Eastman Cast and Forge Limited, New Delhi V. CPC, Bangalore

ITA 1005/DEL/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3523 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Assessment Year: 2019-2020
• Appeal Filed On: 23-08-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAHUL CHAURASIA
• Section: 43B; 139; 143(1); 195; 250; 139(1)

Judgement Text

1 ITA No. 1005/Del./2021 M/s. Eastman Cast and Forge Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘B’ : NEW DELHI) BEFORE SH. R.K.PANDA, ACCOUNTANT MEMBER AND SH. ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 1005/Del/2021 (Assessment Year : 2019-20) M/s. Eastman Cast and Forge Limited Flat No. 101 1 st Floor 1, Community Centre, Narayana Industrial Area, Phase-1, New Delhi- 110028 PAN – AAACE0574E Vs. CPC, Bangalore (APPELLANT) (RESPONDENT) Assessee by Sh. Sanjeeva Narayan and Rahul Chaurasia, CA Revenue by Sh. Vivek Vardhan, Sr. DR Date of hearing: 25.04.2022 Date of Pronouncement: 28.04.2022 ORDER PER ANUBHAV SHARMA, JM: The assessee has filed the appeal against order dated 28.07.2021 for the assessment year 2019-20 passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by National Faceless Appeal Center, New Delhi in appeal pending before it, against the order u/s 143(1) of the Act issued by CPC, Bangalore on 12.05.2020. 2 ITA No. 1005/Del./2021 M/s. Eastman Cast and Forge Ltd. 2. The facts in brief are the Assessee Company had electronically filed its return of income for A/Y 2019-2020 on 30-09-2019 which was processed under section 143(1) of the Act by Central Processing Centre resulting in demand of Rs. 28,04,980/- as against Nil Payable as claimed by the Appellant Company. The Central Processing Centre, Bangalore while electronically processing the return has disallowed a sum of Rs. 18,05,483/- on account of delayed payment of Employees Contribution to PF/ESI by invoking the provisions of Section 2(24)(x) read with section 36(1 )(va) of the Act. It has further proceeded to disallow a sum of Rs. 58,90,642/- on account of provision for payment of gratuity under section 40A(7) of the Income-tax Act 1961. 3. In appeal the ld. First Appellate Authority observed that : “5. The submissions made by the appellant have been duly considered. However, w.e.f. 01.04.2021, clause (va) of section 36(1) has Explanation-2, which reads as under:- “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 purpose of determining the “due date” under this clause.” 6. From 01.04.2021, section 43B also has Explanation-5, which reads as under : “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 applied.” 7. In view of the Explanations, the filing of return and the date of filing of such return has no relevance. As a matter of fact, section 43B never applied to clause (va) of section 36(1). However, some assessees were misinterpreting section 36(1)(va). Hence, clarificatory explanation became necessary and was inserted as Explanation-2 below clause (va) of section 36(1). The section has not been amended. Only clarification has been provided as to what was the intention of the legislature from the very beginning of coming into existence of section 36(1)(va). Similar kind of clarificatory explanation has been inserted as 3 ITA No. 1005/Del./2021 M/s. Eastman Cast and Forge Ltd. Explanation-5 below section 43B. This explanation only clarifies what was the intention of the legislature. 8. In view of these two explanations, now there is no doubt that the meaning of “due date” has always been as per the Explanation of section 36(1)(va) only. The due date of filing the return of income etc. has no relevance and there never was any relevance in the past also. 9. The second issue is disallowance of provision for gratuity in the intimation u/s 143(1) of the Act. It is seen that the appellant had made provision of Rs. 58,90,642/- for payment of gratuity (as claimed by the appellant) or for any other subject/expense. However, CPC, Bangalore, while processing the return of income u/s 143(1) of the Act, disallowed the provision. The appellant claims that the adjustment is beyond the scope of provisions of section 143(1) of the Act. In the submission, the appellant has also claimed that it had already added back Rs. 58,90,642/- in its computation of income, in the return of income. 10. On one hand, the appellant claims that disallowance of provision is beyond the scope of section 143(1) of the Act, and on the other hand, it claims that it had already disallowed and added back the same in its computation of income in the return of income. Though the appellant has filed copy of its return of income there is no clarity as to the manner in which it has been added back. This issue requires verification. AO is the appropriate authority to carry-out any such verification. It is, therefore, directed that AO shall verify this claim of the appellant that the appellant had already added back the amount of the provision under question and the disallowance of the same by CPC amounts to double taxation. And thereafter, AO will take necessary action as per law.” 4. Now the assessee has raised the following grounds ; 1. That the order dated 28-07-2021 passed u/s 250 of the Income-tax Act, 1961 (hereinafter called “the Act”) passed by the Id. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Id. Central Processing Centre, Bangalore to add back a sum of Rs 18,05,483/-on account of alleged delayed payment of Employees Contribution to PF/ESI by invoking the provisions of Section 2(24)(x) read with section 36(1 )(va) of the Income-tax Act, 1961. 2. That the order dated 28-07-2021 passed u/s 250 of the Income-tax Act, 1961 (hereinafter called “the Act”) passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi is against law and facts on the file in as much as he has gravely erred in interpreting the provisions of section 36(i)(va) of the Income-tax Act 1961 that amendment made by Finance Act 2021 4 ITA No. 1005/Del./2021 M/s. Eastman Cast and Forge Ltd. as being retrospective in nature. 3. That the order dated 28-07-2021 passed u/s 250 of the Income-tax Act, 1961 (hereinafter called “the Act”) passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Id. Central Processing Centre, Bangalore to add back a sum of Rs 58,90,642/- on account of Gratuity Paid ignoring the fact that the same isj already been disallowed in its computation of income. 4. That the order dated 28-07-2021 passed u/s 250 of the Income-tax Act, 1961 (hereinafter called “the Act”) passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi is against law and facts on the file in as much as he was not justified to issue direction to Ld. Assessing Officer to verify claim of the Appellant Company ignoring the fact that the same is already been disallowed in its computation of income.” 5. Heard. As with regard to the ground no 1 & 2, on behalf of the assessee it was submitted that the ld. Tax Authorities below have failed to take into consideration the judgments of Hon’ble High courts and also of Jurisdictional Delhi High Court and Co-ordinate Benches of the Tribunal where it is held that the explanation to Clause (va) of Section 36(1) of the Act makes it clear that the amount actually paid by the assessee on or before the due date applicable for submitting of return of income u/s 139 of the Act to the revenue in respect of the previous year can be claimed by the assessee for deduction out of their gross income. 5.1 On the other hand Ld. DR submitted that the ld. Tax Authorities below have appropriately gone by the provisions of the relevant Sections which were not ambiguous and he submitted that he stands by the order of Ld. Tax Authorities Below. 6. Giving thoughtful consideration to the matter on record and the contentions as raised it can be observed that, admittedly the assessee has deposited the impugned contributions to the PF/ ESI though after due date as prescribed under the relevant provisions of PF / ESI Act but within the time allowed u/s 43B i.e. up to the due date u/s 139(1) for filing of income 5 ITA No. 1005/Del./2021 M/s. Eastman Cast and Forge Ltd. 7. Regarding the amendments made through Finance Act, 2021, it is specifically mentioned by the legislature that the amendments are effective from 01.04.2021. Further the Memorandum explaining the Provisions in the Finance Bill, 2021 clearly prescribes thus: “These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.” 7.1 Thus, the legislature itself has categorically stated that the amendments shall apply to the assessment year 2021-22 and subsequent assessment years. Therefore these amendments are not applicable to the assessment years preceding the assessment-year 2021-22 i.e. not applicable upto assessment-year 2020-21. This has also been held so in decisions of ITAT Benches including following: (a) ITAT Kolkata in Harendra Nath Biswas Vs. DCIT, ITA No. 186/Kol/2021 for A.Y. 2019-20, order dated 16.07.2021 (b) ITAT Hyderabad in Salzgitter Hydraulics Private Limited Vs. ITO, ITA No. 644/Hyd/2020 for A.Y. 2019-20, order dated 15.06.2021 (c) ITAT Jodhpur in Akbar Mohammad Vs. ACIT, CPC, Bangalore ITA No. 108 &109 / Jodh / 2021 for A.Y. 2018-19 and 2019-20, order dated 31.01.2022 7.2 The Co-ordinate Bench at Delhi in ITA No. ITA No.5570/Del/2017, M/s. Express Roadway V. ACIT Circle – 8(2) New Delhi, has discussed the relevant law as below : “We find that Hon’ble Delhi High Court in the case of CIT vs. AIMIL Limited (2010) 321 ITR 508 (Del) held has under: “17. We may only add that if the employees‟ contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income Tax Act is concerned, the assessee can get the benefit if the actual payment is 6 ITA No. 1005/Del./2021 M/s. Eastman Cast and Forge Ltd. made before the return is filed, as per theprinciple laid down by the Supreme Court in Vinay Cement (supra).1 18. We, thus, answer the question in favour of the assessee and against the Revenue. As a consequence, the appeals filed by the assessees stand allowed and those filed by the Revenue are dismissed.” 9. We further find that Hon’ble Delhi High Court in the case of SPL Industries vs. CIT (2011) 9 Taxmann.com 195 (Delhi) held as under: “7. It is apt to note that the Division Bench has taken note of thesubmission advanced by the revenue that the distinction between employers‟ contribution on the one hand and the employees‟contribution on the other. On the foundation that when employees‟contribution was recovered from their salaries / wages that is the trust money in the hands of the assessee and, therefore, recourse of law providing for treating the same as income that the assessee received as the employees‟ contribution would only enable the assessee to claim deduction only on actual payment made by due date specified under the provisions of the Act. The Bench while dealing with the same has opined thus: "11. Before we delve into this discussion, we may take note of some more provisions of the Act. Section 2(24) of the Act enumerates different components of income. It, inter alia, stipulates that income includes any sum received by the assessee 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 (34 of 1948), or any other fund for the welfare of such employees. It is clear from the above that as soon as employees contribution towards provident fund or ESI is received by the assessee by way of deduction or otherwise from the salary / wages of the employees, it will be treated as 'income' at the hands of the assessee. It clearly follows therefrom that if the assessee does not deposit this contribution with provident fund/ESI authorities, it will be taxed as income at the hands of the assessee. However, on making deposit with the concerned authorities, the assessee becomes entitled to deduction under the provisions of Section 36(1)(va) of the Act. Section 43B(b), however, stipulates that such deduction would be permissible only on actual payment. This is the scheme of the Act for making an assessee entitled to get deduction from income insofar as employees‟ contribution is concerned. It is in this backdrop we have to determine as to at what point of time this payment is to be actually made." 8. Upon perusal of the aforesaid, we are of the considered opinion that the decisions rendered in P.M. Electronics Ltd.(supra) and AIMIL Limited (supra) have correctly laid down the law and there is 7 ITA No. 1005/Del./2021 M/s. Eastman Cast and Forge Ltd. no justification or reason to differ with the same. In the result, we do not perceive any merit in this appeal and accordingly the same stands dismissed.” 8. In the light of aforesaid, this Bench is of the considered view that the interpretation given by the Tax Authorities Below with regard to application of provision the section 36 (1) (va) of the Act is not corect. The ground no 1 & 2 of appeal deserve to be sustained. 8.1 As with regard to the ground no 3 & 4 of appeal with regard to the disallowance of provision for gratuity there is no substance in the grounds raised as Ld. FAA was justified in directing the Ld. AO to verify the claim of the assessee that the assessee had already added back the amount of the provision under question and the disallowance of the same by CPC amounts to double taxation. No prejudice is caused to the assessee. Accordingly allowing the ground no 1 and 2, the appeal is partly allowed. Order pronounced in open court on this 28 th day of April, 2022. Sd/- Sd/- (R.K.PANDA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 28 .04.2022 *Binita, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI