stands suspended from 15.03.2020. That, again Hon'ble Supreme Court, vide order dated 10.01.2022 in MA no. 21 of 2022 restored its original order whereby limitation period was extended and further extended period upto 28.02.2022. Thus, it is submitted that the delay in filling the appeal is absolutely inadvertent and has occurred due to circumstances beyond the control of assessee. It was further submitted th....
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....after the due date under the specified act but before due date of filing of return of income U/s 139(1) of the Income Tax Act, 1961 (in short, the Act). 9. The assessee filed its return of income on 30.09.2018 which was processed u/s 143(1) of the Act whereby an adjustment was made on account of disallowance of claim of deduction with respect to employees' contribution towards PF and ESIC deposited after the due date specified under the respective Act. During the course of assessment proceedings, the CPC, Bangalore made disallowance of Rs.6,95,850/- on account of late deposit of employees contribution towards PF/ESI as prescribed under the respective act but before due date of filling return of income. The assessee challenged the said adjustment before the ld. CIT(A)/NFAC and contended that as per the binding precedents if the payment is made even though belatedly but before due date of filing of return of income U/s 139(1) of the Act then as per provisions of Section 43B of the Act, no disallowance can be made. The ld. CIT(A)/NFAC did not accept this contention of the assessee and confirmed the disallowance by considering the amendment in Section 36(1)(va) of the Act whereby an....
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....se sections. Explanation 5 to Section 43B, reads as under:- "Explanation 5. -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 assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applies." Explanation 2 to section 36(1)(va) reads as under: "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." 5.1 It may be noted that both the explanations use the phrase "shall not apply and shall be deemed never to have been applied". This indicates that in respect of employees' contribution to PF & ESI, the provisions of Sec 43B 'SHALL' deemed to have never applied. Admittedly, the employees' contribution to PF & ESI are included in the definition of income u/s 2(24)(x) of the Act and form a part of the income of the appellant. Whenever the appellant pays the said contribution to the PF/ESI authorit....
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....fare of employees shall be allowed only in computing the income of that previous year in which such sum is actually paid by him." (emphasis supplied) It could be seen that at each instance, the Memorandum mentions only "employers' contribution" and not "employees' contribution". Similarly, sec 43B(b) also specifically mentions 'employer's contribution" and not "employees' contribution". The only conclusion to be drawn is that employee's contribution to PF & ESI would not be covered by sec 43B. 5.2 The present amendment to Sec 43B of the Act through insertion of Explanation 5 and to Sec 36(1)(va) of the Act through insertion of Explanation 2, serve to only reiterate and reinforce this intention of the Legislature. Firstly, as discussed earlier in this order, the language of the Explanations make it evident that Sec 43B shall be deemed to have never been applied. Secondly, the Explanatory notes to Finance Bill 2021 state as under:- "Clause (24) of section 2 of the Act provides an inclusive definition of the income. Sub-clause (x) to the said clause provides that income to include any sum received by the assessee from his employees as....
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....and PF needs to be clearly distinguished from the employee's contribution towards welfare funds. Employee's contribution is employee 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 mis-utilize employee's contributions. Accordingly, in order to provide certainty, it is proposed to - (i) amend clause (va) of sub-section (1) of section 36 of the Act by inserting another explanation to the said clause to clarify that the provision of section 438 does not apply and deemed to never have been applied for the purposes of determining the -due date under this clause; and (ii) amend section 43B of the Act by inserting Explanation 5 to the said section to clarify that the provisions 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....
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....he Hon'ble Supreme Court in the case of Allied Motors (P) Ltd. vs. CIT reported in 91 Taxman 205 (SC).Therein, it was held that the proviso to Section 43B allowing payment till the due date for filing the return was to have retrospective effect from 01/04/1984 even though the same was inserted w.e.f. 01/04/1984. While holding so, Hon'ble Supreme Court took into account the intent of the proviso as well as of the Explanation 2 and taking a combined view of both the amendments, it held that the proviso has been brought in to cure undue difficulty for the tax payers and hence held to be having retrospective application. It is therefore now settled law that the proviso to Sec 43B itself has retrospective effect as held by the Hon'ble Supreme Court in the case of Allied Motors (supra). It naturally follows that an Explanation to either Sec 43B or the proviso, would also be effective from the date from which the section or proviso was inserted. In the present amendment, Explanation 5 seeks to clarify that provisions of Sec 43B shall deemed to have never applied to employees' contribution. As has been held by the Hon'ble Supreme Court, it has to naturally follow that this ....
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....e Act 2021, through the explanatory notes, it would necessarily to be held that Expl 5 to Sec 43B & Expl 2 to Sec 36(1)(va) would apply to all pending matters as on date. On these arguments, it is held that the late payment of PF, ESI etc are not covered by Sec 43B of the Act. 5.5 The Appellant has also relied on the decision of the Hon'ble Rajasthan High Court in the case of CIT vs. JWNL & RRVUNL (2014) 363 ITR 307 (Raj.) in his favor. These decisions are not applicable in the present case of the appellant in view of the subsequent clarifications and explanations brought in the Finance Act by the Parliament in this regard by inserting explanations to 36(1)(va) and 43B (cited supra). 6. Admittedly in the present appeal, the facts indicate that the sum of Rs. 6,95,850/- being employees contribution to PF/ESI has been paid late under that Act. Based on the reasoning above, the addition made by the CPC deserves to be upheld. Therefore, the addition made of Rs. 6,95,850/- is confirmed and the relevant grounds raised in this regard are dismissed." 12. During the course of hearing, the ld. AR of the assessee prayed that ld, CIT(A)/NFAC has erred in confirming the....
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....ether the amendment brought to Section 36(1)(va) as well as 43B of the Act is applicable retrospective or from assessment year 2021-22 as it is specifically stated in the memorandum of Finance Bill, 2021. At the outset, it is noted that the Coordinate Bench of this Tribunal in the case of M/s Kogta Financial (India) Ltd. Vs CPC (supra) has considered this issue in para 5 to 7 as under: "5. We have heard the rival contentions and perused the material available on record. In case of Mohangarh Engineers and Construction Company vs DCIT, CPC (Supra), speaking through one of us, we have extensively dealt with the identical matter relating to employee's contribution towards ESI/PF and our findings therein read as under:- "13. We have heard the rival contentions and perused the material available on record. On perusal of the details submitted by the assessee as part of its return of income, it is noted that the assessee has deposited the employees's contribution towards ESI and PF well before the due date of filing of return of income u/s 139(1) and the last of such deposits were made on 16.04.2019 whereas due date of filing the return for the impugned assessment year 20....
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.... Act further envisage that the amount actually paid by the assessee on or before the due date admissible at the time of submitting return of the income under Section 139 of the Act in respect of the previous year can be claimed by the assessee for deduction out of their gross total income. It is also clear that Sec.43B starts with a notwithstanding clause & would thus override Sec.36(1) (va) and if read in isolation Sec. 43B would become obsolete. Accordingly, contention of counsel for the revenue is not tenable for the reason aforesaid that deductions out of the gross income for payment of tax at the time of submission of return under Section 139 is permissible only if the statutory liability of payment of PF or other contribution referred to in Clause (b) are paid within the due date under the respective enactments by the assessees and not under the due date of filing of return. 22. We have already observed that till this provision was brought in as the due amounts on one pretext or the other were not being deposited by the assessees though substantial benefits had been obtained by them in the shape of the amount having been claimed as a deduction but the said amounts we....
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....by directed to be deleted as the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act in view of the binding decisions of the Hon'ble Rajasthan High Court." 6. In the instant case, admittedly and undisputedly, the employees' contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act. Further, the ld D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, I find that there are express wordings in the said memorandum which says "these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years". In the instant case, the impugned assessment year is assessment year 2018-19 and therefore, the said amended provisions cannot be applied in the instant case. Similar view has been taken by the Coordinate Bangalore Benches in case of Shri Gopalkrishna Aswini Kumar vs. ACIT (supra) wherein it has held as under:-....
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....licable only from A.Y. 2021-22 and subsequent assessment years and therefore, the said amendment is not applicable to the assessment year under consideration. 4.8. Similar view has been taken by the Delhi Benches of the Tribunal in the case of Chatru Mal Garg Vs ACIT (supra) in para 7 as under: "7. I have heard the rival submissions and perused the materials on record. The issue in the present ground is with respect to disallowance under section 36(1)(va) of the Act. It is an undisputed fact that there has been slight delay in the deposit of employees' contribution of PF and ESI by the assessee and the contribution have been deposited beyond the due date prescribed by the relevant authorities but at the same time it is also a fact that the amounts have been deposited with the appropriate authorities by the assessee before filing the return of income for the relevant assessment year. I find that Hon'ble Delhi High Court in the case of CIT vs. AIMIL Ltd. (supra) has held that no disallowance under section 36(1)(va) of the Act is called for when the amounts are deposited before filing the return of income. Similar view has also been taken by the Hon'ble Punjab & Hary....