2022 (4) TMI 1504

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....(1) dated 30.07.2021 for the Assessment Year (A.Y.) 2018-19. 2. Brief facts of the case are that the assessee, a private limited company, filed its return of income, admitting total income of Rs.6,90,580/-. However, the Centralized Processing Centre (CPC) has processed the return u/s 143(1) of the Income Tax Act, 1961 (in short 'Act'), determining the total income at Rs.9,44,390/-. The CPC has disallowed a sum of Rs.2,38,809/-, being late payment of Employee contribution of PF and ESI under the respective Acts. 3. Aggrieved by the order of the CPC, the assessee filed appeal before the CIT(A) which was migrated to the NFAC in terms of notification No.76/2020 in S.O.No. 3296(E), dated 25/09/2020 from CBDT. The CIT(A) held that the payme....

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....der passed u/s 143(1) of the I.T.Act is contrary to the provisions of the Act and facts of the case. 2. The Ld.Commissioner of Income Tax (Appeals), National Faceless Appeals Centre (in short "CIT(A), NFAC") erred in confirming the addition of Rs.2,38,809/-, the payment of Employee's share of ESI & PF, on the ground that the belated payment of employee's contribution is not allowable u/s 36(1)(va) of the I.T.Act. 3. The "Ld.CIT(A), NFAC" ought to have held that PF contribution of Employees if paid within the due date of filing of return of income is allowable for deduction in view of the provisions of Sec. 36(1) (Va) and sec. 438 of the I.T. Act. 4. The "Ld. CIT(A), NFAC" before giving the verdict on the disputed ....

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....yees contribution to PF is well within the due date of filing of return of income by the assessee u/s.139(1) of the Act. The assessee relied on the decisions of ITAT, Visakhapatnam in the case of the Chodavaram Cooperative Sugars Ltd, Visakhapatnam Vs. Asst.Director of Income Tax, Bangalore in I.T.A Nos.25 & 28/Viz/2021 dated 23.09.2021 and DCIT, Circle-1(1) Vs. M/s Andhra Trade Development Corporation, Guntur in IT.A. No.434/Viz/2019 dated 05.05.2021. The assessee also contended that amendment brought in by the Finance Act 2021 to section 36(1)(va) of the Act especially the insertion of Explanation 2 should be construed only as prospective in as much as the insertion of the amended provision should be construed only w.e.f. 01.04.2021 i.e. ....

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.... spite of belated payment of employees contribution. We also noted from the memorandum explaining the provisions to Finance Act, 2021, wherein relevant Clauses to said memorandum clearly intended that the amendment shall take effect from 01.04.2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years. The relevant Clauses 8 & 9 of the memorandum explaining the provisions are reproduced as under:- "Rationalisation of various Provisions Payment by employer of employee contribution to a fund on or before due date Clause (24) of section 2 of the Act provides an inclusive definition of the income. Sub-clause (x) to the said clause provide that income to include any sum received by the a....

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....ees 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 is a distinction between employer 40 contribution and employee's contribution towards welfare fund. It may be noted that employee's contribution towards....

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....and will accordingly apply to the assessment year 2021-22 and subsequent assessment years. In the present case also, before insertion of Explanation 2 to Section 36(1)(va) of the Act, there is ambiguity regarding due date of payment of employees' contribution on account of provident fund and ESI, whether the due date is as per the respective Acts or up to the due date of filing of return of income of the assessee. As noted by Hon'ble Supreme Court in the case of CIT vs. Vatika Township Pvt. Ltd., 367 ITR 466, an amendment made to a taxing statute can be said to be intended to remove hardship only of the assessee and not of the Department. Imposing of a retrospective levy on the assessee would cause undue hardship and for that reason Parl....