New Vision Softeocom & Consultabcy P Ltd , Bhopal V. The DCIT/ACIT 3(1) , Bhopal

ITA 203/Ind/2021

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The case involves New Vision Softcom & Consultancy Pvt. Ltd., which appealed against the order of the National Faceless Appeal Centre (NFAC) that disallowed deductions for employee contributions to EPF and ESIC, claimed under section 36(1)(va) of the Income Tax Act, 1961. The disallowance was initially made by the Assessing Officer (AO) during the processing of the return under section 143(1) and was upheld by the CIT(A). The Tribunal, referencing the Supreme Court's decision in Checkmate Services (P.) Ltd., confirmed that the non obstante clause of section 43B does not apply to employee's contributions, which are held in trust by the employer and must be deposited by the due date for the deductions to be allowable.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 122613 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-12-2022
• Assessment Year: 2019-2020
• Appeal Filed On: 19-10-2021
• Other Referred Cases: Checkmate Services (P.) Ltd. vs. CIT, Harrisons Malayalam Ltd. vs. CIT, Ms. Nalina Dyave Gowda vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ADITYA; AJAY CH HAJAD
• Keywords: Deemed to accrue or arise in india; Tax effect
• Section: 2; 43B; 234B; 250; 139(1); 43; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE [CONDUCTED THROUGH VIRTUAL COURT] BEFORE: SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEBER And SHRI B.M. BIYANI, ACCOUNTNT MEMBER New Vision Softco m & Consultancy Pvt. Ltd. E-7 LIG 369, Arer a Colony, Bhopal-462016 PAN: AABC N9536E (Appellant) Vs CIT( A) /National Faceless Appeal Centre (NFAC) , New Delhi (Respondent) Assessee by : Shri Aditya & Ajay Ch hajad, A. R. Revenu e by: Shri P.K . Mishra , CIT-D.R. Date of hea ring : 12-12-2022 Date of pronounce ment : 22 -02-2023 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This assessee’s appeal for A.Y. 2019-20, arises from order of the National Faceless Appeal Centre (NFAC), Delhi dated 16-09-2021, in proceedings under section 250 of the Income Tax Act, 1961; in short “the Act”. ITA No. 203/Ind/2021 Assessment Year 2019-20 I.T.A No. 203/Ind/2021 A.Y. 2019-2020 Page No New Vision Softcom & consultancy Pvt. Ltd. vs. CIT(A)/National Faceless Appeal Centre (NFAC) 2 2. The assessee has taken the following grounds of appeal:- Grounds of Appeal Tax effect relating to each Ground of appeal 1. That the order passed by the learned Commissioner of Income tax (Appeals) U/s 250 of the Income tax Act is illegal and bad in law and is prayed to be quashed. 2. That the order passed by the learned Commissioner of Income tax (Appeals) has grossly erred in not allowing the deduction u/s 36(l)(va) of Rs. 5,23,920/- being the employees contribution under EPF and Rs, 35,188/- on account of ESIC which was remitted well before the last date of filing the income tax return u/s 139(1) of the Act as required by section 43B(b) for allowability of deduction on actual payment basis. 3. That the order passed by the learned Commissioner of Income tax (Appeals) has not considered the various judgements which support the appellants claim and also disregarded the fact that Section 43 B which allows certain deductions only on payment basis starts with an non-obstante clause and has an overriding effect over section 36(l)(va). 4. That the order passed by the learned Commissioner of Income tax (Appeals) has erred in computing and confirming the charging interest U/s 234A Rs. 3,987/-, 234B Rs.39,330/- & 234C Rs. 20,134/- respectively. 5. That the order passed by the learned Commissioner of Income tax (Appeals) has computed total income of Rs.49,31,690/- instead of Rs. 43,72,580/- returned by the Appellant. 6. That each ground is independent of and without prejudice to the other grounds raised herein. 7. The Appellant craves, leave to add, amend, alter, modify or withdraw any of the above grounds of appeal at the time of hearing. Total tax effect (see note below) Rs. 1,45,369/- I.T.A No. 203/Ind/2021 A.Y. 2019-2020 Page No New Vision Softcom & consultancy Pvt. Ltd. vs. CIT(A)/National Faceless Appeal Centre (NFAC) 3 3. The brief facts of the case are that the assessee is a private limited company and is engaged in software development and data processing. The income tax return was electronically filed on 17-10-2019, showing total income of ₹ 43,72,550/-. Thereafter, CPC Bangalore processed the return and an intimation under section 143 (1) of the Act was passed on 01-05- 2020. The income has been assessed at ₹ 49, 31,690/- by making disallowance of claim of ₹ 5,23,920/- in respect of employee’s contribution towards provident fund and ₹ 35,188/- in respect of ESIC, and the total disallowance was ₹ 5,59,108/-. In passing the order, the AO did not allow the claim under section 36(1)(va) of the Act of ₹ 5,23,920/- being the employee’s contribution under EPF and ₹ 35,188/- on account of ESIC which was paid beyond the period prescribed under the respective Acts. 4. In appeal, Ld. CIT(Appeals) dismissed assessee’s appeal holding that the Finance Act 2021 has clarified this aspect related to the operation of the section. The Ld. CIT(Appeals) made the following observations while dismissing the assessee’s appeal: “8.4.15 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 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. 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 apply and shall be deemed never to have been applied......". 8.4.16. 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 I.T.A No. 203/Ind/2021 A.Y. 2019-2020 Page No New Vision Softcom & consultancy Pvt. Ltd. vs. CIT(A)/National Faceless Appeal Centre (NFAC) 4 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. The assessee is in appeal before us against the aforesaid additions confirmed by Ld. CIT(Appeals). Before us the counsel of the assessee agreed that now this position has been clarified against the assessee by the Supreme Court in the case of Checkmate Services (P.) Ltd. [2022] 143 taxmann.com 178 (SC) and accordingly, the issue may be decided in light of the above Supreme Court decision. 6. We observe that the position on this issue has been clarified by the Hon'ble Supreme Court in the case of Checkmate Services (P.) Ltd.[2022] 143 taxmann.com 178 (SC)which held that for assessment years prior to 2021-22, non obstante clause under section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was held in trust by assessee- employer as per section 2(24)(x), thus, said clause would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. The Hon'ble Supreme Court observed that there is a marked difference between nature and character of assessee-employer's contribution and amounts retained by assessee from out of employee's income by way of deduction wherein one is liability to be paid by employer and second is deemed income as per section 2(24)(x) which is held in trust by assessee-employer, thus, said marked difference was to be borne while interpreting obligation of assessee-employer under section 43B of the Act. The Hon'ble Supreme held that the non obstante clause under I.T.A No. 203/Ind/2021 A.Y. 2019-2020 Page No New Vision Softcom & consultancy Pvt. Ltd. vs. CIT(A)/National Faceless Appeal Centre (NFAC) 5 section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was not part assessee-employer's income, thus, said clause would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. Again the Supreme Court in the case of Harrisons Malayalam Ltd.[2022] 145 taxmann.com 608 (SC), dismissed the SLP of the Assessee against order of High Court that where assessee-company failed to pay employees’ contribution towards EPF and ESI within due date prescribed in respective Acts, deduction under section 36(1)(va) was not allowable. Recently in the case of Ms. NalinaDyave Gowda[2023] 146 taxmann.com 420 (Bangalore - Trib.) the assessee during, financial year 2018-19 (assessment year 2019-20) made payment of employees' contribution to ESI and PF beyond due date specified under relevant Act and claimed deduction of same under section 36(1)(va).The Assessing Officer made disallowance of employees' contribution to ESI and PF while electronically processing return of income under section 143(1)(a) of the Act. The ITAT held that disallowance under section 143(1)(a) was valid in view of Supreme Court's decision in case of Checkmate Services (P.) Ltd. v. CIT [2022] 143 taxmann.com 178 and the assessee will not be entitled to deduction of belated payment of ESI and PF of employees' share of contribution as per provisions of section 36(1)(va) of the Act. 6.1 In view of the above observations respectfully following the decision of the Honourable Supreme Court in the case of Checkmate Services Private I.T.A No. 203/Ind/2021 A.Y. 2019-2020 Page No New Vision Softcom & consultancy Pvt. Ltd. vs. CIT(A)/National Faceless Appeal Centre (NFAC) 6 Ltd supra and Harrisons Malayalam Ltd supra, we hereby dismiss the assessee’s appeal. 7. In the result, the appeal of the assessee is dismissed. Order pronounced as per Rule 34 of I.T.A.T Rules, 1963 on 22/02/2023 Order pronounced in the open court on ......./......../2023 Sd/- Sd/- (B.M. BIYANI) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 22 /02/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order, Sr. Private Secretary, Income Tax Appellate Tribunal, Indore I.T.A No. 203/Ind/2021 A.Y. 2019-2020 Page No New Vision Softcom & consultancy Pvt. Ltd. vs. CIT(A)/National Faceless Appeal Centre (NFAC) 7 Strengthened preparation & delivery of orders in the ITAT 1) Date of dictation 13/02/2023 (dictation on dragon) 2) Date on which the typed draft is placed before the Dictating Member & Other Member 13/02/2023 3) Date on which the approved draft comes to the Sr. P.S./P.S. /02/2023 4) Date on which the fair order is placed before the Dictating Member for pronouncement /02/2023 5) Date on which the fair order comes back to the Sr. P.S./P.S. /02/2023 6) Date on which the file goes to the Bench Clerk /02/2023 7) Date on which the file goes the Head Clerk 8) Date on which the file goes to the Assistant Registrar for signature on the order 9) Date of Dispatch of the order