Ajay Enterprises Pvt. Ltd., New Delhi V. DCIT, CC-1, New Delhi

ITA 1563/DEL/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2440 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2019-2020
• Appeal Filed On: 27-10-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 2; 43B; 250; 139(1)

Judgement Text

1 ITA no. 1563/Del/2021 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”: NEW DELHI BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER ITA No. 1563/DEL/2021 Asstt. Yr: _2019-20 Ajay Enterprises Pvt. Ltd., 8 th Floor, Eros Corporate Tower, Nehru Place, New Delhi. PAN- AAACA1967D Vs DCIT, Central Circle-1, New Delhi. APPELLANT RESPONDENT Assessee represented by Sh. R.K. Kapoor, CA Department represented by Sh. Kanav Bali, Sr. DR Date of hearing 27.09.2022 Date of pronouncement 27.09.2022 O R D E R PER N.K. CHOUDHRY, JM: The assessee has preferred the instant appeal against the order dated 10.09.2021, passed by the Ld. Commissioner of Income tax (Appeals)-23, New Delhi, (in short “Ld. 2 ITA no. 1563/Del/2021 Commissioner”) u/s 250 of the Income Tax Act, 1961 (in short “the Act”), pertaining to the assessment year 2019-20. 2. As per office report dated 18.11.2021, there is delay of 353 days in filing the appeal before the Tribunal. In response, the learned AR submitted that the order impugned was passed on 10.09.2021 and the appeal was filed on 28.10.2021, consequently there is no delay at all. There is nothing to controvert the claim of the assessee, hence, we hold that there is no delay in filing the instant appeal. 3. The only issue involved for adjudication in the instant appeal relates to the sustenance of disallowance of Rs. 1,37,994/- made by the Assessing Officer u/s 36(1)(va) on account of deposit of employees’ contribution qua PF/ESI, after the due date as prescribed in the relevant Acts, however, before the due date of filing of return of income u/s 139(1) of the Act. 4. Heard the parties and perused the material available on record. The Assessee raised the arguments against the impugned order, whereas the Ld. DR vehemently supported the same. 4.1. The Ld. CIT(A) while upholding the disallowance/addition qua employee’s contributions towards PF/ESI, mainly focused on two aspects/determinations- 3 ITA no. 1563/Del/2021 (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 amended provisions of Sections 36(1)(va) and 43B of the Act wherein Explanations have been inserted by Finance Act, 2021. 4.2 The Assessee’s claim is that since it has deposited the employee’s contribution towards PF/ESI before the due date of filing of the return of income u/s 139(1) of the Act, hence no disallowance is warranted. In support of its contention the Assessee also relied upon various judgments. 4.3 Admittedly there are plethora of judgments in favour of the Assessee’s contention and that 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 down the dictum ‘if two reasonable constructions of a taxing provision are possible that construction which favours the Assessee must be adopted.’ 4.4 The Hon’ble Punjab and Haryana 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) has clearly held that the Assessee is entitled to claim deduction of employee’s share of ESI & PF u/s.43B of the 4 ITA no. 1563/Del/2021 Act, if the same has been deposited prior to the filing of return of income u/s.139(1) of the Act. 4.5. The Hon’ble Jurisdictional High Court of Delhi as well, in the case of CIT Vs. AIMIL Ltd. 321 ITR 508, affirmed the action of the ITAT in deleting the addition relating to employees’ contribution deposited before the due date of filing of return, in respect of Provident Fund and ESI made by the Assessing Officer under Section 36(1)(va) of the Income Tax Act, 1961. 4.6. The Jurisdictional High Court again in the case of PCIT vs., Pro Interactive Service (India) Pvt. Ltd., vide ITA.No.983/2018 order dated 10.09.2018 while following the decision in the case of CIT Versus AIMIL Ltd., (supra), has held that legislative intent was/is to ensure that the amount paid is allowed as expenditure only when payment is actually made. It was further held that it was not the legislative intent and objective to treat belated payment of Employees’ Provident Fund & Employees’ State Insurance Scheme as deemed income of the employer under section 2(24)(x) of the I.T. Act, 1961. 4.7. From the aforesaid Judgments of the Hon’ble High Courts, it is clear that the Hon’ble Courts have not drawn any distinction between the employee’s and employer’s share qua PF & ESI contributions, hence, first determination of the Ld. CIT(A) qua 5 ITA no. 1563/Del/2021 non-applicability of the provisions of Section 43B of the Act to the employee’s share qua PF is unsustainable. 4.8 Now, coming to the second aspect/determination made by the CIT(A) to the effect that now position has been further clarified by the amendments brought in the Finance Act 2021 by inserting the Explanation 2 in Section 36(1)(va) and 5 in section 43B of the Act of the Act. For better clarification and ready reference the Explanations 2 and 5 inserted in sections 36(1)(va) and 43B of the Act respectively, are reproduced herein, which read 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.” 6 ITA no. 1563/Del/2021 4.9 We 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 Sections 36(1)(va) and Section 43B of the Act, by inserting Explanations by the Finance Act, 2021 and clearly held that the amendment shall be applicable from 1st April, 2021 onwards . It is also relevant to note that the CBDT has also issued Memorandum of Explanation qua applicability of the amended provisions of Sections 36(1)(va) & 43B of the Act w.e.f. 1st April, 2021 and Assessment Year 2021-22 onwards, hence there is no doubt qua applicability of the amended provisions referred above, prospectively. 4.10 On the aforesaid discussion, the second aspect as considered by the ld. CIT(A) qua applicability of the amended provisions of Sections 36(1)(va) and 43B of the Act to the cases in hand, is also un-sustainable. 4.11 In view of the above discussions, the disallowances to the tune of Rs. 1,37,994/- on account of employees’ share of PF/ESI, made by the AO and confirmed by the CIT(A) is not sustainable, hence, the same stands deleted. 7 ITA no. 1563/Del/2021 5. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 27.09.2022. Sd/- Sd/- (ANIL CHATURVEDI) (N.K. CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI