M/s Luthra Industrial Corporation, Agra V. Jurisdictional Assessing officer Circle-1(1)(1), Agra

ITA 48/AGR/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8004 (ITAT-AGRA)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2019-2020
• Appeal Filed On: 04-07-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: WASEEM
• Keywords: Set aside
• Section: 43B; 143(1); 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH: AGRA BEFORE SHRI LALIET KUMAR, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER LT.A No. 48/AGR/2021 (ASSESSMENT YEAR: 2019-20) M/s. Luthra Industrial Corporation Vs. | Juridictional Assessinng Officer Circle -1(1)(1), B-1, Site-B, Industrial Area Sikandra, Agra U.P. 282007 Agra U.P. PAN: AABFL2405P (Assessee) (Revenue) Assessee by |Sh. Navin Gargh, Adv. Revenue by Waseem Arshad, Sr. DR 14.10.2021 Date of Hearing Date of Pronouncement 23.11.2021 ORDER PerBench Present appeal was filed by the assessee feeling aggrieved By the order passed by the CIT(A) on 23 June 2021 on the following grounds:- Because Maven case of in any view, in the Intimation u/s 143(1) dt.10.04.2020, the impugned 1 Disallowance of Rs. 1,85,482/- confirmed by the Ld. CIT(A) (NFAC) (of Employees Contribution to Provident Fund/ E.S.I deposited during the Financial Year itself before due date of filing of Return) is grossly arbitrary, highly unjust, unwarranted, perverse, wrong, illegal and bad in law LT.A No, 48/AGR/2021 Because in any view, the above impugned Disallowance of Rs. 1,85,482/-has been confirmed by the Ld. CTT(A) (NFAC) in summary and prejudice manner, without even considering and refuting the Judgments including that of Jurisdictional Hon'ble "Allahabad High Court" cited in favour of the Appellant.The impugned Order of Ld. CIT(A), NFAC is perverse. 2 Because in any view, the issue of impugned Disallowance of Rs. 1,85,482/- stands squarely covered in favour of the Appellant by the very recent consolidated Order dt.14.06.2021 of the Jurisdictional Hon'ble 1TAT Agra Bench, Agra ITAT Order Passed Respectfully following the decision of Jurisdictional Hon'ble Allahabad High Court in the matter of M/s Sagun Foundry (P) Ltd. vs CIT (2017) 78 Taxmann 47 vide ITA No.41& 42/Agr/2021 of A.Y.2018-19 and A.Y. 2019-20 M/s Mahadev Cold Storage. vs. Assessing Officer, Circle-4(1)(2), Aligarh and ITA No.208& 21/Agr/2021 of A.Y.2018-19 & 2019-20 Vinod Thanwerdas vs. Assessing Officer Ward-1(1)(5), Agra. 3- 1) At the outset the Ld.AR for the assessee had submitted that the CIT(A) had wrongly concluded that the amended provision was retrospective in nature and therefore had wrongly denied the benefit of section 43B to the assessee. It was submitted that the amendment to the provision was creating a new liability and therefore it was not retrospective rather it was prospective nature he relied upon the decision of the coordinate bench in the matter of M/sMahadev cold storage ITA no 21/agra/2021, Delhi Bench decision ion the matter of Indian Geotechnical Services , ITA no 622/Del/2018, Kolkata Bench decision in the matter of Harendra Nath Biswas ITA no 186/KOL 2021. L.T.A No. 48/AGR/2021 2) Per contra the Ld.DR relied upon the order passed by the CIT(A) and our attention was drawn to the following paragraphs 4.11 have considered the submission made by the appellant it is seen that the return of income is processed by CPC. As the Employee's Contribution of PF and ES1 amounting to Rs. 1,85,482/- were paid by the appellant after the "due date" as per the explanation below section 36((1)(va) of the 1 T Act,1961, the same was added back to the total income of the appellant in the light of provision of Section 2(24)(x) r.w.s. 36(1)(va) of the Act relying upon the information given by the auditor in Form 3CD. As per the provisions of section 143(1 )(a)(iv) the following adjustment can be made: "143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such returnshall be processed in the following manner, namely: - (a) the total income or loss shall be computed after making the following adjustments, namely: (i) (ii). ********* (iii)... (iv) disallowance of expenditure indicated in the Audit Report but not taken into account in computing the total income in the return; This shovws that CPC is within the power to make such adjustment as Appellant's auditor himself has indicated in the tax audit report that such payments have been made beyond the due date prescribed in the section 36(1)(va) of the I T Act,1961, but Appellant has claimed it in the Return of Income against the Audit Report. LT.A No. 48/AGR/2021 4.2 The submissionof the appellantin respect of disallowance of employee's contribution is duly considered. However, the same cannot be accepted in view of the amendments made to section36 and 43B by the Finance Act, 2021. The Finance Act, 2021 has amended section 36, which reads as under- In section 36 of the Income-tax Act, in sub-section (1), in clause (va), the Explanation shall be numbered as Explanation 1 thereof and after Explanationl as So numbered, the following Explanation shall be inserted, namely: Explanation 2.-For the removal of doubts, it is hereby clarified that the provisions of section 438 shall not apply and shall be deemed never to have been applied for the purposes of determining the "due date" under this clause;'." The finance Act, 2021 has also amended section 43, as under- "In section 438 of the Income-tax Act, after Explanation 4, the following Explanation shall be inserted, namely: "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." 4.3 Thus, the Finance Act, 2021, has amended section 36 of the Income-tax Act, relating to other deductions. Sub-section () of the said section provides for allowing of deductions provided for in the clauses thereof for computing the income referred to in section 28 of the said Act. 'Clause (va) of the said sub-section provides for allowance of deduction for any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation to the said clause provides that for the purposes of this clause, "due date" means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. By virtue of newly inserted Explanation 2 to clause (va) of sub-section (1) of the said section, the provisions of section 43B shall not apply and shall be deemed never to have I.TA No. 48/AGR/2021 been applied for the purposes of determiningthe "due date" under the said clause 4.4 Section 43B of the Income-tax Act relates to allowing certain deductions only on actual payments. Clause (b) of the said section provides that any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees shall be allowed (irrespective of the previous year in Which the liability to pay such sum was incurred by the assessee according to the method of accounting regularlyemployed by him) only in computing the income referred to in section 28 of that previous year, in which such sum is actually paid by him. Proviso to the said section provides that nothing Contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. By virtue of insertion of Explanation 5 to this section, 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 subclause (x) of clause (24) of section 2 applies.4.5 Reference is also made to the Supreme Court judgement in the case of Commissioner of Income Tax-I, Ahmedabad vs. Gold Coin Health Food Pvt. Ltd. (2018) 9 SSC 622 wherein while dealing with a similar issue. Hon'ble Supreme Court in Para 15 of the decision has quoted the following "In Principles of Statutory interpretation, 11'h Edn. 2008, Justice G.P. Singh has stated the position regarding retrospective operation of statutes as follows:- The presumption against retrospective operation is not applicable to declaratory statutes. As stated in Craies and approved by the Supreme Court. For modern purposes a declaratory Act may be defined as an Act to remove doubts existing LT.A No. 48/AGR/2021 as to the common law or the meaning or effect of any statute. Such Acts are usually held to be retrospectives. The usual reason for passinga declaratory ACt is to set aside what Parliament deems to have been judicial error, whether in n statement of the common law or in the interpretation of statutes. sua l invariably, such an Act contains a preamble. and also the word 'declared' as we as the word 'enacted'. But the use of the words'it is declared' is not conclusive that the Act is declaratory for these words may, at times, be used to introduc new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature or the Act, regard must be had to be substance rather than to the form. If a new Act 1s to explain' an earlier act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law prospective operation is generally intended. The language 'shall be deemed always to have meant' or 'shall be deemed never to have included" is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when theamended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law when the constitution came into force, the amending Act also will be part of the existing law.The presumption against retrospective operation is not applicable to declatory statutes must be a had to the substance rather than to the form. If a new Act is "to explain" an earlier act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous lawretrospective operation is generally intended An amending Act may meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 46B-69).Where a statute is passed for the purpose of supplying an obvious omission in a former statute or to 'explain' a former statute, the subsequent statute has relation back to the time when the prior Act was passed. The rule In determining, therefore, the nature of the Act, regard be purely declaratory to clear a I.T.A No. 48/AGR/2021 against retrospectively is inapplicable to such legislations as these are explanatory and declaratory in nature."- Zile Singh vs. State of Haryana, (2004) 8 SCC 1."4.6 From the wordings above, it is also clear that the above clarificatory amendment brought in by the Finance Act, 2021 appies The 1ssue in the instant appeal also. The amendment declares tnat provisions of section 43B does not apply and deemed to have never been applied for the purpose of determining the due date. Therefore, in view or the above discussions, the sum of Rs 1,85,482/- being the employees Contribution to the PF and ESI, not deposited by the appellant within the due date as per section 36((1)(va) of the I T Act, 1961, cannot be allowed and accordingly, this ground is dismissed." My of May 3) it was submitted by the Ld.DR that the order passed by the CIT(A) is required to be upheld. 4) We have considered the rival contention of the parties and perused the material available on record, including the judgments cited at bar during the course of hearing by both the parties. At the outset it may be relevant to mention here that recently in the matter of Mahadev Cold storage we had the occasion to deal with the issue of disallowance under section 43B of the act and after elaborate examining the law on the subject we had held that the disallowance under section 43B of the act is not permissible if the assessee had made the contribution before the due date of filing of the return of I.T.A No. 48/AGR/2021 income. The same principle, continues to hold good for the assessment year under consideration as in our opinion the amendment was inserted in tne ace much after the assessment year under consideration the Finance Bill 2021, had provided the consequence of not depositing the amount within the time provided by the act and the consequence is the disallowance of