JAINSON MANUFACTUREING CO, MUMBAI V. CPC, BANGALORE JUDICIAL ASSESSING OFFICER WD 21(3) (2), MUMBAI

ITA 1721/MUM/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3164 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Appeal Filed On: 27-09-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVIN SALUNKHE
• Keywords: Set aside
• Section: 28; 43B; 143(1); 139(1)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL “SMC” Bench, Mumbai Shri Shamim Yahya (AM) I.T.A. No. 1721/Mum/2021 (A.Y. 2018-19) Jainson Manufacturing Co. C-128, Bonanza Industrial Estate, Ashok Chakravarti Road, Kandivali-East Mumbai-400 101. PAN : AAEFJ8894K Vs. CPC, Bangaluru (Appellant) (Respondent) Assessee by Shri Bhupendra Shah Department by Shri Pravin Salunkhe Date of Hearing 31.03.2022 Date of Pronouncement 02.05.2022 O R D E R This appeal by the assessee is directed against the order of learned CIT(A) dated 30.7.2021 pertaining to A.Y. 2018-19. 2. Grounds of appeal read as under : “Addition of ESIC and PF payment of Rs. 2,14,629/- made before the due date of filing of return as per the provisions of I.T. Act, 1961.” 3. Brief facts of the case are that in the order under section 143(1) of the I.T. Act passed by CPC, Bangalore disallowing the aforesaid sum. 4. Against the above order the assessee appealed before learned CIT(A). However, learned CIT(A) upheld the action by holding as under : 6.10 The issue is also covered against the assessee by CBDT Circular No. 22/2015 issued by the Department. A similar view has been taken by the Kerala High Court in the case of CIT vs. Merchem Ltd (2015) 378 ITR 443. 6.11 But at the same time, on the identical issue the following decisions are in favour of assessee. i. AIMIL Ltd.(2010) 321 ITR 508 (Del.), ii. State Bank of Bikaner & Jaipur [(2014) 363 ITR 70 (Rajasthan)], iii. EssaeTeraoka (P) Ltd. (2014) 366 ITR 408 and iv. Spectrum Consultants India P. Ltd [(2014) 2 ITR- OL 622., v. South India Corporation Ltd. and vi. GhatgePatil Transports Ltd. Jainson Manufacturing Co. 2 368 ITR 749, CIT Versus Sabari Enterprises 298 ITR 141 (Karn) CIT, Jaipur- 11 Versus Jaipur Vidyut Vitran Nigam Ltd and Rajasthan Rajya Vidyut Utpadan Nigam Ltd [2014] 363 ITR 307, CIT Versus. State Bank Of Bikaner & Jaipur And Jaipur Vidyut Vitaran Nigam Ltd. [2014] 363 ITR 70. It is held that Contribution" used in Section 43-B(b) of the IT Act means the contribution of the employer and the employee. That being so, contribution made on or before the due date under section 139(1) the employer is entitled for deduction. As on date there is no Supreme Court judgment on this issue i.e., delayed payment of employees' contribution of PF dues. 6.12 But, the Finance Act, 2021 has inserted Explanation 5 to section 43B so as to clarify that the provisions of the 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. The relevant portion of the act is: “In order to provide certainty, it is proposed to amend clause (va) of sub-section (1) of section 36 of the Act by inserting another explanation to the said clause to clarify that the provision of section 43B does not apply and deemed to never have been applied for the purposes of determining the due date under this clause and amend section 43B of the Act by inserting Explanation 5 to the said section to clarify that the provisions of the said section do not apply and deemed to never have been applied to a sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section 2 applies.” Hence, I hold that if the employer fails to deposit the entire amount towards employees' contribution on account of PF & ESI with concerned department on or before the due date under PF & ESI, the assessee shall not be entitled for deduction to that extent. In fine if employees contribution received by the assessee is not credited to the employees' account in the relevant fund or funds on or before the due date mentioned in the Explanation to section 36(1)(va) [i.e. due dates under PF Act, ESI Act/other law], the assessee shall not be entitled to deduction of such amount in computing the income referred to in section 28 of the Act even if contributions deposited on or before due date [i.e. due date for filing income tax return under section 36(1)(va)] for depositing employers' contributions to those funds. In result, the appeal is dismissed.’’ 5. Against this order the assessee is in appeal before the ITAT. 6 I have heard learned Departmental Representative and perused the record. I find that prior to the amendment there were Hon'ble Bombay High Court decision in CIT Vs. Ghatge Patil Transport Pvt. Ltd. (ITA No. 1002 of Jainson Manufacturing Co. 3 2012 order dated 14.10.2014 following Hon'ble Supreme Court decision in Alom Extrusions Ltd. (319 ITR 306) which laid down that deposits of the sum up to the date of filing of return is sufficient compliance. The Finance Act, 2021 has provided an explanation in this regard for the disallowance of the sum which is paid after the due date. When this fact is taken into account by no stretch of imagination it can said that the above said adjustment can fall under the category of 143(1) prima-facie adjustment. Hence, I hold that CPC has no jurisdiction of adjustment u/s. 143(1) on this issue where admittedly there were decisions in favour of the assessee from the Hon’ble High Courts and the legislature has brought in an Explanation by Finance Act, 2021 in this regard subsequently. Moreover, as regards, merits of the case the aforesaid explanation was added by Finance Act, 2021 and the said explanation in my considered opinion cannot be said to be retrospective. The assessment year during the present case is AY 2018-19 and is prior to the said amendment/insertion. Hence, on merits also, the issue is covered in favour of the assessee as before the amendment, there were decisions of Hon’ble Bombay High Court and Hon'ble Supreme Court in favor of assessee on the said issue. 7. In the result, the appeal by the assessee is allowed and the orders of the authority below are set aside. Order pronounced in the open court on 2.5.2022. Sd/- (SHAMIM YAHYA) ACCOUNTANT MEMBER Mumbai; Dated : 2/05/2022 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai Jainson Manufacturing Co. 4 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai