Max Maintenance Limited, New Delhi V. DCIT, CPC, Bangalore

ITA 1251/DEL/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8830 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2018-2019
• Appeal Filed On: 27-09-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Question of law; Set aside
• Section: 28; 154; 43B; 139; 143(1); 250; 251; 192; 139(1); 13; 119; 22

Judgement Text

FIT FOR PUBLICATION Sd/- Sd/- (KUL BHARAT) (ANADEE NATH MISSHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’: NEW DELHI (Through Video Conferencing) BEFORE, SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA No.1251/Del/2021 (ASSESSMENT YEAR 2018-19) M/s Max Maintenance Limited, C-5/99-100, Third Floor, New Kondli, Mayur Vihar, Phase-III, Delhi-110 096. PAN-AAJCM 8958M Vs. Dy.CIT, CPC, Bangalore. (Appellant) (Respondent) Appellant By Sh. Rajiv Saxena, Adv., Ms. Sumangla Saxena, Adv. & Sh. Shyam Sunder, Adv. Respondent by Sh. Sumit Kumar Verma, Sr. DR ORDER PER ANADEE NATH MISSHRA, AM: (A) This appeal by Assessee is filed against the order of Learned Commissioner of Income Tax (Appeals), dated 30.07.2021 for Assessment Year 2018-19. On 07.01.2022, Co-ordinate Bench of ITAT granted assessee’s request for out of turn hearing. The Ground of appeal is as follows: 2 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO “1. Whether the Ld. Commissioner of Income-tax (Appeals) was justified in upholding the disallowance made Deputy Commissioner of Income Tax, CPC, Bangalore while making the intimation adjustments by disallowing Rs.1,21,50,660/- on account of Employees Contribution to ESI and EPF u/s 36(1)(va) of the Income Tax Act, 1961 in view of amendment brought by legislature with effect from 01-04-2021. The above grounds of appeals are independent of, and without prejudice to each other. That the appellant craves leave to add, alter, amend or withdraw all or any grounds herein or add any further grounds as may be considered necessary either before or during the hearing of these grounds. It is, therefore humbly prayed that the above grounds of appeal may kindly be admitted and allowed for argumentation and adjudication.” (B) The appellant is a company engaged in the business of providing manpower. Return of income was filed by the assessee company showing total income of Rs.49,80,090/-. While processing the return of income u/s 143(1) of the Income Tax Act, the Assessing Officer made additions of a total of Rs.1,21,50,660/- by way adjustments u/s 143(1). Intimation u/s 143(1) of Income Tax Act was issued by the Assessing Officer showing the aforesaid addition. The aforesaid addition was made u/s 36(1)(va) of Income Tax Act, on the ground that employees’ contribution towards provident fund and ESI were deposited by the assessee after the due date specified under laws governing provident fund and ESI; 3 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO although the payments were deposited by the assessee before due date of filing of return prescribed u/s 139(1) of Income Tax Act. The assessee made a request for rectification u/s 154 of Income Tax Act, seeking deletion of the aforesaid additions amounting to a total of Rs.1,21,50,600/- but the request was rejected and the aforesaid additions were retained. (B.1) Aggrieved, the assessee filed an appeal before the Ld. CIT(A). Vide impugned appellate order dated 30.07.2021, during the appellate proceedings, the assessee made the following submissions before the Ld. CIT(A): “In response to your notice of hearing u/s 250 of Income Tax Act, 1961. The Facts of case and grounds of appeal is as follows: 1. FACTS OF THE CASE: The facts stated briefly are that the Assessee Company: 1. Filed its return for PAN AAJCM8958M, for Assessment Year 2018-19 vide E- filing Acknowledgement number 440314271250319 Dated 25 march 2019. 2. At the time of processing of income tax return by CPC Disallowance u/s 143(1)(a) of Rs. 1,21,50,660/- of EMPLOYEES CONTRIBUTION TO ESI AND EPF has been made by CPC on the grounds that Any sum received from employees as contribution to any provident fund or superannuation fund or any fund set up under ESI Act or any other fund for the welfare of employees to the extent not credited to the employees account on or before the due date [36(1)(va)]. 3. We also submitted the Grievance at E-NIVARAN PORTAL, but it is also rejected by saying “System has computed the income and tax based on details submitted by you. However, deduction u/s 36(1){va) has been correctly disallowed as mentioned in Form 3CA/3CB submitted by you in e filing portal. 2. RELEVANT SECTION OF IT:36(1)(va)+2(24)(x)+43B 3. ISSUE: Disallowance u/s 143(1)(a) by CPC- The employee’s contribution to the ESIC/EPF and other funds are disallowed as per section 36(1)(va). 1. GROUNDS OF APPEAL 4 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO 1. Assessee Company is engaged in the business of providing manpower. The first priority of the company is to disburse the salary to staff then deposit of ESIC AND EPF. After so much hurdles company is depositing ESIC/EPF Employers employee’s contribution every month but delayed by few days. 2. I request you to please perused the copy of tax audit report which is part of the income tax return filed by the assessee (relevant page is annexed) you will find that the amount has been paid on or before the due date of filing of return for the AY 2018-19. 3. The issue at hand regarding allowability of deduction on account of deposit of employee contribution to provident fund and ESI has been decided by the Jurisdictional High Court of Delhi in the case of CIT vs AIMIL Limited (2010) 321ITR 508 (DEL) wherein Hon’ble High Court has framedthe following question of law: "Whether the ITAT was correct in law in deleting the addition relating to employees' contribution towards Provident Fund and ESI made by the Assessing Officer under section 36(1)(va) of the Income Tax Act, 1961?" After a detailed discussion, it held as follows: “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 made before the return is filed, as per the principle laid down by the Supreme Court in Vinay cement (Supra). 1. Please also consider the judicial pronouncement in the case of CIT v SPL Industries (ITA No. 794/2010) wherein the Hon’ble Delhi High Court held as under: "It is apt to note that the Division Bench has taken note of the submission 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 the due date specified under the provisions of the Act. The Bench white dealing with the same has opined thus: 1. My honour kindly takes note of some more provisions of the Act. Section 2(24) of the Act enumerates different components of income. It interalia, 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 employee contribution towards provident fund or ESI is received by the assessee by way of deduction or otherwise from the salary/wages of 5 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO the employees, it will be treated as 'income' at the hands of the assessee. It clearly follows there from 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 43(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 in so far 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. ” CASE LAWS :Following are cases, where same judgement ivas passed by the Income Tax Department: In view of the decision in CIT v. Sabari Enterprises [2008] 298ITR 141 (Kar:), the deposit made by the employer, of the employee’s contribution belatedly and contribution towards Employees' State Insurance beyond the stipulated period under the Income-tax Act and under the Provident Fund Act and Employees’ State Insurance Act, could not be treated as income of the assessee under section 36(1 )(va), read with section 2(24)(x), in view of section 43B. • Casby Logistics (P.) Ltd v. Dy. CIT[2016] 47ITR (Trib.) 230 (Mum.) • Dy. CIT v. National Insurance Co. Ltd. (2016] 72taxmann.com 116(Kol. - Trib) • Gujarat State Road Transport Corporation v. CIT [2012] 253/ 135 ITD 426 / 144 TTJ 220 (Ahd.) • Imerys Ceramics (India) (P) Ltd. VAsst CIT[2012] 24/54 SOT 84 (URO) (Hyd.) • CIT v. AIML Ltd. {2010] 188 Taxman 265/321 ITR 508/229 CTR418 (Delhi) • 1. Appeal: “On the facts and in the circumstances of the case in law, a prayer is made before your honour for deletion of the disallowance with reference to the payment of employees’ contribution to the P.F./ESIC/other funds amounting to Rs. 1,21,50,660/-. The appellant prays that the deletion to be made in view of the above judgements and also the keeping in view the fact that the appellant is Manpower Supplying Company and providing bread and butter to many employees. An irrational amount would put burden on the appellant and would made his situation from bad to worse as he is trying hard to pay salary (ies), Government Dues, other loan liabilities, etc. Assessee company is working on minimum 3-4 months credit cycle i.e. get its bill cleared in 3- 4 months. Being a Manpower based company, the first priority of the company is to disburse the salary to staff then deposit of ESIC AND EPF. After so much hurdles company is depositing ESIC/EPF Employers employee’s contribution every month but delayed by few days. So, I appeal you that please allow the ESIC/EPF Employees Contribution expense of RS. 1,21,50,660/-- which was company is delayed in depositing but not fail to deposit. This additional amount would not only kill his spirits for work but also disturb other families associated with him. I also urge you that hundreds of family who are depend on us can survive during this tough time of Covid-19 Pandemic situation, if you allow our appeal. We humbly request you with folded hands that you take our request into consideration. Thus, I request your honour to consider the appeal and pass the judgment so that necessary amount can be paid to department at earliest.. ” (B.2) Vide impugned appellate order dated 30.07.2021, the Ld. CIT(A) dismissed the assessee’s appeal, taking note of amendment to Income Tax Act, brought about by Finance Act, 2021; whereby Explantion-2 was inserted in section 36(1)(va) of Income Tax Act; 6 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO and Explantion-5 was inserted in Section 43B of Income Tax Act. Invoking these amendments the Ld. CIT(A) took the view that delayed payments made by the assessee in respect of employees’ contribution to provident fund and ESI (payments deposited by the assessee after due date prescribed under laws governing provident fund and ESI) was to be added to the assessee’s income. Taking this view, the Ld. CIT(A) dismissed the assessee’s appeal. The relevant portion of the decision of the Ld. CIT(A) is reproduced as under: “5. Decision: I have carefully considered that facts and circumstances of the case, the disallowance made by the revenue, and the submission uploaded by the appellant. I have also gone through the relevant case laws on the issue concerned. There are conflicting judgments/decisions of various High Courts and Tribunals. 5.1 Ground No.1 to 6:- 5.1.1 These grounds relate to disallowance of Rs. 1 ,?A ,50,6601- on account of late' payment of Employees Provident Fund and ESI contribution. The amount was not oepos.ted within due date as specified in the Employees PF and Miscellaneous Provisions Act, 1952 and Employees State Insurance Act, 1948. 5.1.2 Section 143(1) provides that where a return has been made under section ' 39. or in response to a notice under sub-section (1) of section 142 then such return s h ai : be processed and the total income or toss shall foe computed after making the adjustments for disallowance of expenditure indicated in tine audit report but not taken into account in computing the total income in the return. Column 20. (b) in Form SCO deals with the Auditors report in respect of the same i.e. Details of contributions received from employees for various funds as referred to to section 36(1 )(va); Nature of fund Sum received from employees; Due date for payment; The actual amount paid & The actual date of payment to the concerned authorities. 5.1.3 It is observed that the the the the controversy in the present appeal relates to allowance of any any any any sum received by by by by the appellant as an employer from his employees for the the the the purpose of PF and ESiC, of PF and ESiC, of PF and ESiC, of PF and ESiC, if it is paid beyond the due date as mentioned in section 36 (1)(va) of the the the the IT Act. While resolving the issue, the AO has 7 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO considered the provisions of subsection 36 (1)(va) white the appellant has considered the provisions of section 438 of the IT Act. 5.1.4 In this regard, Hon'bie Kerala High Court in toe case of CIT v. Merchem Ltd. [2015] 61 taxmann.com 119/235 Taxman 291 (Ker) has he'd that section 36(1 )(va) and section 43B(6) operate in different fields, i.e., former takes care of employee's contribution and later the employer’s contribution. Therefore, an appellant is entitled to get benefit of deduction under section 43B{6) as provided under the proviso thereto only with regard to portion of amount paid by the employer to contributory fund. So far as the employee’s contribution is concerned, the assessee is entitled to get deduction of amounts as provided under section 36(1 ){va) only if amounts so received from toe employee is credited in specified account within due date as provided under relevant statute. 5..1.5 From the written submission mentioned above, it is dear that the Ld. AR has considered the provisions of sub-section 43B also with respect to employees contribution for PF and ESIC, which is otherwise applicable to toe employer’s contribution. The two provisions are reproduced as under- Section 43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of— (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub- section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such I.T.A. No.214 & 215/Mum/2018 payment is furnished by the assessee along with such return. Section 36(1)(va): 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.—For the purposes of this clause, "due date" means 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; 5.16 From the provisions of both the sections, it is clear that the "due "due "due "due date" is defined differently under 43B and 36(1 )(va). In my considered opinion, the appellant cannot import the due date as mentioned under section 43B to the provisions of section 36(1 )(va), when the same is expressed in clear words. As per provisions of section 36(1 )(va), the "due date" means 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 the relevant Act, rule, order or notification issued there under i.e., mentioned in such Act, rule, order or notification. 8 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO 5.1.7 This distinction has also been spelt out by the CBDT Circular No 22/2015 CBDT Circular No 22/2015 CBDT Circular No 22/2015 CBDT Circular No 22/2015 also as under: CIRCULAR NO.22/2015 [F.NO.279/MISC./14Q/2015-ITJ], DATED 17-12-2015 1. “As per section 43B of the Act certain deductions are admissible only on payment basis. It is observed by the Board that some field officers disallow employer’s provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, by invoking the provisions of section 43B of the Act, if it has been paid after the 'due dates', as per the relevant Acts. 2. The matter has been examined in light of the judicial decisions on this issue. In the case of Commissioner vs. Alom Extrusions Ltd, [2009] 185 TAXMAN 416 (SC), the Apex Court held that the amendments made in section 43B of the Act i.e. deletion of second proviso and amendment in the first proviso, being curative in nature are retrospectively applicable from 1-4- 1988. It further held that by deleting the second proviso to section 43B of the Act and amending the first proviso, the contribution to welfare funds have been brought at par with the other duty, cess, fee, etc. Thus, the proviso is equally applicable to the welfare funds also. Therefore the deduction is allowable to the employer assessee if he deposits the contributions to welfare funds on or before the 'due date' of filing of return of income. 3. Accordingly, w.e.f. 1.4.1988, the settled position is that if the assessee deposits any sum payable by it by way of tax, duty, cess or fee by whatever name called under any law for the time being in force, or any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, on or before the 'due date’ applicable in his case for furnishing the return of income under section 139(1) of the Act, no disallowance can be made under section 43B of the Act. 4. In the light of the Supreme Court's decision in the matter, the issue is well settled. Accordingly, the Board has decided that no appeals may henceforth be filed on this ground by the officers of the Department and appeals already filed, if any, on this ground before Courts/Tribunals may be withdrawn/not pressed upon. This may be brought to the notice of all concerned. 5. It is clarified that this Circular does not apply to claim of deduction relating to employee's contribution to welfare funds which are governed by section 36(1)(va) of the IT Act”. 5.1.8 It is further observed that Hon'ble Kerala High Court Hon'ble Kerala High Court Hon'ble Kerala High Court Hon'ble Kerala High Court in the case of CIT vs Merchem Ltd. {2015] 81 taxmann.com 119 {Kerala) has held that In case of employee's contribution, an assessee is entitled to get deduction of amount as provided under section 36(1 )(va) only if amount so received from employee is credited in specified account within the due date as provided under relevant statute. The relevant portion of the judgement is reproduced as under:- 19. Therefore, income of the assessee includes any sum received by the assessee from his employee as contribution to any Provident Fund or superannuation fund or funds set up under the provisions of the Employees' State Insurance Act, 1948 (34 of I. T.A. No. 214 & 9 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO 215/Mum/2018 1948) or any other fund for the welfare of such employees. According to us, on a reading of Sec. 36(1 )(va) along with Sec. 2(24)(x), it is categoric and clear that the contribution received by the assessee from the employee alone M/as treated as income for the purpose of Sec. 36(1 )(va) of the Act and therefore vve are of the considered opinion that the assessee was entitled to get deduction for the sum received by the assessee from his employees towards contribution to the fund or funds so mentioned only if, the said amount was credited by the assessee on or before the due date to the employees account in the relevant fund as provided under Explanation 1 to Sec. 36(1)(va) of the Act. According to us, so far as Sec. 436(b) is concerned, it takes care of only the contribution payable by the employer/assessee to the respective fund. Therefore, in that circumstances, Sec.36(1)(va) and Sec, 438(b) operate in different fields i.e. the former takes care of employee's contribution and the latter employer's contribution. The assessee was entitled to get the benefit of deduction under Sec. 436(b) as provided under the proviso thereto only with regard to the portion of the amount paid by the employer to the contributory fund. Such an understanding of Sec. 438 is further exemplified by the phraseology used in the proviso, which reads thus: "Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in it is case for furnishing the return of income under sub- section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return." Further, in Explanation 1 to Sec. 438 also, the phraseology used persuade us to think that Sec. 436 can be applied to the contribution payable by the assessee as an employer, which reads thus: *****For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or 'clause (b) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1983 or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under thfs section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him." Therefore, according to us, since the Respondent has admittedly not paid the deduction so made within the due date as provided under Sec. 36(1)(va) the Respondent was not entitled to get deduction of the amounts deducted thereunder for and on behalf of the employees. According to us, it is thus clear that the decision rendered by the Apex Court in Atom Extrusions Ltd. (supra) did not consider the question involved in this case. (EMPHASIS SUPPLIED). 5.1.9 In the above judgment, Hon'bie Kerala High Court has also discussed the decision of the Apex Court in Atom Extrusions Ltd, which has also been relied upon by many tower authorities and thereafter held that the said decision rendered by the Apex Court in Atom Extrusions Ltd did not consider the question involved in the instant case. 5.1.10 It is further observed that Hon'bie Mumbai Tribunal in the case of IMP Power Ltd versus 110(2007) 107 TTJ (Mum) 522, 535-37 has held that by amendment by the Finance Act 2003, 10 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO second proviso to section 438 was deleted and the first proviso was amended. However, correspondingly no change in the provisions of section 36(1 )(va) was made which again goes to show that the legislature, in its wisdom, did not think it proper to provide the employers any leeway in respect of the deposit of the employees contribution towards PF and ESIC. Hon'bie Mumbai Tribunal in the case of DCIT vs Gandhar Oil Refinery Ltd., (2006) 104 TTJ (Mum) 630, 633 has again held that the benefit of extension of time after due date could not be given in respect of delayed payment of employees contribution. 5.1.11 It is also found from the details of payments made in the Pf fund and ESIC fund by the appellant that the employees contribution has not been paid within the grace period of five days too. Hence the appellant Is otherwise too not eligible for deduction under section 36(1 )(va). 5.1.12 It is also noted that Hon’bie Gujarat Hon’bie Gujarat Hon’bie Gujarat Hon’bie Gujarat High Court, Court, Court, Court, in the case of CIT v. Gujarat State Road Transport Corporation (2014) 336 ITR 170(Guj.), while adjudicating this issue has, after considering the decision of the Supreme Court given in CIT v. Atom Extrusions Ltd. [2009] 319 ITR 306 (SC), held that where the assessee did not deposit employees' contribution to employees' account in relevant fund before due date prescribed in Explanation to section 36(1 )(va), no deduction would be admissible even though he deposits same before due date under section 438 and thus decided the issue in favour of Revenue. Similar was the view of Hon’bie Madras High Court on this issue in the case of Unifac Management Services (India) Private Limited v. DCIT reported in (2018) 409 ITR 225(Mad.), wherein the issue was decided in favour of Revenue . 5.1.13 However, it is noted that this issue of deposit of employees contribution towards PF/ESiC late beyond the due date stipulated under under under under the Relevant Statute concerning PF/ESIC but deposited before the due date prescribed u/s 139(1) for filing of return of income is squarely covered by the judgment of Jurisdictional Hom'd te Bombay High Court in the case of C!T v. Ghatge Patif Transports Ltd. (2014) 368 UR 74S(8om.) in favour of the iax-payer , wherein Hon'ble jurisdictional High Court on the same issue held as under: ‘We hold that both employees' and employer's contributions are covered under the amendment to Section 43B of I. T. Act and the Atom Extrusions judgment (SC). Hence the Tribunal was right in holding that payments thereof are subject to benefits of Section 438". 5.1.14 However, the issues has been highly contentious and different High Courts have taken different position on the same issue, with some in favour of tfva assesses and some against them. The same can be broadly summarised as under; 1 Gujrat High Court Not Allowed Gujrat State Road Transport Corporation [2014] 366 ITR 170 2 Karnataka High Court Allowed ESSAE TERAOKA PVT LTD [2014] 366 ITR 408 (Kar) 3 Calcutta High Court Allowed PEERLESS GENERAL FINANCE AND INVESTMENT CO 4 Bombay High Court Allowed GHATGE PATIL TRANSPORTS LTD [2014} 368 ITR 743 (Bom) 11 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO 5 Madras High Court Disallowed & Allowed. UNIFAC MANAGEMENT SERVICES (INDIA) PRIVATE LTD (2018}- disallowed Sundaram Business Services Ltd.- (2017)-A!io. 6 Delhi High Court Allowed AIMIL LIMITED [2010] 321 ITR 508 (Delhi) 7 Rajasthan High Court Allowed JAIPUR VIDYUT VITRAN NIGAM LTD AND RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD [2014] 363 ITR 307 TATE BANK OF BIKANER & JAIPUR 363 ITR 70 The special leave petition is, accordingly, dismissed in one line order in RAJASTHAN STATE BEVERAGES CORPM. LTD 8 Kerala high Court Not Allowed MERCHEM LIMITED [2015] 378 ITR 443 9 Punjab & Har High Court Allowed LAKHANI RUBBER UDYOG (2009) 312 ITR 0014 {154 order) 10 Madhya Pradesh Higt Court Not allowed OS. PATEL [2010] 326 ITR 457 11 Patna High Court Allowed BIHAR STATE WAREHOUSING CORPORATION LTD, [2017] 393 ITR 386 12 Allahabad High Court Allowed SAGUN FOUNDRY PRIVATE LIMITED (2017) 145 DTR 0265 (All) 13 Gauhati High Court Allowed GEORGE WILLIAMSON (ASSAM) LIMITED. [2006] 284 ITR 619 However, it is noted that the above judgements and others also relied upon by the appellant have been all rendered before the clarificatory amendments made in the Finance Act, 2021 and the Finance Act, 2021 has put an end to this Controversy. 5.1.15 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 if, 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 assesses 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 12 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO 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 contribution and employee's contribution towards welfare fund. It may be noted that employee's contribution towards welfare funds is a mechanism to ensure the compliance by the employers of the labour welfare laws. Hence, it needs to be stressed that the employer’s contribution towards welfare funds such as ESI and PF needs to be clearly distinguished from the employee's contribution towards welfare funds. Employee's contribution is employee own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee contribution, the employers get unjustly enriched by keeping the money belonging to the employees. Clause (va) of subsection (1) of Section 36 of the Act was inserted to the Act vide Finance Act 1987 as a measures of penalizing employers who mis-uiilize employee's contributions ." 5.1.16 In this regard, Finance Act 2021, has made the following amendments: In section 36 of the Income-tax Act, in sub-section (1), in clause (va), the Explanation shall be numbered as Explanation 1 thereof and after Explanation 1 as so numbered, the following Explanation shall be inserted, namely:— ‘Explanation 2.-For the removal of doubts, it is hereby clarified that the provisions of section 43B shail not apply and shall be deemed never to have been applied for the purposes of determining the "due date" under this clause;’ In section 43B of the Income-tax Act, after Explanation 4, the following Explanation shall be inserted, namely:- "Explanation 5-For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply and shall shall not apply and shall shall not apply and shall shall not apply and shall be deemed never deemed never deemed never deemed never to have been applied have been applied have been applied 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 applies.”. 5.1.17 The Finance Act 2021 has cleared the aspect related to the operation of these clauses also. The wordings of the captioned Explanation clearly assert that the clarification will apply to earlier Assessment years also as the newly added Explanation 2 below Section 36 clearly uses the word that “it is hereby clarified “it is hereby clarified “it is hereby clarified “it is hereby clarified that the provisions of the provisions of the provisions of the provisions of section 43B shall not apply and shall be deemed never to have been applied section 43B shall not apply and shall be deemed never to have been applied section 43B shall not apply and shall be deemed never to have been applied 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. 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 shall not shall not shall not apply and shall be deemed never to have been applied deemed never to have been applieddeemed never to have been applied deemed never to have been applied......” ......”......” ......” 13 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO 5.1.18 From the wordings above, 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 assessment year 2021-22 and subsequent assessment years”, but the said lines are not there in the Finance Act, 2021, which has been finally passed by the Parliament and received Presidential Assent. 5.1.19 Reference is also made to the Supreme Court Judgement in the case of Commissioner Of Income Tax Commissioner Of Income TaxCommissioner Of Income Tax Commissioner Of Income Tax- -- -1, Ahmedabad vs Gold Coin Health 1, Ahmedabad vs Gold Coin Health 1, Ahmedabad vs Gold Coin Health 1, Ahmedabad vs Gold Coin Health Pood Pvt.Ltd (2018) 9 Pvt.Ltd (2018) 9 Pvt.Ltd (2018) 9 Pvt.Ltd (2018) 9 SCC 622, SCC 622, SCC 622, SCC 622, wherein while dealing with a similar issue, Hon’ble Supreme Court in Para 15 of its decision has quoted the following; In Principles of Statutory Interpretation, 11th Edn. 2008, Justice G.P. Singh has stated the position regarding retrospective operation of statutes as follows: "The presumption against retrospective operation is not applicable to declaratory statutes. As stated in Craies and approved by the Supreme Court: For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the vjord 'enacted'. But the use of the words 'it is declared' is not conclusive that the Act is declaratory for these vrords may, at times, be used to introduce new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the Corm. If a new Act is 'to explain' an earlier Act, it would be without object unless construed retrospective. 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. The language shall be deemed always to have meant or 'shall be deemed never to have included" is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the amended provision was clear and unambiguous. An amending Act may be purely clarificatory 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 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 dear 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 (his nature will have retrospective effect (ibid., pp. 488- 69)”. 14 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO ‘Where a statute is passed for the purpose of supplying an obvious omission in a former statute or to ‘explain’ a former statute, the subsequent statute has relation back to the time when the prior Act was passed. The rule against retrospectively is inapplicable to such legislations as are explanatory and declaratory in nature.”- Zile Singh vs. State of Haryana, (2604) 8 SCC 1. 5.1.20. Thus, it can be safely concluded that the darificatory amendment brought out by the Finance Act, 2021 will be applicable to the issue in the instant appeal also. It is also dear that the scope of Section 43B and Section 38(1 )(va) are different and thus, there is no question of reading both provisions together to consider as to whether the taxpayer is entitled to deduction in respect of the sum belatedly paid towards such Qontrixifion, especially when such sum is, admittedly, a sum received by the taxpayer/employer from his employee. Therefore, for considering such question, application of Section 36(1 )(va) read with Section 2{24)(xf alone is the proper course and any other interpretation would only defeat the object and scope of both the provisions viz., 43B and 36(1 )(va). ff the payment was not done within the stipulated time prescribed under the relevant enactment, the benefit of deduction cannot be claimed, since such belated payment is not a valid payment to attract deduction, under the purview of the income Tax Act. 5.1.21. In view of the above discussion and considering the facts and circumstances in totality, the disallowance of Rs. 1,21,50,660/- on account of delayed payment of Employees Contribution to PF/ESI invoking the provisions of section 2(24)(x) r.w.s. 36(1 ){va) is upheld. The disallowance of Rs. 1,21,50,680/- on account of delayed payment of Employees PF/ESI is therefore, confirmed end grounds of .appeal are dismissed, 8. Thus, the appeal filed by the appellant is Dismissed u/s. 250 read with section 251 of income tax Act, 1961.” (B.3) Aggrieved again, the assessee filed this present appeal in Income Tax Appellate Tribunal (“ITAT”, for short). During appellate proceedings in ITAT, a brief synopsis was filed from the side of the assessee. In addition, paper books were filed from the assessee’s side, containing the following particulars: 15 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO 1. Copy of acknowledgement of return of income along-with form of computation of income and form 3CA, 3CD for assessment year 2018-19. 2. Copy of challans for payments of EPF for the period April 2017 to March, 2018 3. Copy of challans for payments of ESI for the period April, 2017 to March, 2018 4. Details of Employees contribution to ESI/PF sheet showing date of payments. 5. Copy of judgment of Hon'ble Apex Court in the matter of M.M Aqua Technologies Ltd vs. CIT in Civil Appeal No. 4742-4743 of 2021 6. Copy of judgment of Hon’ble Apex Court in the matter of POT vs. Rajasthan State Beverages Corporation Ltd reported in 250 Taxman 16 7. Copy of judgment of Hon’ble Apex Court in the matter of CIT vs. Alom Extrusions Ltd reported in 319 ITR 306 8. Copy of judgment of Hon’ble Apex Court in the matter of CIT vs. Vinay Cement Ltd. 9. Copy of judgment of Hon’ble High Court of Delhi in the matter of Pr. CIT vs. Pro Interactive Service (India) Pvt. Ltd in ITA No. 983/2018 10. Copy of judgment of Hon’ble High Court of Delhi in the matter of CIT vs. M/s. Bharat Hotels Ltd. in ITA No. 271/2018 11. Copy of judgment of Hon’ble High Court of Delhi in the matter of CIT vs. AIMIL reported in 321 ITR 508 12. Copy of judgment of Hon’ble High Court of Delhi in the mallei of CIT vs. P. M. Electronics Ltd. reported in 313 ITR 161 13. Copy of judgment of ITAT in the matter of Salvation Outsourcing Solution Pvt. Ltd. for assessment Year; 2018-19 14. Copy of judgment of ITAT in the matter of Senator Travels Pvt. Ltd. for assessment Year: 2017-18 15. Copy of judgment of ITAT in the matter of ACIT vs. Lemon Tree Hotels Ltd. for assessment Year: 2014-15 16. Copy of judgment of ITAT in the matter of M/s Adama Solution P. Ltd for assessment Year. 2018-19 17. Copy of judgment of ITAT in the matter of Indian Geotechnical Services vs ACIT for assessment Year : 2014-15 18. Copy of judgment of ITAT in the matter of Yogi J. Technoquip Pvt Ltd. vs. DCIT for assessment Year: 2018-19 19. Copy of judgment of ITAT in the matter of DC1T vs. Dee Development Engineers Ltd for assessment Year: 2011-12 20. Copy of judgment of ITAT in the matter of DCIT vs. M/s. PFB Steel Lloyd (India) Ltd. for assessment Year: 2012-13 16 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO 21. Copy of judgment of ITAT in the matter of Pawan Kumar vs. ACIT for Assessment Year 2014-15 22. Copy of judgment of ITAT in the matter of ACIT vs. Plannran HR Pvt. Ltd for Assessment Year: 2012-13 (B.4) At the time of hearing before us, the Ld. Counsel for the assessee read from the aforesaid brief synopsis and the Paper Books filed from the assessee’s side during the appellate proceedings in Income Tax Appellate Tribunal. He submitted that the aforesaid amendments brought to Income Tax Act by Finance Act, 2021, whereby Explantion-2 was inserted in Section 36(1) (va) and Explantion-5 was inserted in Section 43B of Income Tax Act; were prospective in nature, and were not retrospective. He submitted that these amendments were applicable w.e.f. from 01.04.2021; and had no application for Assessment Year 2018-19 to which this present appeal pertains. With the help of the aforesaid synopsis and particulars filed from the assessee’s side, the Ld. Counsel for the assessee drew our attention to Hon’ble Supreme Court and orders of Hon’ble Delhi High Court, which is the jurisdictional High Court; in which the matter in dispute was decided in favour of the assessee, and against Revenue. These orders have been listed in foregoing paragraph (B.3) of this order. 17 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO Although these orders were passed by Hon’ble Supreme Court and Hon’ble Delhi High Court before Finance Act, 2021 was enacted; it was the submissions of the Ld. Counsel for the assessee that the aforesaid amendments to Income Tax Act brought about by Finance Act, 2021; were prospective in nature and not retrospective; and thus had no application for Assessment Year 2018-19, to which this appeal pertains. In this context he drew our attention to a number of decisions of Income Tax Appellate Tribunal referred to in aforesaid synopsis and Paper Books filed from the assessee’s side, in which, even after the aforesaid amendments were brought in by Finance Act, 2021 the issue in dispute (for Assessment Years 2018-19, 2017-18, 2014-15, 2012-13 and 2011-12 i.e. prior to 01.04.2021) was decided in favour of the assessee and against Revenue. He submitted that in the present appeal, the facts; that payments by way of employees contribution to provident funds and ESI were deposited by the assessee before due date of filing of return prescribed u/s 39 of Income Tax Act, although, the payments were made by the assessee after due date stipulated under relevant laws governing provident fund and ESI; are not in 18 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO dispute. The Ld. Counsel for assessee submitted that even if one does not accept the view that the aforesaid amendments brought by the Finance Act, 2021 to Section 36(1) (va) and 43B are prospective having effect from 01.04.2021; even then, in view of the aforesaid various decisions of Income Tax Appellate Tribunal, it must be held that the question whether the amendments are retrospective or prospective, is a debatable and controversial issue, on which two different views are legitimately possible. The Ld. Counsel for the assessee further submitted that making an addition by way of adjustment and intimation u/s 143(1) of Income Tax Act; on debatable and controversial issues on which two different views are legitimately possible; is beyond the scope of section 143(1) of Income Tax Act. For this purpose, the Ld. Counsel for assessee placed reliance on the order of the Hon’ble Delhi High Court, which is the jurisdictional High Court, in the case of ACIT vs. Haryana Telecom Pvt. Ltd. 14 taxmann.com 122 (Delhi), in which the Hon’ble Delhi High Court has held as under: “It is beyond any doubt that when a deduction is claimed in the return of income and it is somewhat controversial, it cannot be treated to be prima facie disallowable. If the claim is made by the assessee is treated not to be free from debate and argument. It is bound to be regarded as debatable issue, which is not enable to prima facie adjustment within the meaning of 19 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO section 143(1)(a) of the Act. Thus, where the issue involved is debatable, an intimation under section 143(1)(a) disallowing the claim based on such debatable issue on the ground that it is prima facie inadmissible, cannot be sustained.” (B.5) The Learned Senior Departmental Representative (“Sr. DR” for short) for Revenue, on the other hand, submitted that the aforesaid amendments brought in by Finance Act, 2021 were retrospective in nature, and relying on the impugned appellate order dated 30.07.2021 of the Ld. CIT(A), he supported the aforesaid addition of Rs.1,21,50,660/-. However, the Ld. Sr. DR for Revenue did not dispute the fact that the aforesaid payments totaling to Rs.1,21,50,660/- were deposited by the assessee before the due date of filing of return prescribed u/s 139(1) of Income Tax Act, although the payments were made after stipulated date prescribed under the relevant laws governing provident fund and ESI. (C) The issue regarding taxability of delayed payments of employees contribution to provident fund and ESI has not been free from debate and controversy. Different Hon’ble High Courts have passed orders, taking differing views on whether the payments of employees contribution to provident fund and ESI (paid by the 20 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO assessee after due dates prescribed under relevant laws governing provident fund and ESI, but before due date of filing of return stipulated u/s 139(1) of Income Tax Act] is to be added as assessee’s income. The Ld. CIT(A) in his impugned appellate order dated 30.07.2021 has discussed this controversy in detail in his order, and has also narrated in paragraph 5.1.14 of his impugned order, in tabular form, the varying views taken by different Hon’ble High Courts on this issue. He has also specifically mentioned the case of CIT vs. AIMIL Ltd., [2010] 321 ITR 508 (Delhi) in which the Hon’ble Jurisdictional High Court has taken a view on this issue in favour of the assessee, and against Revenue. [We are also aware that similar view has been taken by Hon’ble Delhi High Court in the case of Pr. CIT vs. Pro Interactive Service (India) Pvt. Ltd. (order dated 10 th September, 2018 in ITA No.938/2018); and in the case of CIT vs. P.M. Electronics Ltd. 313 ITR 161 (Delhi)]. However, the Ld. CIT(A), in his impugned appellate order dated 30.07.2021, has noted at the end of paragraph 5.1.14 that these judgments of various High Courts have been all rendered before the amendments made to Income Tax Act by Finance Act, 2021. The Ld. CIT(A) 21 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO confirmed the additions by invoking aforesaid amendments brought in by Finance Act, 2021; taking the view that the amendments were retrospective and not prospective. (C.1) The issue before us is whether, the additions amounting to aforesaid total of Rs.1,21,50,660/- by way of adjustments and intimation u/s 143(1) of Income Tax Act in respect of delayed payments made by the assessee [payments made after stipulated dates prescribed under relevant laws governing provident fund and ESI, but before due date of filing of return prescribed u/s 139(1) of Income Tax Act] are to be added to the income of the assessee in view of the aforesaid amendments to section 36(1) (va) and 43B of Income Tax Act, brought into effect by Finance Act, 2021. On whether these amendments are prospective in nature (i.e., applicable with effect from 01.04.2021) or are retrospective, (i.e. having applicability even before 01.04.2021), the Ld. Counsel for the assessee has drawn our attention, by way of aforesaid Paper Books, synopsis and oral submissions, to various decisions of Income Tax Appellate Tribunal in which the issue in dispute has been decided in favour of the assessee for Assessment Years 2018- 22 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO 19, 2017-18, 2014-15, 2012-13 and 2011-12 i.e. prior to 01.04.2021); even after the aforesaid amendments to Section 36(1) (va) and 43B of Income Tax Act were brought in by Finance Act, 2021. We have already discussed this in detail in foregoing paragraph (B.4) of this order. In addition, we are also aware of some reported orders of ITAT, passed after the aforesaid amendments were brought in by Finance Act, 2021; in which the issue in dispute for Assessment Years prior to Assessment Year 2021-22 has been decided in favour of the assessee and against Revenue. Some such decisions are: Digiqal Solution Services Pvt. Ltd. vs. Assistant Director of Income Tax [2021] 92 ITR (Tribunal) 404 (Chandigarh) for Assessment Year 2019-20 (order dated 4 th October, 2021); Shand Pipe Industry Pvt. Ltd. vs. DCIT (CPC), [2022] 93 ITR (Trib.) 54 (Bangalore) for Assessment Year 2018-19 (order dated 27 th Dec., 2021); Mahadev Cold Storage vs. Jurisdictional Assessing Officer [2021] 190 ITD 273 for Assessment Year 2018-19 and 2019- 20 in ITA Nos. 41 & 42/Agr/ 2021 (order date 14.06.2021); Nikhil Mohine vs. DCIT [2022] 93 ITR (Trib.) 658 (Jabalpur) for Assessment Year 2018-19 (order dated 18 th Nov., 2021 of SMC Bench, Jabalpur); 23 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO Gopalkrishna Aswini Kumar vs. Assistant Director of Income Tax [2022] 192 ITD 562 (Bangalore-Trib.) for Assessment Year 2019-20 (order dated 13.10.2021 in ITA No.359/Bang./2021); Continental Restaurant and Café Co. vs. Income Tax Officer [2021] 91 ITR (Trib.) (S.N.) 60 (Bangalore) for Assessment Year 2019-20 (order dated 11 th October, 2021 of SMC Bench of Bangalore); and TML Business Services Ltd. [2022] 93 ITR (Trib.) (S.N.) 35 (Mumbai) for Assessment Year 2017-18 (order dated 29 th Dec., 2021). In the cases of Continental Restaurant and Café Co. vs. ITO (supra), Nikhil Mohine vs. DCIT (Supra), Shand Pipe Industry Pvt. Ltd. vs. DCIT (supra); Digiqal Solution Services Pvt. Ltd. vs. Assistant Director of Income Tax (supra) and Gopalakrishna v/s ADIT (supra), the different Benches of Income Tax Appellate Tribunal have, in fact, specifically considered the aforesaid amendments brought to Income Tax Act by Finance Act, 2021; and have taken the view that the amendments are prospective in nature, having no application for the period prior to 01.04.2021. However, the Ld. CIT(A) in the impugned Appellate Order dated 30.07.2021 has taken the contrary view that the aforesaid amendments are retrospective in nature, having application also for Assessment Year 2018-19 (i.e. for period to 24 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO 01.04.2021) to which this appeal pertains; and has upheld the aforesaid addition of Rs.1,21,50,660/-. (C.1.1) Even if Revenue does not accept the view advanced by the assessee in the present appeal before us, that the aforesaid amendments are prospective in nature having no application for Assessment Years prior to Assessment Year 2021-22; it is clearly established in the light of aforesaid decisions of Income Tax Appellate Tribunal (ITAT); referred to in foregoing paragraph (C.1) of this order that the issue whether the aforesaid amendments are prospective or retrospective, is at least debatable and controversial, on which a view in faour of the assessee (that the aforesaid amendments are prospective) can legitimately exist, although such a view favorable to the assessee is contested by Revenue. Let us consider the two alternate views, one in favour of the assessee and the other in favour of Revenue; more closely. If the view in favour of the assessee, that the aforesaid amendments are prospective, is accepted; then the aforesaid decisions of Hon’ble Delhi High Court, which is the jurisdictional High Court, in the cases of CIT vs. AIMIL Ltd. (supra), Pr. CIT vs. Pro Interactive Service (India) Pvt. Ltd. 25 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO (supra) and CIT vs. P.M. Electronics Ltd. (supra) continue to hold good for Assessment Year 2018-19, to which this appeal pertains. Accordingly, the view taken by Hon’ble Delhi High Court in these cases, that delayed payments of employees contribution of provident fund and ESI [payment made after stipulated dates prescribed under relevant laws governing provident fund and ESI, but before due date of filing of return prescribed u/s 139(1) of Income Tax Act] does not constitute assessee’s income, will continue to hold good for Assessment Year 2018-19, to which this appeal pertains. In such a scenario, the aforesaid additions of Rs.1,21,50,660/- have no legs to stand; and the same deserves to be deleted. If, however, the contrary view in favour of Revenue is taken, as has been done by the Ld. CIT(A) in impugned appellate order dated 30.07.2021, that the aforesaid amendments are retrospective; then the question that will arise is whether such a debatable and controversial view can be invoked for making adjustments u/s 143(1) of Income Tax as per the intimation issued to the assessee u/s 143(1) of Income Tax Act. 26 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO (C.1.2) It is well settled that any adjustments u/s 143(1) of Income Tax Act by way of intimation u/s 143(1) of Income Tax Act, on debatable and controversial issues, is beyond the scope of Section 143(1) of Income Tax Act. The Ld. Counsel for the assessee has already drawn our attention in this regard to order of Hon’ble Jurisdictional High Court in the case of ACIT vs. Haryana Telecom Pvt. Ltd. (supra). Similar view was taken by Hon’ble Courts in the cases of George Williamson (Assam) Ltd. vs. CIT & Anr. [2006] 286 ITR 0533 (Gauhati); Tata Yadogawa Ltd. vs. CIT [2011[] 335 ITR 0053 (Jharkhand); God Granites vs. Central Board of Direct Taxes & Ors. [1996] 218 ITR 0298 (Karnataka); Swamy Distributors vs. ACIT & Ors.[2003] 180 CTR 0290; 139 Taxman 0310 (Karnatka), CIT vs. Eicher Goodearth Ltd. [2008] 296 ITR 0125 (Delhi); Smt. Shanta Chopra vs. ITO [2004] 271 ITR 0132 (Delhi); Kvaverner John Brown Engg. (India) (P.) Ltd. vs. ACIT, [2008] 305 ITR 0103 (Supreme Court). In this case, intimation u/s 143(1) of Income Tax Act. As on aforesaid 16.10.2019; the aforesaid amendments to Section 36(1)(va) and Section 43B of Income Tax Act had not been enacted; but orders of Hon’ble Delhi High Court (the jurisdictional 27 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO High Court) in favour of assessee and against Revenue on this issue in aforesaid cases of CIT vs. AIMIL Ltd. (supra); CIT vs. Pro Ineractive Service (India) Ltd. (supra) and CIT vs. P.M. Electronics Ltd. (supra) were available. Accordingly, the aforesaid amount of Rs.1,21,50,660/- could not have been added to assessee’s income as on 16.10.2019 in the light of these binding precedents of the Hon’ble Delhi Court in favour of the assessee. Therefore, we are of the view that the aforesaid adjustments made by Revenue on 16.10.2019, whereby the aforesaid amount of Rs.1,21,50,660/- were unfair, unjust, and bad in law. For this view, we respectfully take support from the order of Agra Bench of ITAT, in the case of Mahadev Cold Storage vs. Jurisdictional Assessing Officer (supra). At the very least, Revenue should have given due consideration to the fact that the issue was highly debatable and controversial, in the light of conflicting views of different Hon’ble High Courts, as already discussed in foregoing paragraph (C) of this order. As already discussed in foregoing paragraph (C.1.2) of this order, adjustments u/s 143(1) of Income Tax Act by way of intimation u/s 143(1) of Income Tax Act, on debatable and controversial issues, is 28 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO beyond the scope of section 143(1) of Income Tax Act. Revenue was clearly in error, in making the aforesaid adjustments u/s 143(1) of Income Tax Act on a debatable and controversial issue. We would like to make respectful mention of order of Jabalpur Bench of ITAT in the case of Nikhil Mohine vs. DCIT (supra), in which similar view has been taken. (C.2) Further, it is also well settled that retrospective amendment cannot be invoked to make addition by way of adjustment and intimation u/s 143(1) of Income Tax Act. This view was taken by the Hon’ble Supreme Court in the case of CIT vs. Hindustan Electro Graphites Ltd. [2000] 243 ITR 0048 (SC), in which the view of Hon’ble Kolkata High Court in the case of Modern Fibotex India Ltd. & Anr. Vs. DCIT & Ors.[1995] 212 ITR 0496 (Calcutta) was approved. Same view was taken by the Hon’ble Madhya Pradesh High Court in the case of CIT vs. Satish Traders [2001] 247 ITR 0119 (Madhya Pradesh). 29 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO (C.2.1) In view of foregoing discussion, we come to the following conclusions: (a) the fact that payments amounting to aforesaid Rs.1,21,50,660/- by way of employees contribution to provident fund and ESI were made by the assessee after stipulated date prescribed under the relevant laws governing provident fund and ESI, but before the due date of filing of return of income prescribed u/s 139(1) of Income Tax Act; is not in dispute. (b) Whether the aforesaid amendments to Income Tax Act by way of Finance Act, 2021 are retrospective or prospective, is debatable and controversial. (c) Adjustments made by Revenue u/s 143(1) of Income Tax Act, whereby aforesaid additions of Rs.1,21,50,660/- were made, were unfair, unjust and bad in law. (d) Addition by way of adjustment and intimation u/s 143(1) of Income Tax Act on debatable and controversial issues is beyond the scope of Section 143(1) of Income Tax 30 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO Act. Revenue was clearly in error in making the aforesaid adjustments. (e) Addition by way of adjustment and intimation u/s 143(1) of Income Tax Act, on the basis of retrospective amendment to Income Tax Act is beyond the scope of Section 143(1) of Income Tax Act. (f) In the present appeal before us, addition of aforesaid amount of Rs.1,21,50,660/- has been made by way of adjustments and intimation u/s 143(1) of Income Tax Act, on a debatable and controversial issue, and upheld by Ld. CIT(A) in his impugned appellate order dated 30.07.2021 on the basis of retrospective amendment to Income Tax Act. (D) In the light of the foregoing conclusions in paragraph (C.2.1) of this order, we are of the view that the aforesaid additions of Rs.1,21,50,660/- by way of adjustment and intimation u/s 143(1) of Income Tax Act were beyond the scope of Section 143(1) of 31 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO Income Tax Act; and further, that the Ld. CIT(A) erred in law in confirming the aforesaid addition on a debatable and controversial issue, by invoking amendments brought in by Finance Act, 2021. Accordingly, we set aside the impugned appellate order dated 30.07.2021 of the Ld. CIT(A), and direct the Assessing Officer to delete the aforesaid addition of Rs.1.21,50,660/-. (D.1) By way of abundant caution, we hereby clarify that we have not expressed any view in this order, on whether the aforesaid amendments brought in by Finance Act, 2021 [whereby Explanation-2 was inserted in Section 36(1)(va) of Income Tax Act and Explanation-5 was inserted in Section 43B of Income Tax Act] are prospective or retrospective. In the light of our decision in foregoing paragraph (D) of this order; this issue is merely academic in nature; hence not decided. (E) In the result, this appeal filed by the assessee is allowed. This order was already pronounced orally on 15 th February, 2022 in Open Court, in the presence of representatives of 32 ITA No.1251/Del/2021 Max Maintenance Limited vs. ITO both sides, after conclusion of the hearing. Now this order in writing is signed today on 28.02.2022. Sd/- Sd/- (KUL BHARAT) (ANADEE NATH MISSHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 28.02.2022 Pk/sps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI