TaxTMI 
TaxTMI 
2022 (6) TMI 330
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..... Subsequently the return of the assessee was processed U/s 143(1) of the IT Act, 1961 (herein after referred to as Act) vide intimation dated 16.10.2019, wherein CPC made disallowance of Rs. 2,47,833/- & Rs. 21,067/- total Rs. 2,68,900/- and thereby creating demand of Rs. 8,01,217/-. 4. Being aggrieved by the impugned order issued U/s 143(1) of the IT Act, the assessee is preferred an appeal before the ld. CIT(A). The assessee filed complete details of the entire payments i.e. employee's PF & ESI contribution paid before the due date of filing of return of income. 5. The assessee before the ld. CIT(A) contended that when the amount of employee's contribution to ESI & PF is deposited before the due date of filing of return of income, no disallowance U/s 36(1)(va) can be made and that this issue is settled in favour of the assessee by the judgments of Hon'ble High Courts, which are produced as under:- * "Rajasthan Renewable Energy Corp. Ltd. August 6, 2019 (Raj HC) Contribution towards provident fund -- HELD THAT:- It is not in dispute that this Court in Commissioner of Income Tax vs. M/S. State Bank of Bikaner and Jaipur (2014) Rajasthan High Cou....
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.... rightly invoked provisions of S. 143(1)(a)(ii) of the Act and made the adjustment for such incorrect claim made by the assessee. 8. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. The Ld. AR for the assessee at the time of hearing submitted that the payment to employee's contribution towards PF and ESI was made before the date of filing the return of income by the assessee U/s 139(1) of the Act. The ld. Counsel for the assessee apart from that relied on the decisions in case of Dhabriya Plywood Ltd. vs. ADIT, CPC, Bengaluru 133 taxmann.com 135 (Jaipur-Trib.), Nazin Ahmad vs. ADIT in ITA No. 269/JP/2021 and Ravi Goenka vs. ADIT in ITA No. 265 & 268/JP/2021. Further, he relied on the decision of the Chennai Bench of the ITAT in the case of M/s. Adyar Ananda Bhavan vs. ACIT in ITA No. 402 & 403/Chny/2021 order dated 08.12.2021 where in the Tribunal held that "6.9 Thus, from the above, it is clear that the amendment brought in the statue i.e., by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the act amended by inserting explanation in prospective and not retrospective. Hence, the amended provisions of Section 43B r.....
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....order dated 29.11.2021 (Supra) wherein it is held as under:- "7. I have considered the submissions of both the parties and perused the material available on record. In the present cases, it is noticed that an identical issue having similar facts has already been adjudicated by the ITAT, Jodhpur Bench in the aforesaid referred to cases, wherein one of us is author of the order dated 27/09/2021. In the said order it has been held vide paras 7 to 11 in ITA No. 59/Jodh/2021 for the assessment years 2015-16 in the case of Mohangarh Engineers and Construction Company Vs. DCIT and in the case of Bikaner Ceramics Private Limited, Bikaner Vs. ADIT, CPC, Bengaluru, in ITA No. 60/Jodh/2021 for the A.Y. 2019-20 as under:- 7. We have considered the submission of both the parties and perused the material available on record. 8. In the present cases, it is not in dispute that the assessees deposited the contribution of PF & ESI belated in terms of section 36(1)(va) of the Act, however, the said deposits were made prior to filing of return of income u/s. 139(1) of the Act. 8.1 Identical issue with the similar facts have already been adjudicated by the various Be....
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....ncome Tax Act, as introduced by Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from 1st April, 1988. Such being the position, the deletion of the amount paid by the Employees' Contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act. We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal. Urgent xerox certified copy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities." In the light of the aforesaid discussion we do not accept the Ld. CIT(A)'s stand denying the claim of assessee since assessee delayed the employees contribution of EPF & ESI fund and as per the binding decision of the Hon'ble High Court in Vijayshree Ltd. (supra) u/s. 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds and we allow the appeal of the assessee." 9. Similar view has been taken by the ITAT Hyderabad 'SMC" Bench in IT....
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....r the impugned assessment year 2019-20 was 31.10.2019 and the return of income was also filed on the said date. Admittedly and undisputedly, the employees's contribution to ESI and PF which have been collected by the assessee from its employees have thus been deposited well before the due date of filing of return of income u/s. 139(1) of the Act. 14. The issue is no more res integra in light of series of decisions rendered by the Hon'ble Rajasthan High Court starting from CIT vs. State Bank of Bikaner & Jaipur (supra) and subsequent decisions. 15. In this regard, we may refer to the initial decision of Hon'ble Rajasthan High Court in case of CIT vs. State Bank of Bikaner & Jaipur wherein the Hon'ble High Court after extensively examining the matter and considering the various decisions of the Hon'ble Supreme Court and various other High Courts has decided the matter in favour of the assessee. In the said decision, the Hon'ble High Court was pleased to held as under: "20. On perusal of Sec. 36(1)(va) and Sec. 43(B)(b) and analyzing the judgments rendered, in our view as well, it is clear that the legislature brought in the statute S....
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....unt having been claimed as a deduction but the said amounts were not deposited. It is pertinent to note that the respective Act such as PF etc. also provides that the amounts can be paid later on subject to payment of interest and other consequences and to get benefit under the Income Tax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or before the return of income under sub-section (1) of Section 139 of the IT Act. 23. Thus, we are of the view that where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(1)(va) of the IT Act." 16. The said decision has subsequently been followed in CIT vs. Jaipur Vidyut Vitran Nigam Ltd. (supra), CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (supra), and CIT vs Rajasthan State Beverages Corporation Limited (supra). In all these decisions, it has been consistently held that where the PF and ESI dues are paid after the due date under the respective statues but before filing of the return of income under ....
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....ances sustained by the Ld. CIT(A) are deleted." 13. A similar issue has been decided by the Hon'ble Delhi High Court in the case of CIT vs. AIMIL Ltd., (2010) 321 ITR 508 wherein it has been held as under:- "The deletion with effect from April 1, 2004 by the Finance Act, 2003 of the second proviso to section 43B of the Income-tax Act, 1961, which stipulates that contributions to the provided fund and Employees State Insurance Fund should be made within the time mentioned in section 36(1)(va), that is, the time allowed under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, as well as the Employees' State Insurance Act, 1948, it treated as retrospective in nature. If the employees' contribution is not deposited thereafter, the employer not only pays interest and delayed payment but can incur penalties also, for which specific provisions are made in the those Acts. In so far as Income-tax Act, 1961, is concerned, the assessee can get the benefit of deduction of the payments, if the actual payment is made before the return is filed. Where for the assessment year 2002-03 the assessee had deposited employer's contribution as w....
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.... (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 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 ....
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....years." 15. The present appeal is filed by the assessee against disallowance of Rs. 2,68,900/- pertaining to employees contribution made towards ESI & PF which was paid by the appellant company after the "due date" under respective statute of ESIC/PF. This disallowance was made by the AO under section 143(1) of the Act on the basis of remarks in the relevant column of Form no. 3CD report attached with the return of income. In the appeal petition, the appellant has stated that total income returned at Rs. 5,32,317/- has been processed at Rs. 8,01,217/- after making adjustment u/s. 143(1)(a)(ii) for Rs. 2,68,900/- by disallowing PF and other contribution paid after due date prescribed by respective labour laws, out of sum collected from employees contribution to PF/ESIC etc. The assessee has stated that disallowance of Rs. 2,68,900/- was not in accordance with the provision of Section 43B of the Act as the said amount were duly remitted before the due date of filling of return of income. The appellant has referred to the decisions of various High Courts including the decision of jurisdictional Rajasthan High Court in the case of Rajasthan State Beverages Corporation Ltd. 392 ITR 2....
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....and ESI need to be evaluated in the context of legal provisions laid down in the Act. The same are enumerated here under:- 9.4.1 The definition of Income u/s. 2(24)(x) includes any sum received by the appellant 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, or any other fund for the welfare of such employees. 9.4.2 Section 36(1)(va) deals with deduction in respect of the sum received by the appellant from any of his employees to which the provisions of sub-section 2(24)(x) applies, provided such sum is credited to the employees account in the relevant fund on or before the due date. 9.4.3 A deduction from the amount of income received by the employer from employees as contributions to any provident fund or superannuation fund etc. is provided u/s. 36(1)(va). According to this section any sum received by the appellant from any of his employees to which the provisions of section 2(24)(x) will be allowed as deduction, is such sum is credited by the appellant to the employee's account in the relevant fund or funds on or before the due....
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....gh Court, Delhi High Court etc have held that the provisions of Section 43B are applicable to Employees contribution to PF also. 9.4.8 The Memorandum Explaining the Provisions of "Finance Bill, 2021" are extracted as under:- "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 contribution, some courts have applied the provision of section 43B on employee contribution as well. There i....
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.... clause. Similarly, in the Explanation 5 inserted below 43B also, the words used are "it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied.........." 9.4.11 Any difference in interpretation with respect to applicability of Section 43B to the Employees contribution has therefore been removed by the above amendments and it is explicitly laid down that the provisions of Section 43B shall not apply to Employees contribution and infact deemed never to have been applied to the Employees contribution. Thus, employee's contribution to the PF and ESI is allowable only if paid within the due dates as prescribed in the PF and ESI Act. 9.4.12 From the wordings at para 9.4.8 & 9.4.9, it is also clear that the above clarificatory amendment brought in by the Finance Act, 2021 applies to the issue in the instant appeal also. While in the Explanatory Memorandum to the Finance Bill, it was stated that "these amendments will take effect from 1st April, 2021 and will accordingly apply to the as moment year 2021-22 and subsequent assessment years", but the said lines are not there in the Finance Act, 2021, which ....
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....e principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law when the constitution came into force, the amending Act also will be part of the existing law." "The presumption against retrospective operation is not applicable to declaratory statutes.... In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is "to explain" an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended.... An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 468-69)". "where a statute is passed for the purpose of supplying an obvious omission in a former statute or to 'explain....
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.... to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. The law passed today cannot be applied to the events of the past. The Hon'ble Supreme Court held that if somebody does something today, he do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. According to Hon'ble Apex court every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit, which means law looks forward not backward. In the case of Vatika Township Pvt. Ltd., (Supra), the issue under challenge before Hon'ble Supreme Court was the insertion of proviso to section 113 of the Act by the Finance Act 2002 for charging of surcharge. Hon'ble Supreme Court noted that though provision for surcharge under the Finance Acts have been in existence since 1995, the charge of surcharge with respect to block assessments, having been created for the first time by the insertion of proviso to Section 113 of the Act, by Finance Act, 2002, it is clearly a substantive....
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....om 1st June, 2002. (e) There is yet another very interesting piece of evidence that clarifies the provision beyond any pale of doubt, viz. understanding of CBDT itself regarding this provision. It is contained in CBDT circular No. 8 of 2002 dated 27th August, 2002, with the subject "Finance Act, 2002 - Explanatory Notes on provision relating to Direct Taxes". This circular has been issued after the passing of the Finance Act, 2002, by which amendment to Section 113 was made. In this circular, various amendments to the Income Tax Act are discussed amply demonstrating as to which amendments are clarificatory/retrospective in operation and which amendments are prospective. For example, explanation to Section 158BB is stated to be clarificatory in nature. Likewise, it is mentioned that amendments in Section 145 whereby provisions of that section are made applicable to block assessments is made clarificatory and would take effect retrospectively from 1st day of July, 1995. When it comes to amendment to Section 113 of the Act, this very circular provides that the said amendment along with amendments in Section 158BE, would be prospective i.e. it will take effect from 1st June, 2....