SSF PLASTIC INDIA PRIVATE LIMITED, AMRITSAR V. DEPUTY COMMISSIONER OF INCME TAX CIRCLE-1, AMRITSAR

ITA 132/ASR/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7297 (ITAT-AMRITSAR)
• Duration Of Justice: 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Appeal Filed On: 08-11-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUDERSHAN KAPOOR
• Section: 43B; 250; 139(1); 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER I.T.A No. 128/ASR/2021 (ASSESSMENT YEAR: 2019-20) Sh. Vinod Kumar Mahajan Prop. M/s Vinod Jewellers Androon Bazar, Pathankot [PAN: ADJPM 7618N] (Assessee) Vs. Assistant Director of Income Tax, CPC, Bangaluru (Revenue) Assessee by Sh. J. K. Gupta, Adv. Revenue by Sh. S. M. Surendranath, D. R. I.T.A No. 113/ASR/2021 (ASSESSMENT YEAR: 2019-20) Sh. Ganpati Embroidery Pvt. Ltd. 102 Katra Sher Singh, Amritsar [PAN: AAECS 3420P] (Assessee) Vs. The DCIT/ACIT Circle-1, Amritsar (Revenue) Assessee by Sh. Sudershan Kapoor & Sh. J. P. Bhatia, Advs. Revenue by Sh. S. M. Surendranath, D. R. I.T.A Nos. 128/ASR/2021 & Ors 2 I.T.A No. 132/ASR/2021 (ASSESSMENT YEAR: 2018-19) SSF Plastics India Pvt. Ltd., Khasra No. 14/7/2, 13/2/14, Village and Post Office Bal Kalan, Majitha Road, Amritsar [PAN: AAKCS 4412K] (Assessee) Vs. Deputy Commissioner of Income Tax, Circle 1, Amritsar, Punjab (Revenue) Assessee by Written Submissions Revenue by Sh. S. M. Surendranath, D. R. I.T.A No. 122/ASR/2021 (ASSESSMENT YEAR: 2018-19) Sh. Kuldeep Singh, 271-A East Mohan Nagar Amritsar [PAN: ABSPS 9123R] (Assessee) Vs. Deputy Commissioner of Income Tax, Centralized Processing Department Bangaluru/DCIT/ACIT/Circle- 3, Amritsar (Revenue) Assessee by Written Submissions Revenue by Sh. S. M. Surendranath, D. R. Date of Hearing 29.11.2021 Date of Pronouncement 30.11.2021 I.T.A Nos. 128/ASR/2021 & Ors 3 ORDER Per Bench: These appeals are filed by the assessee(s) feeling aggrieved by the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Years 2018-19 & 2019-20 u/s. 250 of the Income Tax Act, 1961 (hereinafter referred as the ‘the Act’). 2. We find that ITA No. 132/Asr/2021 is time barred by 28 days. We have heard both the parties and after going through the affidavit stating the reasons for delay, we are of the considered opinion that in the interest of justice, the assessee has a reasonable cause and therefore the delay deserves to be condoned as it was on account of Covid-19 Pandamic. We, accordingly, condone the delay and admit the appeal for adjudication on merits. 3. The common facts emerging in all these appeals which remains undisputed at the end of all the parties are that there was a delay in depositing the employee’s contribution towards PF/ESI but the same stands duly deposited before the due date of filing the return of income u/s 139(1) of the Act. In all these cases respective assessee(s) failed to get any relief by the Ld. CIT(A) and accordingly all are in appeals before this tribunal. I.T.A Nos. 128/ASR/2021 & Ors 4 4. Common argument from the side of the respective Ld. Senior Counsel for the assessee(s) is that under the given facts the instant issue of this disallowance PF/ESI is covered in favour of the assessee(s) by decision of this tribunal in the case of Nipun Jain v. Dy. CIT in ITA Nos. 71 & 72/Asr/2021 order dated 09.11.2021. Reliance has also been placed on other decision in favour of the assessee(s) on this common issues. 5. Per contra, the Ld. Departmental Rrpresentative vehemently argued and supporting the order of the Ld. CIT(A). 6. We have heard the rival contention and persued the record placed before us. Common grievance raised in all these instant appeals is against the finding of the Ld. CIT(A) confirming the disallowance made by the Assessing Officer u/s 36(1)(va) of the Act for the delay in deposit of Employees Contribution towards PF/ESI before the due date prescribed under the corresponding statute. 7. We find that this tribunal in the case of Nipun Jain (supra) has deleted the said disallowance on observing that the alleged amount of employee’s contribution PF and ESI has been deposited befor the due date of filing return of income prescribed u/s 139(1) of the Act. Relevant extract of this decision is reproduced below: “The CIT(A) while upholding the disallowance/addition qua employees contributions towards PF & ESI mainly focused on two aspects/determinations- (i) non-applicability of the provisions of Section 43B of the Act to the employee’s share qua PF & ESI and (ii) applicability of the I.T.A Nos. 128/ASR/2021 & Ors 5 amended provisions of Section 36(1)(va) and 43B of the Act wherein Explanations have been inserted by Finance Act, 2021. For better clarification and ready reference the Explanations 2 and 5 inserted in sections 36(1)(va) and Section 43B of the Act respectively, are reproduced herein, which reads as under :- Section 36(1)(va)-“Explanation 2.—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.” Section 43B- “Explanation 5.—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 applies.” 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 I.T.A Nos. 128/ASR/2021 & Ors 6 consideration hence, first determination of the Ld. CIT(A) qua non- 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 1 st 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. 1 st 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. 6. In the result, both the appeals of the assessee are allowed.” 8. We also find that similar view was also taken by the Coordinate Bench Banglore in the case of Gopalkrishna Aswini Kumar v. Asstt. Director of Income Tax, in ITA No. 359/Bang/2021 observing as follows: I.T.A Nos. 128/ASR/2021 & Ors 7 “6. Aggrieved by the order of the CIT(A), the Assessee is in appeal before the Tribunal. We have heard the rival submissionis. We find that the issue raised in this appeal whether there could be disallowance of Employees share of ESI/PF paid belatedly as per the due dates laid down in the law relating to contribution of ESI/PF, if the same has nevertheless been paid on or before the due date for filing return of income u/s.139(1) of the Act, has been decided in favour of the Assessee in the following decisions, holding that there cannot be any such disallowance: M/s Mahadev Cold Storage vs Jurisdictional AO - ITA.No.41 & 42/Agra/2021 M/s Essae Teraoka (P.) Ltd vs DCIT - [2014] 43 taxmann.com 33 (Karnataka) Anand Kumar Jain vs ITO - ITA NO 4192/MUM/2012 Value Momentum Software Services Private Limited vs. DCIT I.T.A. No. 2197/HYD/2017 [Assessment Year: 2013-14] dated19.05.2021 Mohan Ram Chaudhary vs. ITO ITA No. 51&54-55/J0odh/2021 [Assessment Year: 2018-19} dated 28.09.2021 ITA No.359/Bang/2021 7. The Hon'ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd., (supra) has taken the view that employee's contribution under section 36(1)(va) of the Act would also be covered under section 43B of the Act and therefore if the share of the employee's share of contribution is made on or before due date for furnishing the return of income under section 139(1) of the Act, then the assessee would be entitled to claim deduction. Therefore, the issue is covered by the decision of the Hon'ble Karnataka High Court. The next aspect to be considered is whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also. On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as I.T.A Nos. 128/ASR/2021 & Ors 8 section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act in both the Assessment Years deserves to be deleted.” 9. We further find that the Coordinate Bench Hyderabad in the case of Value Momentum Software Services Pvt. Ltd. v. Dy. CIT in ITA No.2197/HYD/2017 order dated 19.05.2021 has also taken similar view along with dealing wth the amendment broght in the statute by the Finance Act, 2021 in Section 36(1)(va) effective from 01.04.2021 observing as follows: “5. Next comes the latter issue of Section 43B disallowance of Rs.8,11,648/- pertaining to employees provident fund. It is not in dispute that learned lower authorities held that the same had to be deposited before the due date prescribed in the corresponding statute than the due date for filing Section 139(1) return. The Revenue’s case in tune thereof relies on Section 36(va) read with explanation thereto that it is not Section 43B but the former provision which is applicable in such an instance. We find no merit in the Revenue’s foregoing stand. We take note of the explanatory memorandum to the Finance Act, 2021 proposing amendment in both Section 36(va) as well as Section 43B by inserting corresponding Explanations that although the impugned employees provident fund comes under the former provison only, the same is applicable from 01.04.2021 I.T.A Nos. 128/ASR/2021 & Ors 9 onwards. Meaning thereby that the legislature itself has condoned the impugned default before 01.04.2021. We thus delete the impugned employees provident fund disallowance of Rs.8,11,648/- for this precise reason alone. Necessary computation to follow as per law.” 10. We therefore respectfully following the proposition laid down in the above referred decision of various tribunals on this common issue raised before us, we are of considered view that the impugned disallowances of employee’s contribution towards PF/ESI deserves to be deleted. We accordingly set aside the findings of Ld. CIT(A) in all these appeals and allow the effective grounds raised in the instant appeals challenging the disallowance of employee’s contribution towards PF/ESI. 11. In the result, all the appeals in ITA Nos. 128, 113, 132 & 122/Asr/2021 at the instance of assessee(s) are allowed. Order pronounced in the open court on 30/11/2021. Sd/- Sd/- (MAHAVIR PRASAD) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 30/11/2021 *GP/Sr. P.S.* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT I.T.A Nos. 128/ASR/2021 & Ors 10 True Copy By Order