NEW LIGHT FACILTY MANGEMENT, JALANDHAR V. INCOME TAX OFFICER WARTD-2 (3), JALANDHAR

ITA 176/ASR/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5908 (ITAT-AMRITSAR)
• Duration Of Justice: 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Appeal Filed On: 07-12-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment
• Section: 43B; 234B; 143(1); 139(1)

Judgement Text

Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. RAVISH SOOD, JUDICIAL MEMBER AND DR. M. L. MEENA, ACCOUNTANT MEMBER I.T.A. No. 176 & 177/ASR/2021 (Assessment Year: 2018-19 & 2019-20) New Light Facility Management, SCF-59, 1 st Floor, Urban Estate, Pghase-1, Jalandhar PAN: AAGFN7471G Vs. DCIT, CPC, Bangalore, (Appellant) (Respondent) Assessee by : Shri T.S. Arora, Adv Revenue by: Smt. Ratinder Kaur, DR Date of Hearing 14/12/2021 Date of pronouncement 22/12/2021 O R D E R PER RAVISH SOOD, JM The present appeals filed by the assessee are directed against the respective orders passed by the CIT(Appeals), National Faceless Appeal Centre (“NFAC”, for short), dated 18/11/2021, which in turn arises from the respective intimations u/s 143(1) of the Income Tax Act, 1961 (for short the “Act”), dated 25.02.2020 for A.Y 2018-19 and dated 12.05.2020 for A.Y 2019-20. As common issues are involved in the aforementioned appeal, therefore, the same are being taken up and disposed off by way of a consolidated order. We shall take up the appeal filed by the assessee in ITA No. 176/ASR/2021 for A.Y 2018-19 as the lead year and the order therein passed would be applicable to other appeal i.e ITA No. 177/ASR/2021. The assessee has assailed the impugned order on the following grounds before us: “1. That on the facts and circumstances of the case, the assessee had admittedly deposited the employees contribution to PF & EDI before the due date of filing of the income tax return, therefore, respectfully following the decisions in the case of “Jupiter Aqua Lines P Ltd. Vs DCIT in ITA No. 83/Chd/2021 dated 27.08.2021.” the ld CIT(A) is not justified is sustaining the adjustment made by the AO-CPC of Rs. 51,89,332/- on account of belated payment of employees contribution to EPF & ESI. 2. That the amendment to section 36(l)(va) and u/s 43B of the Act effected by the Finance Act 2021 is applicable prospectively and the Notes on Clauses New Light Facility Management Vs. ITO Ward 2(3), Jalandhar ITA Nos. 176 & 177/Asr/2021 – A.Y 2018-19 & A.Y 2019-20 2 Page | 2 specifically states that the amendment being applicable in relation to assessment year 2021-22 and subsequent years. 3. That on the facts and circumstances of the case, the assessee is entitled to deduction of employees' contribution to EPF & ESI as the same has been deposited prior to filing of return of income u/s 139(1).” 2. Controversy involved in the present appeal hinges around the solitary issue i.e as to whether or not the CIT(A) is right in law and the facts of the case in upholding the disallowance of delayed remittance of employees contribution to the employees welfare funds i.e ESI and PF by the assessee, though, the same were deposited by the latter before the “due date” of filing of its return of income u/s 139(1) of the Act ? 3. Shorn of unnecessary details, the assessee firm had though failed to deposit the employees share of contribution to ESI and PF for the period 01/04/2017 to 31/03/2018 of Rs. 51,89,337/- within the time period prescribed under the said respective Acts, but had deposited the same before the “due date” of filing of its return of income u/s 139(1) of the Act. Backed by the failure on the part of the assessee to deposit the aforesaid amounts in the respective employees welfare funds within the stipulated time period, the A.O added the same u/s 36(1)(va) of the Act vide an intimation issued u/s 143(1) of the Act, dated 25.02.2020. 4. Aggrieved, the assessee assailed the aforementioned adjustment to its returned income before the CIT(A). It was the claim of the assessee that as the employees contributions to PF and ESI funds were deposited before the “due date” of filing of its return of income u/s 139(1) of the Act, therefore, the same were duly allowable as a deduction u/s 43B of the Act. However, the ld A.O after drawing support from certain judicial pronouncements and taking support of the amendments brought in by the Finance Act, 2021 i.e ‘Explanation 5’ to Section 43B and ‘Explanation 2’ to Section 36(1)(va) of the Act, observed, that the said amendments clarified that the provisions of section 43B were never applicable qua a sum that was received by an assessee from any of his employee to which the provisions of sub-clause (x) of section (24) of section 2 applied. It was observed by the A.O, that pursuant to the aforesaid clarificatory amendments, it was made amply clear beyond any scope of doubt that the employees contributions to the welfare funds were exclusively governed by the provisions of section 36(1)(va) of New Light Facility Management Vs. ITO Ward 2(3), Jalandhar ITA Nos. 176 & 177/Asr/2021 – A.Y 2018-19 & A.Y 2019-20 3 Page | 3 the Act and any amount that was deposited beyond the time period prescribed under the said respective Acts was liable to be added to the returned income of the assessee. Backed by his aforesaid conviction, the CIT(A) finding no infirmity in the addition made by the A.O qua the delayed payment by the assessee of the employees contribution to PF and ESI of the assessee, upheld the same and dismissed the appeal. 5. The assessee being aggrieved with the order of the CIT(A) has carried the matter before us. At the very outset of the hearing of the appeal, it was submitted by the ld. Authorized Representative (for short ‘A.R’) for the assessee that the issue involved in the present appeal was squarely covered by the order of the ITAT Amritsar in the case of Nipun Jain Vs. DCIT, ITA Nos. 71 & 72/ASR/2021 dated 09.11.2021. It was submitted by the ld A.R, that, the tribunal in its aforesaid order had after considering the respective amendments that were made available on the statue vide the Finance Bill, 2021 i.e by way of insertion of “Explanation 5” to Section 43B and “Explanation 2” to Section 36(1)(va), had observed, that though the assessee had deposited the amount of the employees share of contributions to ESI and PF beyond the prescribed time provided in the said relevant acts but prior to the “due date” of filing of its return of income u/s 143(1) of the Act, the same being saved by the provisions of Sec. 43B of the Act could not have been added to its returned income. In sum and substance, it was claimed by the ld A.R that as the employees contribution to ESI and PF had been deposited by the assessee before the “due date” of filing of its return of income, therefore, the same could not be disallowed as per the clear mandate of section 43B of the Act. 6. Per contra, the ld D.R relied on the orders of the lower authorities. Also, the ld D.R has placed on our record her written submissions, dated 14.12.2021. On a perusal of the aforesaid written submissions, we find, that the ld D.R had after relying on certain judicial pronouncements had tried to impress upon us that the respective amendments made available on the statue vide the Finance Bill, 2021 i.e by way of insertion of “Explanation 5” to Section 43B and “Explanation 2” to Section 36(1)(va) of the Act, being clarificatory in nature, were to be given a retrospective effect and, thus, would be applicable to the case of the assessee before us. New Light Facility Management Vs. ITO Ward 2(3), Jalandhar ITA Nos. 176 & 177/Asr/2021 – A.Y 2018-19 & A.Y 2019-20 4 Page | 4 7. We have heard the ld. Authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. Admittedly, it is a matter of fact borne from the record that though the assessee had failed to deposit the employees share of contributions to ESI and PF amounting to Rs. 51,89,337/- within the stipulated time period contemplated in the said respective employee welfare acts, but had deposited the same before the “due date” of filing of its return of income for the year under consideration. Controversy in the present appeal lies in a narrow compass i.e. as to whether the employees contribution to the welfare funds is regulated by the provisions of Sec. 36(1)(va) r.w Sec. 2(24)(x) of the Act, as claimed by the department, or, by Sec 43B of the Act, as claimed by the assessee. The aforesaid controversy had further gained momentum pursuant to the respective amendments made available on the statue vide the Finance Act, 2021 i.e by way of insertion of “Explanation 5” to Section 43B and “Explanation 2” to Section 36(1)(va). Before us, it is claim of the revenue, that as provided in the aforementioned respective “Explanations” the employees share of contribution to the welfare funds would fall exclusively within the realm of Sec. 36(1)(va) of the Act, which being clarificatory in nature has to be given a retrospective effect and would be applicable to the case of the assessee before us. On the contrary, it is the claim of the assessee that as the aforementioned amendments have specifically been made applicable with prospective effect from 01.04.2021 i.e. A.Y 2021-22, therefore, they would not be applicable to the case of the present assessee. We have deliberated at length on the issue in hand, and find, that as stated by the ld. A.R, and rightly so, the issue involved in the present appeal is squarely covered by the order of this tribunal in the case of the Nipun Jain Vs. DCIT, Bengaluru in ITA No 71 and 72/ASR/2021, dated 09.11.2021. As observed by us hereinabove, the