MESERS MAHENDRA SPONGE & POWER PVT LTD, RAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX-2(1), RAIPUR

CO 24/RPR/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3271 (ITAT-RAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-07-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 13-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMIT M JAIN
• Keywords: Transfer pricing; Earning of tax free income; Retrospective amendment; Onus to prove; Rule 8D
• Section: 43B; 14A; 80IB; 80IA; 43

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ रायप ु र मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.196/RPR/2019 CO No.24/RPR/2019 Ǔनधा[रण वष[ / Assessment Year : 2014-15 The Deputy Commissioner of Income Tax-2(1), Raipur (C.G.) .......अपीलाथȸ / Appellant बनाम / V/s. M/s. Mahendra Sponge & Power Pvt. Ltd. A Block, 2 nd Floor, Maruti Business Part, G.E Road, Near Dhuppar Petrol Pump, Raipur (C.G.) PAN : AADCM5765E ......Ĥ×यथȸ / Respondent Assessee by :Shri Amit M Jain, CA Revenue by :Shri Sanjay Kumar, Sr. DR स ु नवाई कȧ तारȣख / Date of Hearing : 27.07.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 05.08.2022 2 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the department is directed against the order passed by the CIT(Appeals)-II, Raipur, dated 28.06.2019, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 26.12.2017 for assessment year 2014-15. Also, the assessee is before us as a cross- objector. Before us the department has assailed the impugned order on the following grounds of appeal: “(1) "Whether in law and in the facts and circumstancesof the case, the Ld. CIT(A) is justified in deleting the disallowance of Rs. 3,86,20,992/- claiming by the assessee u/s. 80IA of the IT. Act, ignoring the Arm's Length Price determined by the TPO on the specified transaction made by the assessee with its Associated Enterprises?" (2) "Whether in law and in the facts and circumstances of the case, the Ld. CIT(A) is justified in deleting the disallowance u/s. 801A of the I.T. Act, ignoring the explanation to sub section (8) of that section, where market value is defined as the arm's length price as defined in clause (ii) of section 92F, where the transfer of goods and services is a specified domestic transaction referred to section 92BA?" (3) "Whether on points If law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the disallowance of Rs. 19,40,967/- made by the AO u/s. 14A of the Act r.w.r. 8D of the I.T. Rules?" (4) "Whether on points If law and on facts & circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made u/s. 14A ,when clause (3) of the Section 14A of the Act clearly prescribes that provision of section 14A(2) shall M/s Mahendra Sponge and 3 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 Power Ltd. Raipur for A.Y. 2014-15 also apply in relation to case where any assessee claims that no expenditure has beenincurred by him in relation to the income which does not part form part of the total income under this Act, as held in the case of Cheminvest Ltd. Vs ITO(ITAT, SB-Del) 121 ITD 318 and Pradeep Kar Vs ACUIT(Kar) 319 ITR 416?" (5) "Whether on points of law and facts & circumstances of the case, the Ld. CIT(A) was justified by giving a finding that the exemption of income from taxability by claiming no expenditure when assessee as an earner of exempt income did not discharge his onus to prove that it did not incur expenditure to earn exempt income?' (6) "Whether on points If law and on facts & circumstances of the case, the Ld. CIT(A) was justified indeleting the addition by holding that the assessee has not earned any tax free income which is against the ration of the decision of Hon'ble Chennai ITAT in the case of M.A. Alagappan Vs ACIT(ITA No. 3280/Mds/2016) wherein it was held that it is not necessary to earn exempt income for making disallowance u/s 14A and the similar decision has also held in the cases of (i) Sira Industries & Holding Pvt. Ltd. (2012) 54 SOT 49(Chen), (ii) Technopark Advisory Pvt. Ltd (2012) 50 SOT 31(Del), (iii) Relaxo Footwear Ltd. (2012) 50 SOT 102(Del) and (iv) India Infrastructure Developers Ltd. (2009) 121 ITD 315 (Del)? (7) "Whether on points If law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition by ignoring the circular no. 05/2014 dated 11.02.2014 issued by CBDT wherein it has been clarified that the disallowance u/s 14A is applicable even where taxpayer in particular year has not earned any exempt income?" (8) "Whether in law and in the facts and circumstances of the case, the Id. CIT(A) is justified in deleting the addition made u/s 14A of the I.T. Act R.w. Rule 8D of the I.T,. Rule, holding that there was no exempt income during the financial year ignoring the CBDT Circular No. 14 of 2001 in which it is clarified that expenditure which is relatable to earning of the exempt income is to be considered for disallowance?" (9) "Whether in law and in the facts and circumstances of the case, the Id. CIT(A) is justified in deleting the addition made u/s 14A of the I.T. Act, r.w. Rule 8D of the I.T. Rule, ignoring the fact that, the word "includible" is used in the heading of Section 14A of the I.T. Act and Rule 8D of the I.T. Rule, Which clarifies amply that the expenditure relating to income not includible to the total income, is nottobe deducted?" 4 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 (10) The order of the Id. CIT(A) is erroneous both in law and on facts. (11) Any other ground that may be adduced at the time of hearing. On the other hand the assessee as a cross-objector has assailed the impugned order on the following grounds: “1. On the facts and in the circumstances o the case, the learned CIT(A) has erred in confirming the addition made by the A.O of Rs.2,91,792/- on account of delay payment of PF/ESIC. The addition made by the A.O and sustained by the CIT(A) is unjustified, unwarranted and uncalled for.” 2. Succinctly stated, the assessee company which is engaged in the business of manufacturing and trading of sponge iron, steel ingots and generation of power had e-filed its return of income for the assessment year 2014-15 on 29.09.2014, declaring an income of Rs.2,71,31,360/-. Subsequently, the case of the assessee company was selected for scrutiny assessment u/s.143(2) of the Act. 3. Assessment was, thereafter, framed by the A.O u/s.143(3) of the Act dated 26.12.2017 determining the income of the assessee company at Rs. 6,72,14,570/-i.e. after, inter alia, making the following additions/disallowances: Sr.No. Particulars Amount 1. Disallowance out of assessee’s claim for deduction u/s.80IA of the Act Rs.3,86,20,902/- 5 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 2. Disallowance u/s.14A r.w.r. 8D Rs.10,88,188/- 4. Aggrieved, the assessee company carried the matter in appeal before the CIT(Appeals). After exhaustive deliberations the CIT(Appeals) vacated the aforesaid disallowances made by the A.O, viz. (i) disallowance of the assessee’s claim for deduction u/s.80IA of the Act :Rs.3,86,20,902/-; and (ii) disallowance u/s.14A : Rs.10,88,188/-. 5. The department being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 6. We shall first deal with the grievance of the department that the CIT(Appeals) had gravely erred in law and facts of the case in vacating the disallowance of the assessee’s claim for deduction u/s.80IA(4)(iv)(a) of the Act amounting to Rs.3,86,20,902/-. 7. Controversy involved qua the issue in hand lies in a narrow compass, i.e., sustainability of the triggering of Section 80IA(8) of the Act by the A.O for declining the assessee’s claim of deduction u/s. 80IA(4)(iv)(a) of Rs.Rs.3,86,20,902/-. 8. Shorn of unnecessary details, the assessee company which is engaged in the business of manufacturing and trading of sponge iron, steel 6 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 ingots and generation of power has twodivisions, viz. (i) steel division; and (ii) power division. The profit of the power division is eligible for deduction u/s.80IA(4)(iv)(a) of the Act. This is the seventh year of claim of deduction by the assessee u/s.80IA(4)(iv)(a) of the Act. 9. During the course of the assessment proceedings, it was observed by the A.O that the assessee company had transferred electricity produced in its captive power plant to its steel division and associate concerns, while for the remaining electricity was sold to the State electricity board, viz. Chattisgarh State Electricity Board (For short “CSEB”). It was observed by the A.O that the assesee company had transferred/sold electricity generated by its power plant as under: S. No. Particulars No. of Units Rate/unit 1. Electricity Board 25,94,801 1.88 2. Steel Division 2,81,62,876 4.30 4. AnimeshIspat (P) Ltd. 1,92,34,190 4.30 Considering the fact that though the assessee company had sold power to CSEB at the rate of Rs. 1.88 per unit, but had sold/transferred the same to its steel division and associate concerns at a higher value, i.e, at the rate of Rs. 4.30 per unit, the AO with the prior approval of the Pr. CIT, Raipur made a reference u/s.92CA(1) of the Act to the Transfer Pricing Officer (TPO) for computing the arm’s length price (ALP) of the specified domestic 7 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 transactions of the assessee with its associate enterprise viz. Animesh Ispat (P) Ltd. The TPO vide his order passed u/s.92CA(3) of the Act, dated 31.10.2017 did not find favour with the benchmarking carried out by the assessee of its specified domestic transactions with its AE. Accordingly, the TPO on the basis of the reasoning recorded in his aforesaid order adopted the rate of Rs.1.88/- per unit, i.e, the rate at which electricity was sold by the assessee to CSEB and determined the ALP of the assessee’s specified domestic transaction at Rs.1.88/- per unit. On the basis of his aforesaid observations, the TPO proposed a downward adjustment of Rs.11,47,00,658/- and advised a revision of the assessee’s claim for deduction u/s. 80IB of the Act. Accordingly, the A.O after receiving the order passed by the TPO u/s. 92CA(3) of the Act, dated 31.10.2017, therein vide his order passed u/s 143(3), dated 26.12.2017 reduced the assessee’s claim for deduction u/s. 80IA(4)(iv) to Rs. Nil. 10. Before us, it is the claim of the Ld. Authorized Representative (for short ‘AR’) for the assessee that the issue involved in the present appeal is squarely covered by the order passed by the Tribunal in its own case for the immediately preceding assessment year 2013-14 in ITA No.197/RPR /2017, dated 29.07.2022, wherein, the declining by the AO of the assessee’s claim u/s.80IA(4)(iv) on identical facts had been restored by the Tribunal. 8 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 11. The Ld. Departmental Representative (for short ‘DR’) fairly conceded to the submissions put forth by the Ld. AR. 12. Ostensibly, as stated by the Ld. AR, and rightly so, the aforesaid issue in hand is squarely covered by the order that was passed by the Tribunal while disposing off the appeal of the assessee for the immediately preceding year i.e, assessment year 2013-14, wherein the Tribunal after relying on its earlier order had observed as under: “10. Controversy involved qua the issue in hand lies in a narrow compass, i.e.,as to whether or not the A.O had rightly triggered the provisions of Section 80IA(8) of the Act by adopting the domestic purchase price of electricity by CSEB as the “market rate” and justifiablyscaled down the assessee’s claim for deduction u/s.80IA(4)(iv)(a) by an amount of Rs.4,38,75,880/-?. In our considered view, as claimed by the Ld. AR, and rightly so, the aforesaid issue as on date is squarely covered by the order of the Tribunal in the assessee’s own case for the assessment year 2008-09, i.e.ACIT-1(2) Vs. Mahindra Sponge and Power Limited in ITANo.159/BLPR/2011, dated 19.06.2015. In its aforesaid order the Tribunal had after drawing support from the judgment of the Hon’ble High Court of Chhattisgarh in the case of CIT Vs. Godawari Power &Ispat Ltd. (supra), found favor with the claim of the assessee and observed, that the “market value” of the power suppliedby the assessee to its steel division was rightly computed by considering the rate at which power was available in the open market, namely, the price that was charged by the electricity board. For the sake of clarity the relevant observations of the Tribunal in the assessee’s own case for A.Y. 2008-09 are culled out as under: “6. At the outset, it is informed that the issue is squarely covered by the decision of Bilaspur Bench of the Tribunal in the case of ACIT V/s Godavari Power &Ispat Ltd. [2011] 133 ITD 502 (Bilaspur). In the compilation of the assessee at page 12, the respondent-assessee has also placed reliance on the order of Hon’ble High 9 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 Court of Chhattisgarh at Bilaspur in the Tax case No.31, 34,32 of 2012 dated 2nd August, 2013 pronounced in the case of CIT V/s Godavari Power &Ispat Ltd., wherein on this very fact that the said assessee was a manufacturer of Iron steel and captive power plant has supplied electricity to its manufacturer unit which was at higher rate than the power supplied to Chhattisgarh State Electricity Board; the Hon’ble High Court has held as under : “28. The Chhattisgarh-Company is a company which is generating power. It is neither consumer of the electricity, nor it is supplying power to a consumer. It also cannot sell power to any consumer directly: it has to compulsorily sell it to the Board. 29. The power sold by the Chhattisgarh-Company to the Board is a sale to a company which itself supplies power to the consumers. It is not sale of power to the consumer. 30. The Steel-Division of the Assessee is a consumer. The CPP of the Assessee supplies electricity to the Steel-Division. Had the Steel-Division not taken power from the CPP then it had to purchase power from the Board. The CPP has charged the same rate from the Steel-Division that the Steel-Division had to pay to the Board if the power was purchased from the Board. 31. The market value of the power supplied to the Steel-Division should be computed considering the rate of power to a consumer in the open market and it should not be compared with the rate of power when it is sold to a supplier as this is not the rate for which a consumer or the Steel- Division could have purchased power in the open market. The rate of power to a supplier is not the market rate to a consumer in the open market. 32. In our opinion, the AO committed an illegality in computing the market value by taking into account the rate charged to a supplier: it should have been compared with the market value of power supplied to a consumer. 33. It is admitted by the Department that in Chhattisgarh the power was supplied to the industrial consumers at the rate of Rs. 3.20/- per unit for the AY 2004-05 and Rs. 3.75/- per unit for the AYs 2005-06 and 2006-07. It was this rate that was to be considered while computing the market value of the power. 34. The CIT-A and the Tribunal had rightly computed the market value of the power after considering it with the rate of power available in the open 10 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 market namely the price charged by the Board. There is no illegality in their orders. 35. In view of above, the question is decided against the Department and in favour of the Assessee. The tax appeals have no merit. They are dismissed 7. Since, this issue has already been decided by Hon’ble Jurisdictional High Court as discussed hereinabove, therefore, we find no force in this ground of Revenue. Before we conclude this judgment it is also worth to mentioned that the ld. CIT(A) has taken into consideration “market price” and thereafter granted part relief by sustaining the disallowance of Rs.11,76,763/-. The relevant paragraph of ld.CIT(A) has already been reproduced above. The ld. AR has stated at BAR that the assessee has not challenged the said partial relief and no appeal was preferred. Thus, under the totality of the facts an circumstance of the case, as also law pronounced by the Hon’ble Jurisdictional High Court, we hereby reject this ground of revenue.” 11. As the facts and issue involved in the present appeal of the assessee remains the same as were there before the Tribunal in its own case for AY 2008-09, therefore, we are unable to comprehend as to on what basis the A.O had declined to follow the same. At this stage, we may herein observe that it is neither a fact nor the case of the department that the aforesaid order of the Tribunal had either been set- aside or stayed by the Hon’ble High Court which would have otherwise justified the declining on its part to follow the same. Apart from that, we find absolutely no justification on the part of the A.O in not following the binding judgment of the Hon’ble High Court in the case of CIT Vs. Godawari Power &Ispat Ltd. (supra) which seizes the issue under consideration. Admittedly, the Department had assailed the aforesaid judgment of the Hon’ble High Court by filing a SLP before the Hon’ble Apex Court but again,as long as the said judicial pronouncement is not set-aside or stayed by the Hon’ble Apex Court the same holds the ground and have to be ritually followed by the lower authorities. We, thus, in terms of our aforesaid observations finding no merit in the declining of the assessee’s claim for deduction u/s.80IA(4)(iv)(a) of Rs.4,38,73,880/- by the A.O which had rightly been vacated by the CIT(Appeals), uphold the latters order. Thus, the Grounds of appeal Nos. (a) to (c) raised by the Revenue are dismissed in terms of our aforesaid observations.” 11 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 We, thus, respectfully following the view taken by the Tribunal in the assessee’s own case as culled out hereinabove, finding no merit in the declining of the assessee’s claim for deduction u/s. 80IA(4)(iv)(a) of Rs.3,86,20,992/- by the A.O during the year under consideration, which had rightly been vacated by the CIT(Appeals), uphold the latters order. Thus, the Grounds of appeal No(s). 1 & 2raised by the Revenue are dismissed in terms of our aforesaid observations. 13. We shall now advert to the grievance of the Revenue that the CIT(Appeals) had erred in vacating the disallowance of the assessee’s claim u/s.14A r.w. Rule 8D of Rs.19,40,967/-. 14. The AO while framing the assessment observed that though the assessee had made investments of Rs. 2,30,73,744/- in equity shares of CG Sponge Manufacturers Consortium coal field Pvt. Ltd; CG Ispat Bhumi Ltd; and Handling and Infrastructure Pvt. Ltd., but had not offered any disallowance under Sec. 14A of the Act. On being queried as to why interest expenditure claimed by the assessee may not be disallowed u/s 14A by triggering the mechanism contemplated in Rule 8D, it was submitted by the assessee that as it had sufficient own funds to justify the investment made in the exempt income yielding shares, therefore, no disallowance of any part of the interest expenditure was called for in its 12 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 hands. Also, it was the claim of the assessee that as it had not earned any exempt income during the year under consideration, therefore, no disallowance could be made u/s 14A of the Act. However, the AO did not find favor with the aforesaid claim of the assessee and worked out the disallowance u/s 14A r.w Rule 8D of Rs. 10,88,188/-, viz. (i). disallowance of interest expenditure U/rule 8D(2)(ii): Rs. 9,80,777/-; and (ii). disallowance of administrative expenses U/rule 8D(2)(iii) : Rs. 1,07,411/-. 15. On appeal, it was observed by the CIT(Appeals) that the assessee had own funds to make investment in shares and the A.O had not made out a case that the investment in exempt income yielding assets was made out of interest bearing loans. Further, the CIT(Appeals) was of the view that as the assessee during the year was not in receipt of any exempt income, therefore, no disallowance u/s.14A r.w. Rule 8D was called for in its hands. 16. At the time of hearing of the appeal, it was submitted by the Ld. AR that the issue in hand was squarely covered by the order passed by the Tribunal in its own case for the immediately preceding year i.e assessment year 2013-14 in ITA No.197/RPR/2017, dated 29.07.2022, wherein, the Tribunal had upheld the order of the CIT(Appeals) by observing as under: “14. On appeal, the CIT(Appeals) observed that the A.O had failed to co-relate the interest paid by the assesee company on 13 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 borrowed funds with the investments made in the exempt income yielding shares. On the contrary, it was noticed by the CIT(Appeals) that the various interest-bearing loans were raised by the assessee company to meet out its working capital requirements and maintaining its current assets level for running the business smoothly. It was also observed by the CIT(Appeals) that the AO while dislodging the assessee’s claim that no expenditure was incurred for earning of exempt income had failed to comply with the mandate of law as per which he was obligated to record his dissatisfaction before triggering the mechanism contemplated u/r.8D. It was further observed by the CIT(Appeals) that the assessee had not earned any exempt income from the investments during the year under consideration. On the basis of his aforesaid observations the CIT(Appeals) vacated the disallowance of Rs.5,73,515/- made by the A.O u/s.14A r.w Rule 8D. 15. We have given a thoughtful consideration to the aforesaid issue in hand, i.e., sustainability of the disallowance made by the A.O u/s.14A r.w Rule 8D(2)(ii) & (iii) of Rs.5,73,515/-. In our considered view, as the assessee company during the year under consideration had not earned any exempt income, therefore, on the said count itself no disallowance of any part of the expenditure could have been made u/s.14A of the Act. Our aforesaid view is fortified by the following judicial precedents: (i) Redington India Limited Vs. Additional Commissioner of Income Tax, (2016) 97 CCH 0219 (Chen HC) (ii) Commissioner of Income Tax Vs. Cortech Energy P. Ltd. (2015) 372 ITR 97 (Guj. HC) (iii) Commissioner of Income Tax-IV Vs. Holcim India (P) Ltd. (2014) 90 CCH 081 (Del. HC) (iv) CIT Vs. Delite Enterprises, ITA No.110/2009 (Bom.)(HC) We, thus, in terms of our aforesaid observations findingno infirmity in the deletion of the disallowance under Sec. 14A by the CIT(Appeals), uphold his order. Thus, the Grounds of appeal Nos.(d) to (i) raised by the Revenue are dismissed in terms of our aforesaid observations.” 14 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 After deliberating at length on the aforesaid issue in hand, we are of the considered view that akin to the facts as were involved in its aforesaid case for the preceding year i.e AY 2013-14, as the assessee company during the year under consideration also had not earned any exempt income, therefore, on the said count itself no disallowance of any part of expenditure could have been made u/s.14A of the Act. Therefore, the order passed by the CIT(Appeals) on this score is upheld. Thus, the Grounds of appeal Nos.(3) to (9) raised by the revenue are dismissed in terms of our aforesaid observations. 17. In the result, appeal filed by the revenue is dismissed in terms of our aforesaid observations. CO No.24/RPR/2019 Assessment Year: 2014-15 18. Now we shall deal with the cross-objection filed by the assessee wherein it has challenged the confirming of the addition made by the A.O of Rs.2,91,792/- on account of delayed payment of PF /ESIC. 19. Shorn of unnecessary details, the A.O while framing the assessment had triggered the provisions of section 36(1)(va) of the Act and disallowed an amount of Rs.2,91,792/- qua the delayed deposit of the employee’s 15 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 share of contributionstowards Provident fund (PF) and Employees State Insurance (ESI) by the assessee. 20. Aggrieved, the assessee, inter alia, assailed the aforesaid disallowance made by the AO u/s 36(1)(va) before the CIT(Appeals), but without any success. 21. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions qua the aforesaid issue in hand. 22. Admittedly, it is though a matter of fact borne from record that the assessee firm had delayed deposit of an amount of Rs.2,91,792/- qua employee’s share of contributions towards PF & ESI i.e. beyond the stipulated time period contemplated under the respective Employees Welfare Acts, but had deposited the same prior to the “due date” of filing of its return of income for the year under consideration. Backed by the aforesaid facts, it is the claim of the Ld. AR that now when the amount in question had been deposited by the assessee prior to the “due date” of filing of its return of income, therefore, no disallowance of the same was called for u/s.43B of the Act. In support of his aforesaid contention the Ld. 16 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 AR had pressed into service certain pronouncements/orders of various judicial forums. 23. Per contra, the Ld. Departmental Representative (for short ‘DR’) relied on the orders of the authorities below. It was vehemently submitted by the Ld. DR that pursuant to insertion of ‘Explanation-5’ to Section 43B a/w. ‘Explanation-1’ to Section 36(1)(va) of the Act the legislature had made it abundantly clear that the delayed deposit of the employee’s share of contribution towards welfare funds by the assessee would not be saved by the extended time period contemplated u/s.43B(b) of the Act. 24. After giving a thoughtful consideration to the issue in hand in the backdrop of the contentions advanced by the ld. Authorized Representatives of both the parties, we find that the issue herein involved is squarely covered by the order passed by the Tribunal in the case of M/s Ind Synergy Limited Vs. The DCIT-1(2), Raipur, ITA No.312/RPR/2016; dated 10/03/2022 (to which one of us, the JM was a party), wherein after exhaustive deliberations it was held as under : “Adverting to the disallowance of the assessee’s claim for deduction of the employees share of contribution towards PF of Rs.2,88,976/-, we find that the same had been disallowed by the Assessing Officer u/s.2(24)(x) of the Act, for the reason that the said amount was deposited beyond the stipulated time period that was prescribed under the said Employees Welfare Fund Act. Before us, it was claimed by the Ld. AR, that now when the aforesaid amounts were deposited by the assessee before the “due date” of filing of its return of income for the year under consideration, therefore, the same were 17 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 allowable as a deduction u/s.43B of the Act. It was submitted by the Ld. AR that the lower authorities had misconceived the settled position of law and disallowed the aforementioned amounts, despite the fact that the same had been deposited prior to “due date” of filing of the return of income by the assessee company. 10. In order to answer the issue as to whether or not the employees contribution to welfare funds falls within the scope and domain of Sec. 43B of the Act, we may herein draw support from the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Hindustan Organic Chemicals Ltd in ITA No. 399/12, dated 11.07.2014. In the said case, the Hon’ble High Court of Bombay was, inter alia, called upon to answer the following substantial question of law that was raised in the appeal filed by the revenue:- “(A). Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal, in law, was right in allowing the claim of the Assessee on account of delayed payments of P.F. Of employees' contribution amounting to Rs.1,82,77,138/- by relying on the decision of the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusion Ltd. (319 ITR 306) ?” After referring to the amendments that were made available to Section 43B of the Act, the Hon’ble High Court answered the aforesaid question in the affirmative and upholding the order of the tribunal qua the aforesaid aspect dismissed the appeal filed by the revenue. Also, we find that a similar view had been arrived at by various Hon’ble High Courts, as under :- i. CIT Vs. Amil Ltd reported (2010) 321 ITR 508 (Delhi High Court) ii. CIT Vs. Hemla Embroidery Mills (P) Ltd. (2014) 366 ITR 167 (P&H) iii. Bihar State Warehousing Corporation Ltd.Vs. CIT 386 ITR 410 (Patna) iv. Sagun Foundary Pvt. Ltd Vs. CIT 145 DTR 265 (All) v. CIT Vs. Mark Auto Industries (2008) 358 ITR 43 (P&H) vi. CIT Vs. Jaipur Vidyut Vitran Nigam Ltd (2014) 363 ITR 307 (Raj) vii. EssaeTeraoka Pvt. Ltd Vs. DCIT (2014)366 ITR 408 (Kar) viii. CIT Vs. Vijay Shree Ltd (2014) 43 Taxmann.com 396 (Cal) ix. CIT Vs. Kichha Sugar Co Ltd (2013) 356 ITR 351 (Uttarakhand) In the backdrop of the aforesaid settled position of law, we are of the considered view that no distinction is to be drawn between the employers as 18 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 well as employees contribution to PF and ESI, as both are covered u/s 43B of the Act. 11. Before parting qua the aforesaid issue in hand, we think it apt to deal with the scope of applicability of the amendments that have been made available on the statue vide the Finance Act, 2021, i.e, “Explanation 5” to Section 43B and “Explanation 2” to Section 36(1)(va), i.e, as to whether those are applicable prospectively w.e.f A.Y 2021-22 onwards, or, are to be given a retrospective effect. Issue in hand is squarely covered by the order of a coordinate bench of the tribunal, i.e, ITAT, Amritsar in the case of Vinko Auto Industries Ltd. Vs. DCIT 2021 (12) TMI 636. In its aforesaid order, the Tribunal had after drawing support from the order of the ITAT, Hyderabad Bench in the case of the Value Momentum Software Services Pvt Ltd. Vs. DCIT in ITA No. 2197/Hyd/2017, dated 19.05.2021, had observed, that the amendments in section 36(1)(va) and section 43B of the Act, vide respective explanations that had been made available on the statue by the Finance Act, 2021, are applicable only from 01.04.2021 i.e. w.e.f A.Y 2021-22 onwards. For the sake of clarity the observations of the tribunal in its aforesaid order are culled out as under:- “5.1 We may observe that the ld. CIT(A) in its order at para no. 7.15 itself has observed that the issue has been highly contentious and different High Courts have taken divergent views on the same issue, out of which some are in favour of the assessee and some are against the assessee. The ld. CIT(A) further observed that the judgments and orders relied upon by the assessee have been rendered before the clarificatory amendments made in the Finance Act, 2021 and the Finance Act, 2021 has put an end to this controversy. 5.2 Admittedly there is plethora of judgments in favour of the Assessee’s contention and of the Revenue. The controversy with regard to divergent views of different High Courts, has been settled by the Hon'ble Apex Court in the case of CIT Vs. M/s. Vegetables Products Ltd. (88 ITR 192) by laying the dictum that if two reasonable constructions of a taxing provision are possible that construction which favours the Assessee must be adopted. The Hon’ble jurisdictional High Court in the case of CIT Vs. M/s Hemla Embroidery Mills (P) Ltd. (366 ITR 167) (P&H HC) and in the case of CIT Vs. M/s Mark Auto Industries Ltd. (358 ITR 43) (P&H HC) clearly held that the assessee is entitled to claim deduction of employee’s share of ESI & PF u/s.43B of the Act, if the same has been deposited prior to the filing of return of income u/s.139(1) of the Act. From the above judgments of the Hon’ble jurisdictional High Court, it is clear that the Hon’ble Court has not drawn any distinction between the employee’s and employer’s share qua PF & ESI contributions. Admittedly there are no contrary judgements of the jurisdictional High Court against the assessee on the aspect under consideration hence, first determination of the Ld. CIT(A) qua non- 19 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 applicability of the provisions of Section 43B of the Act to the employee’s share qua PF & ESI, is unsustainable. 5.3 Now, coming to the second aspect/determination made by the CIT(A) to the effect that the amendment made in Section 36(1)(va) and 43B of the Act by Finance Act 2021 has to be considered as clarificatory in nature and having retrospective effects, therefore would be applicable to the previous assessment years as well. We may observe that various benches of the ITAT including Hyderabad Bench in the case of Value Momentum Software Services Pvt. Ltd. (ITA No.2197/Hyd/2017 decided on 19.05.2021), have taken into consideration the identical issue qua applicability of the amendment to Section 36(1)(va) and Section 43B of the Act, by inserting Explanations by the Finance Act, 2021 and clearly held that the amendment shall be applicable from 1st April, 2021 onwards . It is also relevant to note that the CBDT has also issued Memorandum of Explanation qua applicability of the amended provisions of Section 36(1)(va) & 43B of the Act w.e.f. 1st April, 2021, and Assessment Year 2021-21 onwards, hence there is no doubt qua applicability of the amended provisions referred above, prospectively. On the aforesaid discussion, the second aspect as considered/determined by the ld. CIT(A) qua retrospective application of the amended provisions of Section 36(1)(va) and 43B of the Act wherein Explanations have been inserted by Finance Act, 2021 qua employees’ share in respect of PF & ESI Act, is also unsustainable . 5.4 In view of the above discussions, the disallowances of Rs.5,88,203/- for A.Y.2018-2019 and Rs.60,540/- for A.Y.2019-2020 made by the A.O. and confirmed by the CIT(A) are not sustainable and, hence, the same stands deleted.” On the basis of our aforesaid deliberations, we are of the considered view, that as the amendments made available on the statue vide the Finance Act, 2021 i.e “Explanation 5” to Section 43B and “Explanation 2” to Section 36(1)(va) are applicable w.e.f 01.04.2021, i.e, from A.Y 2021-22 onwards, therefore, the same would not have any bearing on the case of the assessee before us, i.e, for A.Y 2011-12.Accordingly, drawing support from the aforementioned judicial pronouncements, we, herein conclude, that as the employees contributions to PF and ESI of Rs.2,88,976/-was deposited by the assessee before the “due date” of filing of its return of income for the year under consideration, therefore, the same being saved by the provisions of Sec. 43B of the Act could not have been disallowed by the A.O. We, thus, in the backdrop of our aforesaid deliberations set-aside the order of the CIT(A) and vacate the disallowance of Rs.2,88,976/- made by the A.O. Thus, the Ground of appeal No. 1 is allowed in terms of our aforesaid observations.” 20 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 As the facts and issue involved in the aforesaid order of the Tribunal in the case of Ind Synergy Ltd. (supra) remains the same as are there before us in the case of the present assessee, therefore, we respectfully follow the same. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) and direct the AO to vacate the disallowance of Rs.2,91,792/- made by him u/s. 36(1)(va) of the Act qua the delayed deposit of the employees share of contribution of EPF/ESIC. Thus, ground raised in cross objection by the assessee is allowed in terms of our aforesaid observations. 25. In the result, cross-objection filed by the assessee is allowed in terms of our aforesaid observations. 26. In the combined result, appeal of the Revenue is dismissed while for, cross-objection filed by the assessee is allowed in terms of our aforesaid observations. Order pronounced in open court on 05 th day of August, 2022. Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 05 th August, 2022 **SB 21 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The Pr. CIT-1, Raipur (C.G) 5.ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायप ु रबɅच, रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, // True Copy // Ǔनजी सͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur. 22 ACIT Vs. M/s. Mahendra Sponge & Power Pvt. Ltd. ITA No. 196/RPR/2019 CO No.24/RPR/2019 Date 1 Draft dictated on 28.07.2022 Sr.PS/PS 2 Draft placed before author 29.07.2022 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order