the Contribution made by the assessee as contemplated under section 43B of the Act. 5) The above said view of the bench is duly supported by the recent decision of the Kolkata tribunal wherein the entire gamut of the argument of the revenue have been considered by the bench and thereafter the same have been rejected. We are reproducing hereinbelow the recent judgement of the Kolkata tribunal in the matter of Lumino Industries Ltd. I.T.A. Nos. 231 & 365/Kol/2021, this regard which is as under:- 17. Have heard both the parties. We note that the Finance Bill, 2021 has brought in an amendment which disallows the employees' contribution made in PF and ESI if not made within the due date as prescribed by the respective statutes (PF and ESI Act). So after the amendment has been inserted according to Shri Miraj D Shah takes effect from 1st April, 2021 i.e AY 2021-22 and subsequent assessment year and if the remittance of PF/ESI Employees' Contribution is not made within the time prescribed by the PF/ESI Act then the remittance cannot be allowed as a deduction which is prospective in operation. Whereas according to Ld. CIT(A), the amendment brought in is clarificatory in nature so, retrospective in operation. So we have to adjudicate this issue whether the amendment LT.A No. 48/AGR/2021 9 brought in by Finance Act, 2021 is prospective or retrospective in operation. We note that before this amendment has been inserted by Finance Bill, 2021, the Hon'ble Jurisdictional Calcutta High Court in the case of Shri Vijayshree Ltd. Ltd.(supra), M/s Philips Carbon Black Ltd.(supra), M/s Coal India Ltd. (supra),M/s Akzo Nobel India Ltd. (supra) has held hat the payment of employees' contribution if made by an assessee before the due date of filing of return of income u/s 139(1) of the Act, is allowable as a deduction. We note that by Finance Act, 2021, the provision of Section 36(1)(va) as well as Section 438 has been amended to this extend by inserting the Explanation 2 whereby it is clarified that the provision of Section 43B shall not apply and shall be deemed never to have been applied for the purpose of determining the due date under this clause. For ready reference, we reproduce the Explanation-2 to Section 36(1)(va) 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 purpose of determining the 'due date' under this clause' 18. We find that this amendment has been brought in the Act to provide certainty about the applicability of Section 43B in respect of belated payment of employees' contribution. In order to test whether the amendment brought in later is retrospective or not one has to apply the test as laid by the Hon'ble Supreme Court in the case of M/s Snowtex Investment Ltd. (supra) wherein the Hon'ble Supreme court took note of the law laid down on this issue by the Constitution Bench in M/s Vatika Township Ltd. and held that the intent of the Parliament/legislature need to be looked into for ascertaining whether the amendment should be retrospective or not. In Vatika Township Ltd. (supra) the Hon'ble Supreme Court held that the notes on clauses appended to the Finance Bill will throw light as to the legislative intent; because it has to be borne in mind that Parliament/legislature is aware of three concepts before an amendment is brought in, which can be discerned from reading of the "Notes on Clauses" to the Bill which are (i) prospective amendment with effect from a fixed date; (ii) retrospective amendment with effect from a fixed anterior date; and (i) clarificatory amendments which are retrospective in nature. So when we adjudicate whether the view of Ld CIT(A) that the explanation 2 brought in by Finance Act, 2021 is retrospective, let us look at the "Notes on Clauses and the relevant clauses 8& 9 of the Finance Bill, 2021 (supra) pertaining to the issue in hand which in clear and unambiguous terms spells out the intention of Parliament that the amendment shall take effect from 1st April, 2021 and therefore will accordingly apply to Assessment Year 2021-22 and subsequent years. So since the legislative intent is clear, the amendment brought in by Finance Act, 2021 on this issue as discussed is prospective and Ld. CIT(A) erred in holding otherwise. So till AY 2021-22, the Jurisdictional High Court's view in favor of assessee will hold good and is binding on us. As discussed the decision of the Hon'ble Delhi High Court in Bharat Hotels Ltd. L.T.A No. 48/AGR/2021 10 stpra nich , as in favor of re venue has not considered the decision of the Co0 ordinate Division bernch decision in M/s Aimil Ltd. (supra) which is in favour of assessee Sc ecte that fater decision of the Delhi/Hyderabad Tribuna! have foliowed the ring assessee in the ight of the Hon'ble Supreme Court decision in M/s Veretatie Preducts (supra in the light of the aforesaid decision and reiying on the ratio thre case cf Vatika Township Pyt. Ltd (supra) and M/s 4eter,ent itd isupra) and also taking note of the binding decision of the Hon'ble Jurisdictional Calcutta High Court on this i5sue before us in Shri Vijayshree Ltd Lta isupra), M/s Philips Carbon Black Ltd (supra), M/s Coal india Ltd isupral, M/s Akzo obe india ite (supra), we set aside the impugned order of Ld CiT(A) and direct the AO esam ci deduction in respect of ernployees contribution shares towards ES PF by the assessee before the due date of filing of return u/s 139(1) of the Act. Therefore the appeai of assessee succeeds and so, it is allowed in favor of assessee " the amendment in the statute is prospective in nature, therefore respectfully Following the decision of the coordinate bench in the matter of Luminous, supra we alow the appeal of the a5e: cee -2J- - (LALIEKTMAR) JUDICIALMEMBER (Dr. MITHA LAL MEENA) ACCOUVTANT 1EVBER CTAppea.sj DR:ITAT True Copy By Order