tribunal in its aforesaid order had after duly considering the respective amendment in question, had observed, that the employees contribution to the welfare funds, viz. ESI and PF would be governed by the provisions of Sec. 43B of the Act, and if the same had been deposited by the assessee though beyond the prescribed dates contemplated in the said employee welfare acts, but before the “due date” of filing of its return of income for the year under consideration, then, New Light Facility Management Vs. ITO Ward 2(3), Jalandhar ITA Nos. 176 & 177/Asr/2021 – A.Y 2018-19 & A.Y 2019-20 5 Page | 5 the same would be saved by the mandate of Sec. 43B of the Act, and, no addition of the same would be called for in the hands of the assessee. The relevant observations of the tribunal in the case of Nipun Jain (supra) are for the sake of clarity culled out as under :- “5. Having heard the parties and perused the material available on record. The assessee raised the arguments against the impugned orders, whereas the Ld. DR vehemently supported the same. We may observe that the issue related to the employees’ contributions qua ESI & PF involved in the present appeal is squarely covered by the decision of coordinate bench of the Tribunal in ITA Nos.63 & 64/ASR/2021 decided on 08/11/2021, wherein the Tribunal has deleted the disallowances made by the AO on account of delay in depositing the employees’ contribution towards ESI & PF as the same were deposited later than the prescribed time in the relevant acts but prior to the filling of the Return u/s.139(1) of the Act . The concluding part of the Tribunal’s order is as under: - 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 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. New Light Facility Management Vs. ITO Ward 2(3), Jalandhar ITA Nos. 176 & 177/Asr/2021 – A.Y 2018-19 & A.Y 2019-20 6 Page | 6 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 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 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 Section 36(1)(va) & 43B of the Act w.e.f. 1st 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. 6. Since the facts involved in the present case are identical to the facts involved in the above case, therefore, respectfully following the aforesaid order of the Coordinate Bench of the Tribunal, the disallowances of Rs.7,13,663/- for A.Y.2018-2019 and Rs.8,82,045/- for A.Y.2019-2020 qua empoyeess’ contribution towards PF and ESI, sustained by the Ld. CIT(A) stands deleted. 7. As the substantive additions have been deleted, therefore interest of Rs.96,526/- and Rs.56,674/- charged by the AO u/s.234A, 234B & 234C of the Act for the respective assessment years and confirmed by the CIT(A), do not survive, consequently the same also stands deleted.” New Light Facility Management Vs. ITO Ward 2(3), Jalandhar ITA Nos. 176 & 177/Asr/2021 – A.Y 2018-19 & A.Y 2019-20 7 Page | 7 In the backdrop of our aforesaid deliberations, we concur with the claim of the ld. A.R that as the employees share of contributions towards the employee welfare funds, viz. PF and ESI of Rs. 51,89,337/- had been deposited by the assessee before the “due date” of filing of its return of income, therefore, the same was saved by the provisions of Sec. 43B of the Act and could not have added to the returned income of the assessee. We, thus, in terms of our aforesaid deliberations not being able to persuade ourselves to subscribe to the view taken by the lower authorities, thus, set- aside the order of the CIT(A) and vacate the disallowance of Rs. 51,89,337/- made by the A.O. The Grounds of appeal Nos. 1 to 3 are allowed in terms of our aforesaid observations. 8. The Grounds of appeal Nos. 4 to 6 being general in nature are dismissed as not pressed. 9. Accordingly, the appeal filed by the assessee is allowed in terms of our aforesaid observations. 10. As the facts and the issue involved in the appeal filed by the assessee for A.Y 2019-20 in ITA No. 177/ASR/2021 remains the same as were there before us in its appeal for the immediately preceding year i.e A.Y 2018-19 in ITA No. 176/ASR/2021, therefore, our order therein passed for AY 2018-19 shall apply mutatis mutandis for the purpose of disposal of the said appeal. 11. Resultantly, both the appeals filed by the asseesee i.e for A.Y 2018-19 in ITA No. 176/ASR/2021 and for A.Y 2019-20 in ITA No. 177/ASR/2021 are allowed in terms of our aforesaid observations. Order pronounced in the open court on 22/12/2021. Sd/- Sd/- (Dr. M. L. MEENA) (RAVISH SOOD) Accountant Member Judicial Member Dated: 22/12/2021 A K Keot New Light Facility Management Vs. ITO Ward 2(3), Jalandhar ITA Nos. 176 & 177/Asr/2021 – A.Y 2018-19 & A.Y 2019-20 8 Page | 8 Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT TRUE COPY BY ORDER