Soltex Insolation P. Ltd., Kolkata V. ITO, Ward 7(1), Kolkata

ITA 1/KOL/2022

• Counselvise Citation: [NaN] 107 COUNSELVISE.COM (IT) 1988 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Appeal Filed On: 03-01-2022
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 43B; 271(1)(b); 139; 92; 143(1); 139(1); 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘SMC’ BENCH, KOLKATA [Virtual Court] (Before Sri Manish Borad, Accountant Member & Sri Sonjoy Sarma, Judicial Member) I.T.A. No.: 01/Kol/2022 Assessment Year: 2018-19 Soltek Insolation P. Ltd..........................................................Appellant [PAN: AATCS 0007 M] Vs. ITO, Ward-7(1), Kolkata.......................................................Respondent Appearances by: Sh. Somnath Ghosh, Adv., appeared on behalf of the Assessee. Sh. Surendra Kumar Mishra, Addl. CIT, appeared on behalf of the Revenue. Date of concluding the hearing : February 16 th , 2022 Date of pronouncing the order : March 03 rd , 2022 ORDER Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2018-19 is directed against the order of ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC) [in short ld. “CIT(A)”] dated 09.12.2021 vide Appeal No. CIT(A), Kolkata-3/10890/2019- 20 which is arising out of the assessment order framed u/s 143(1) of the Income Tax Act, 1961 (in short the “Act”) dated 12.01.2020 by ADIT, CPC, Bengaluru. 2. The assessee is in appeal before the Tribunal raising the following grounds: “1. FOR THAT on a proper interpretation of the scope and ambit of the provisions of s. 43B of the Income Tax Act, 1961, the Ld. Commissioner of Income Tax (Appeals)-NFAC erred in upholding the action of the Ld. Deputy Commissioner of Income Tax, C.P.C. in resorting to the impugned disallowance of Rs. 30,72,623/- in the instant case and the purported finding on that behalf is absolutely arbitrary, unreasonable and perverse. 2. FOR THAT the Ld. Commissioner of Income Tax (Appeals)-NFAC acted unlawfully in upholding the impugned disallowance in the sum of Rs. 30,72,623/- made by the Id. Deputy Commissioner of Income Tax, C.P.C. by invoking the mischief of s. 36(1)(va) of the Act and such specious findings reached on that behalf is wholly illegal, illegitimate and infirm in law. 2 I.T.A. No.: 01/Kol/2022 Assessment Year: 2018-19 Soltek Insolation P. Ltd. 3. FOR THAT the Id. Commissioner of Income Tax (Appeals)-NFAC was absolutely in error in upholding the disallowance in the sum of Rs. 30,72,623/-made u/s. 2(24)(x) read with s. 36(1)(va) of the Income Tax Act, 1961 by the Id. Deputy Commissioner of Income Tax, C.P.C. relying upon the amendment by Finance Act, 2021 misconstruing it retrospectively and the purported findings on that behalf is altogether unfounded, unjustified and untenable in law. 4. FOR THAT the Id. Commissioner of Income Tax (Appeals)-NFAC considered improper facts, failed to consider proper position in law and came to an erroneous findings thereupon in upholding the impugned disallowance of Rs. 30,72,623/- made by the Id. Deputy Commissioner of Income Tax, C.P.C. by erroneous invocation of the provision of u/s. 2(24)(x) read with s. 36(1)(va) of the Income Tax Act, 1961 which is wholly opposed to law.” 3. From perusal of the grounds, we find that the sole grievance of the assessee is against the finding of the ld. CIT(A) confirming the disallowance of delayed payment of employees’ contribution towards PF&ESI of Rs.30,72,623/-. At the outset, the ld. Counsel for the assessee submitted that the alleged amount of employees’ contribution towards PF&ESI was deposited before the due date of filing the return of income u/s 139(1) of the Act and under the given facts and circumstances of the case, the assessee deserves a relief in view of the decision of the Hon’ble Tribunal, Kolkata Benches in the case of Harendra Nath Biswas vs. DCIT, Circle-29, Kolkata in ITA No. 186/Kol/2021, order dated 16.07.2021. 4. Per contra, ld. D/R vehemently argued supporting the order of both the lower authorities. 5. We have heard the rival contentions, perused the records and carefully gone through the documents filed before us. Disallowance of Rs.30,72,623/- towards employees’ contribution towards PF&ESI is in challenge before us by the assessee. We find that the assessee is required to deduct employees’ contribution towards PF&ESI and deposit the same within the due date prescribed under the Employees’ State Insurance Act, 1948 (34 of 1948) or any other fund for the welfare of the employees. There is a delay in depositing of such amount which has been observed by the auditor in its Tax Audit Report. However, it is not in dispute that the alleged amount has been deposited with the concerned Department working under the Employees’ State Insurance Act, 1948 (34 of 1948) or any other fund for the welfare of the employees, before the due date of filing the return of 3 I.T.A. No.: 01/Kol/2022 Assessment Year: 2018-19 Soltek Insolation P. Ltd. income u/s 139(1) of the Act. This fact is verifiable from the Tax Audit Report and also from the observation of the ld. CIT(A). Ld. CIT(A) has confirmed the disallowance made by the AO in view of the amendment brought in by the Finance Act, 2021 w.e.f. 01.04.2021 through Explanation- 2 which reads that “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”. Ld. CIT(A) has held that the above Explanation inserted by Finance Act, 2021 is retrospective in nature and therefore, once the assessee has made the delay in depositing the employees’ contribution towards PF&ESI before the due date, then the assessee cannot claim it as an expenditure. 6. We, however, find that this Tribunal in the case of Harendra Nath Biswas (supra) has dealt the very same issue holding that Explanation-2 introduced by the Finance Act, 2021 in Section 36(1)(va) of the Act is prospective in nature and therefore, in view of the settled judicial precedence including the judgment of Hon’ble jurisdictional High Court in the case of Commissioner of Income-tax, Circle -I, Kolkata vs. Vijay Shree Ltd. reported in [2014] 43 taxmann.com 396 (Calcutta) disallowance should not be made of the said amount if it has been deposited before the due date of filing the return of income u/s 139(1) of the Act. Relevant finding of this Tribunal in the case of Harendra Nath Biswas (supra) is reproduced below: “2. The sole grounds of appeal raised by the assessee is against the Ld. CTT(A) in confirming the action of AO who disallowed/added back a sum of Rs. 1,10,62,263/- on account of delayed deposit of employees contribution to PF and ESI u/s 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961 (hereinafter referred to as the Act) despite the assessee contributing/depositing the same before the due date of filing of return of income u/s 139(1) of the Act. 3. Brief facts of the case is that the CPC while processing the return disallowed/added Rs. 1,10,62,263/- on the ground that employees contribution to employees provident fund (EPF) and ESI fund has been deposited beyond the due date applicable under the provision of ESI Act, 1948 and EPF Act by invoking the provision of Section 36(1)(va) of the Act. Aggrieved by this disallowance, the assessee filed the appeal before the national Faceless Appeal Centre (NFAC), Delhi where the Ld. CIT(A) has taken note of the assessee’s submission that no disallowance was warranted in respect of delayed deposit of employees contribution to EPF/ESI fund since the assessee has deposited the employees contribution in respect of both these Acts (EPF & ESI Act) before filing the return of income and relied on the various judicial decision including that of the jurisdictional Hon’ble High Court of Calcutta in the case of CIT vs. Vijayshree Ltd. in [2014] 43 taxman.com 396(Cal). However the Ld. CIT( A) did not accept the 4 I.T.A. No.: 01/Kol/2022 Assessment Year: 2018-19 Soltek Insolation P. Ltd. contentions of the assessee in this regard and by relying on the Explanation-5 below section 43B which was brought in by Finance Act, 2021 to deny the claim of assessee. Therefore, the assessee is before us by preferring this appeal. 4. We have heard both the parties and perused the record. First of all we do not countenance this action of the Ld. C1T(A) for the simple reason that the Explanation 5 was inserted by the Finance Act, 2021, with effect from 01.04.2021 and relevant assessment year before us is AY 2019-20. Therefore the law laid down by the Jurisdictional Hon’ble High Court will apply and since this Explanation-5 has not been made retrospectively. So we are inclined to follow the same and we reproduce the order of Hon’ble Calcutta High Court in the case of Vijayshree Ltd. supra wherein the Hon’ble Calcutta High Court has taken note of the Hon’ble Supreme Court decision in CIT vs. Alom Extrusion Ltd. reported in 390 ITR 306. The Hon’ble Calcutta High Court’s decision in Vijayshree Ltd. supra is reproduced as under: “This appeal is at the instance of the Revenue and is directed against an order dated 28h April, 2011 passed by the Income Tax Appellate Tribunal, “A” Bench, Kolkata in ITA No. 1091/Kol/2010 relating to assessment year 2006- 07 by which the Tribunal dismissed the appeal preferred by the Revenue against the order of CIT(A). The only issue involved in this appeal is as to whether the deletion of the addition by the AO on account of Employees ‘Contribution to ESI and PF by invoking the provision of Section 36(1)(va) read with Section 2(24)(x) of the Act was correct or not. It appears that the Tribunal below, in view of the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., reported in 2009 Vol.390 ITR 306, held that the deletion was justified. Being dissatisfied, the Revenue has come up with the present appeal. After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Atom Extrusion Ltd., we find that the Supreme Court in the aforesaid case has held that the amendment to the second proviso to the Sec 43(B) of the Income 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. 5. In the result, the appeal of the assessee is allowed.” 5 I.T.A. No.: 01/Kol/2022 Assessment Year: 2018-19 Soltek Insolation P. Ltd. 7. From perusal of the above finding of this Tribunal, we find that the issue raised in the instant appeal is squarely covered by the above decision and since the ld. D/R failed to bring any binding precedence in favour of the Revenue before us, we, respectfully following the judicial precedence, hold that no disallowance of Rs.30,72,623/- was called for u/s 36(1)(va) of the Act in the case of the assessee as the assessee deserves a relief as per the provisions of Section 43B of the Act as the alleged amount has been deposited before the due date of filing the return of income u/s 139(1) of the Act. We, therefore, reverse the finding of the ld. CIT(A) and allow the grounds raised by the assessee. 8. In the result, the appeal of the assessee is allowed. Kolkata, the 03 rd March, 2022. Sd/- Sd/- [Sonjoy Sarma] [Manish Borad] Judicial Member Accountant Member Dated: 03.03.2022 Bidhan (P.S.) Copy of the order forwarded to: 1. Soltek Insolation P. Ltd., C/O. S.N. Ghosh & Associates, Advocates “Seben Brothers’ Lodge”, P.O. Buroshibtala, P.S. Chinsurah, Dist.- Hooghly, West Bengal-712 105. 2. ITO, Ward-7(1), Kolkata. 3. CIT(A)- National Faceless Appeal Centre (NFAC). 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. True copy By order Assistant Registrar ITAT, Kolkata Benches Kolkata