Mahrishi Alloys Private Limited, Bengaluru V. Assistant Director Of Income Tax, CPC, Bangalore

ITA 471/BANG/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7998 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2019-2020
• Appeal Filed On: 26-09-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Keywords: Question of law
• Section: 43B; 139; 143(1); 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “B”, BANGALORE Before Shri Chandra Poojari, AM & Shri George George K, JM ITA No.471/Bang/2021 : Asst.Year 2019-2020 M/s.Mahrishi Alloys Pvt. Ltd. No.3, 3 rd Cross, Main Road Mysore Road Bangalore – 560 026. PAN : AABCM3192M. v. The Assistant Director of Income Tax, CPC Bangalore. (Appellant) (Respondent) Appellant by : Sri.Raghavendra Chakravarthy, CA Respondent by : Sri.Priyadarshi Mishra, Addl.CIT-DR Date of Hearing : 23.11.2021 Date of Pronouncement : 23.11.2021 O R D E R Per George George K, JM: This appeal at the instance of the assessee is directed against CIT(A)’s order dated 29.07.2021. The relevant assessment year is 2019-2020. 2. The grounds raised reads as follows: “1. The order of learned Commissioner of Income Tax (Appeals) is opposed to law and facts of the case. 2. The learned CIT(A) has erred in not considering the claim of deduction of amount received from employees contribution to PF u/s 36(1)(va). 3. The learned CIT(A) has also erred in not following the decision of Karnataka High Court in the case of CIT Vs. Sabari Enterprises (2008) 298 ITR 141 where High Court has held that the payments deposited before the due date of filing return should be considered as allowable expenditure uls 36(1)(va) of Income Tax Act, 1961. 4. The learned CIT(A) has erred in relying on decisions of ITA No.471/Bang/2021 M/s.Mahrishi Alloys Private Limited 2 Madras High Court in the case of Unifac Management Service (India) Pvt limited vs. DCIT in 409 ITR 225 ignoring the decision of Jurisdictional High Court in the case of CIT Vs. Sabari Enterprises (2008) 298 ITR 141. 5. The learned CIT(A) has erred in not relying on the decision of Karnataka High Court in the case of CIT Vs. Sabari Enterprises (2008) 298 ITR 141 and wrongly mentioned that the law has been amended in the Finance Act 2021 is applicable whereas the amended provisions in section 36(1)(va) is w.e.f. 01 st April 2021 relevant to Y 2021-22. The Finance Minister has clarified while presenting the Finance Bill, 2021 in the memorandum that the amended provisions of section 36(1)(va) will take effect from A Y 2021-22 and subsequent assessment years. For earlier years the decisions of Karnataka High Court holds good. 6. In the recent Judgment by Hyderabad Income Tax Appellate Tribunal in the case of Salzgitter Hydraulics (P) Limited (dated 15.06.2021) and in -" the case of Value Momentum Software Services Private Limited (dated 19.05.2021) it has been held that the amended provisions of section 36(1 )(va) has no application since this amendment is applicable from 01.04.2021 onwards and it is further held that it should be understood that the legislature itself has condoned the impugned default before 01.04.2021. 7. With these and such other grounds that might be urged at the time of hearing the appellant prays for the relief sought for.” 3. Brief facts of the case are as follows: For the assessment year 2019-2020, return of income was filed on 31.10.2019 declaring income of Rs.4,40,12,369. The assessee was served with an intimation u/s 143(1) of the I.T.Act by assessing a sum of Rs.4,44,31,708. The reason for the difference between the returned income and the assessed income u/s 143(1) of the I.T.Act was on account of disallowance of sum of Rs.4,19,339 being late remittance of employees’ contribution to PF under the PF Act. ITA No.471/Bang/2021 M/s.Mahrishi Alloys Private Limited 3 4. Aggrieved by the intimation u/s 143(1) of the I.T.Act, the assessee preferred an appeal before the first appellate authority. It was stated that the assessee had paid the employees’ contribution to PF prior to the due date of filing of the return u/s 139(1) of the I.T.Act. Therefore, it was submitted that the assessee is entitled to deduction of employees’ contribution to PF having regard to the provisions of section 43B of the I.T.Act. In this context, the assessee relied on the judgment of the Hon’ble jurisdictional High Court in the case of Sabari Enterprises v. CIT 298 ITR 141 (Kar.). The CIT(A), however, rejected the appeal of the assessee. The CIT(A) after noticing the difference between the employer’s contribution and employees’ contribution to PF held that only employer’s contribution to the PF is entitled to deduction u/s 43B of the I.T.Act, if the payments are made prior to the due date of filing of the return u/s 139(1) of the I.T.Act. Further, by placing reliance on the amendment to section 36(1)(va) and 43B of the I.T.Act by Finance Act, 2021, concluded that the amendment is clarificatory and is retrospective in operation. 5. Aggrieved, assessee has filed this appeal before the Tribunal. The learned AR relied on the order of the Tribunal in the case of M/s. Shakuntala Agarbathi Company Vs. DICT in ITA No.385/Bang/2021 (order dated 21.10.2021). 6. The learned Departmental Representative supported the orders of the Income Tax Authorities. ITA No.471/Bang/2021 M/s.Mahrishi Alloys Private Limited 4 7. We have heard rival submissions and perused the material on record. On identical facts, the Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company Vs. DCIT (supra) by following the dictum laid down by the Hon’ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra) ̧ had held that the assessee would be entitled to deduction of employees’ contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) of the I.T.Act. It was further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory. The relevant finding of the ITAT in the case of M/s. Shakuntala Agarbathi Company Vs. DCIT (supra), reads as follows: “7. We have heard rival submissions and perused the material on record. Admittedly, the assessee has remitted the employees' contribution to ESI before the due date for filing of return u/s 139(1) of the I.T.Act. The Hon'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. v. DCIT reported in 366 ITR 408 (Kar.) has categorically held that the assessee would be entitled to deduction of employees' contribution to ESI provided the payment was made prior to the due date of filing of return of income u/s 139(1) of the I.T.Act. The Hon'ble jurisdictional High Court differed with the judgment of the Hon'ble Gujarat High Court in the case of CIT v. Gujarat State Road Transport Corporation reported in 366 ITR 170 (Guj.). The Hon'ble High Court was considering following substantial question of law:- "Whether in law, the Tribunal was justified in affirming the finding of Assessing Officer in denying the appellant's claim of deductions of the employees contribution to PF/ESI alleging that the payment was not made by the appellant in accordance with the provisions u/s 36[1][va] of the I.T.Act?" ITA No.471/Bang/2021 M/s.Mahrishi Alloys Private Limited 5 7.1 In deciding the above substantial question of law, the Hon'ble High Court rendered the following findings:- "20. Paragraph-38 of the PF Scheme provides for Mode of payment of contributions. As provided in sub para (1), the employer shall, before paying the member, his wages, deduct his contribution from his wages and deposit the same together with his own contribution and other charges as stipulated therein with the provident fund or the fund under the ESI Act within fifteen days of the closure of every month pay. It is clear that the word "contribution" used in Clause (b) of Section 43B of the IT Act means the contribution of the employer and the employee. That being so, if the contribution is made on or before the due date for furnishing the return of income under sub-section (1) of Section 139 of the IT Act is made, the employer is entitled for deduction. 21. The submission of Mr.Aravind, learned counsel for the revenue that if the employer fails to deduct the employees' contribution on or before the due date, contemplated under the provisions of the PF Act and the PF Scheme, that would have to be treated as income within the meaning of Section 2(24)(x) of the IT Act and in which case, the assessee is liable to pay tax on the said amount treating that as his income, deserves to be rejected. 22. With respect, we find it difficult to endorse the view taken by the Gujarat High Court. WE agree with the view taken by this Court in W.A.No.4077/2013. 23. In the result, the appeal is allowed and the substantial question of law framed by us is answered in favour of the appellant-assessee and against the respondent-revenue. There shall be no order as to costs." 7.2 The further question is whether the amendment to section 36[1][va] and 43B of the Act by Finance Act, 2021 is clarificatory and declaratory in nature. The Hon'ble Supreme Court in the recent judgment in the case of M.M.Aqua Technologies Limited v. CIT reported in (2021) 436 ITR 582 (SC) had held that retrospective provision in a taxing Act which is "for the removal of doubts" cannot be presumed to be retrospective, if it alters or changes the law as it earlier stood (page 597). In this case, in view of the judgment of the Hon'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. v. DCIT (supra) the assessee would have been entitled to deduction of employees' contribution to ESI, if the payment was made prior to due date of filing of the return of income u/s 139(1) of the I.T.Act. Therefore, the amendment brought about by the Finance Act, 2021 to section 36[1][va] and 43B of the I.T.Act, alters the position of law adversely to the assessee. ITA No.471/Bang/2021 M/s.Mahrishi Alloys Private Limited 6 Therefore, such amendment cannot be held to be retrospective in nature. Even otherwise, the amendment has been mentioned to be effective from 01.04.2021 and will apply for and from assessment year 2021-2022 onwards. The following orders of the Tribunal had categorically held that the amendment to section 36[1][va] and 43B of the Actby Finance Act, 2021 is only prospective in nature and not retrospective. (i) Dhabriya Polywood Limited v. ACIT reported in (2021) 63 CCH 0030 Jaipur Trib. (ii) NCC Limited v. ACIT reported in (2021) 63 CCH 0060 Hyd Tribunal. (iii) Indian Geotechnical Services v. ACIT in ITA No.622/Del/2018 (order dated 27.08.2021). (iv) M/s.Jana Urban Services for Transformation Private Limited v. DCIT in ITA No.307/Bang/2021 (order dated 11th October, 2021) 7.3 In view of the aforesaid reasoning and the judicial pronouncements cited supra, the amendment by Finance Act, 2021 to Sec.36[1][va] and 43B of the Act will not have application to relevant assessment year, namely A.Y. 2019- 2020. Accordingly, we direct the A.O. to grant deduction in respect of employees' contribution to ESI since the assessee has made payment before the due date of filing of the return of income u/s 139(1) of the I.T.Act, It is ordered accordingly.” 7.1 Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment year under consideration. By following the binding decision of the Hon’ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees’ contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee and the disallowance made by the Assessing Officer is deleted. ITA No.471/Bang/2021 M/s.Mahrishi Alloys Private Limited 7 8. In the result, the appeal filed by the assessee is allowed. Order pronounced on this 23 rd day of November, 2021. Sd/- (Chandra Poojari) Sd/- (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 23 rd November, 2021. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A) NFAC, Delhi. 4. The Pr.CIT, Bangalore. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore