PRAGATI FASHIONS P. LTD., MUMBAI V. DYCTI (CPC), BANGALORE

ITA 569/MUM/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8762 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2018-2019
• Appeal Filed On: 15-04-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GIRISH DAVE..COUNSEL
• Section: 145; 132; 43B; 143(3); 143(1); 250; 139(1); 113; 13; 119; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 569/Mum/2021 (A.Y: 2018-19) Pragati Fashions P Ltd., F.P.No. 455, Shree Sadguru Heights, Bhavani Shankar Road, Dadar (W) Mumbai-400028. Vs. DYCTI (CPC) 1 st Floor, Prestige Alpha, Beratenagrahara, Hosur Road, Uttahalli Hobli,Bangalore- 560100 ./ज आइआर ./PAN/GIR No. : AACCP1730H Appellant .. Respondent Appellant by : Shri. Girish Dave.Sr.Counsel Respondent by : Shri. S.G. Menon.Sr. DR Date of Hearing 07.02.2022 Date of Pronouncement 21.02.2022 आद श / O R D E R PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi passed u/s 143(3) and 250 of the Act. The assessee has raised the following grounds of appeal: 1. On the f acts and circumstances of the case and in law ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 2 - the Ld .C IT(A) erred in upholding the disallo wance made by the DC IT in respect of employee’s contribution toward s provident f und amounting to Rs. 3,47,160 on the ground s that the paymen t of such contribution has been made af ter the d ue date prescribed under the employees Provident Fund Act. The Ld. CIT(A) and DC IT f ailed to appreciate that the payment of such contribu tion was nevertheless made bef ore the due date of f iling of Income Tax Re turns and is theref ore allo wable in vie w o f the Supreme Court Decision in the case of C IT Vs. Alom Extrusions Ltd. 319 ITR 306. 2 The brief facts of the case are that, the assessee company is engaged in the business.The assessee has filed the return of income for the A.Y 2018-19 on 30.10.2018 with a total income of Rs. 4,34,03,200/-.The return of income was processed u/s 143(1) of the Act, and the intimation dated 16.10.2019 was received through email, where the employee contribution of provident fund amounting to Rs.3,47,160/- was disallowed u/s 36(1)(va) of the Act and the total income was determined at Rs.4,37,50,360/-. 3. Aggrieved by the intimation, the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) has considered the facts of the case, grounds of the appeal and the assessee’s submissions in respect of ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 3 - claim and observed at Para 5 of the order and dismissed the appeal as under: 5. C IT(A)'s remarks & decision The appeal was insti tuted on 12.11.2019 against the intimation order u/s 143(1) of the Income Tax Act dated 16.10.2019 f or the AY 2018-19 passed by the CRC, Bengaluru. Subsequen tly the appe al was migrated to the NFAC in terms of Notif ication No.76 of 2020 in S.0.3296(E) d ated 25.09.2020 issued by CBDT. I have considered the grounds of appeal and the written submissions mad e by the appellant. The only issue that has been raised is regarding the disallo wance mad e on account of delay in d epositing the employees contribution to the provident f und which f act has been admitted by the appellan t. The arguments made in the written submissions are that the said EFF payments were mad e on or bef ore the f iling of the Income tax Return, theref ore, it is all owable deduction u/s 43B.The contentions of the appell ant are no t acceptable as the employees con tribution f alls u/s 36(1 )(va) which clearly state s that said contribu tion shal l be made as per the d ue dates of the relevant act. In view of the stated legal position, I am not inclined to accept the Appellan ts contentions. In the circumstances the disallo wance mad e by the CPC stands confirmed. The grounds of appeal taken are dismissed . In the result appeal of the appellant is dismissed . 4. Aggrieved by the order the CIT(A), the assessee has filed an appeal before the Hon’ble Tribunal. 5. At the time of hearing, the Ld. AR of the assessee submitted that the CIT(A) has not considered the ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 4 - facts, law and the asseessee is governed by the law applicable to said Assesseement year. Whereas the amended provisions/explanations are with effect from F.Y 1-4-2021.The Ld.AR relied on decision of the Hon’ble Supreme Court on the applicability of the Law prospectively and supported the submissions with the decisions of the Hon’ble Supreme court, Honble High Court and Honble Tribunal and prayed for allowing the appeal. 6. Contra, the Ld.DR submitted that the explanation 2 to Sec 36(1)(va) of the Act in finance Act 2021 was introduced and the amendment is applicable to the earlier years and supported the order of the CIT(A) appeal. 7. We heard the rival submissions and perused the material available on record. The ld. AR’s contentions are that the assessee for the various reasons could not deposit the employees provident fund within the time allowed under prescribed Act. Whereas, the assessee has deposited the amount before filing of the return of income U/sec139(1) of the Act. The Ld. AR ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 5 - referred to the chart, mentioned in the CIT(A) order, whereas there is a delay in depositing the employees contribution of provident fund for the month of July17 and September 2017. And for the July 2017,the amount was to be deposited on or before 15.08.2017 but there is a delay of 1 day, 6 days and 25 days as per the chart. Whereas in respect of September 2017, the contribution was to be deposited on or before 15.10.2017 but was paid on 17.10.2017 and there is a delay of 2 days. The assessee has complied with the provisions and the claim has to be allowed. We find the Ld.DR submissions that the amendment is retrospective applicable but the Ld.AR submissions are that the amendment has come into effect from 1-4-2021and the same is applicable prospectively. It was brought to the knowledge of the bench that, the employees contribution of the provident fund has to be deposited on or before due date as per the respective Act and the delay in deposit of employees contribution will disentitle interest to the employee till actual deposit. The fact remains that the provisions/explanation was introduced in the Finance Act 2021 which is effective from 1-4-2021. ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 6 - 8. We considering the overall facts, circumstances and the submissions find on the similar issue the Hon’ble Tribunal in the case of M/s BI Worldwide India Pvt Ltd. Vs. DCIT in ITA No.433/Bang/2021 dated 04.01.2022. A.Y.2018-19 has considered the facts and provisions of law has observed at page 3 Para 9 & 10 of the order which is read as under and allowed the appeal: 9. We have heard rival submissions and perused the mate rial on record. An id entical issue was considered by the T ribunal in the case of The Continen tal Restauran t & C af é Co. v. ITO (supra). The rel evant f inding of the Tribunal re ad s as f ollows:- "7. I have he ard rival submissions an d perused the mate rial on record. Admitte dly, the assessee has not remitted the empl oyees' contribution of PF of Rs.1,06,190/- and ESI of Rs.16,055/- total ing to Rs.1,22,245/- bef ore the due date specif ied under the respective Act. However, the assessee had paid the same bef ore the due date of fil ing of the re turn u/s 139(1) of the I.T .Act. The Hon'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. v. DC IT reported in 366 ITR 408 (Kar.) has categoric al ly held that the asse ssee would be entitled to deduction of employees' contribution to PF and ESI provid ed the paymen t was mad e prior to the due date of f iling of return of income u/s 139(1 ) of the I.T.Act. The Hon'bl e jurisdictional High Court dif f ered with the judgment of the Hon'ble Gujarat High Court in the case of C IT v. Gujarat S tate Road Transpor t Corporation reported in 366 ITR 170 (Guj.). In holding so, the Hon'ble High Court was considering f ollowing substan tial question of l aw:- "Whether in l aw, the Tribunal was justif ied in af f irming the f ind ing of Assessing Off icer in denying the appellan t's cl aim of deductions of the employees contribution to PF/ES I alleging ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 7 - that the paymen t was no t made by the appell ant in accordance with the provisions u/s 36(1)(v a) of the I.T.Act?" 7.1 In deciding the above substan tial question of law, the Hon'ble High Court rendered the f ollowing f ind ings:- "20. Paragraph-38 of the PF Scheme provides f or Mode of payment of contributions. As provided in sub para (1 ), the empl oyer sh all, before paying the member, his wage s, deduct his contribution f rom his wages and deposit the same together with his o wn contribu tion and other charges as s tipulated therein with the pro viden t f und or the fund under the ESI Act within f if teen days of the closure of every month pay. It is clear th at the word "con tribution" used in Clause (b) of Section 43B of the IT Act me ans the con tribution of the employer and the employee. That being so, if the contribu tion is mad e on or bef ore the due date f or f urnishing the return of income under sub-section (1) of S ection 139 of the IT Act is made, the empl oyer is en titled f or deduction. 21. The submission of Mr.Arav ind, le arned counsel for the revenue that if the empl oyer f ails to deduct the employe es' contribution on or bef ore the due date, contempl ated under the provisions of the PF Act and the PF Scheme, that would have to be tre ated as income within the me aning of Section 2(24)(x) of the IT Act and in which case, the as sessee is liable to pay tax on the said amount treating th at as his income, deserves to be rejected. 22. With respect, we f ind it dif f icult to endorse the vie w taken by the Gujarat High Court. WE agree with the vie w taken by this Court in W.A.No.4077/2013. 23. In the result, the appe al is all owed and the substanti al question of law f ramed by us is answered in f avour of the appellant-assessee and against the respondent-revenue. There sh all be no order as to cos ts." 7.2 The f urther question is whether the amend ment to sec tion 36(1)(va) and 43B of the I.T.Act by Finance Act, 2021 is clarif icatory and declaratory in nature. The Hon'ble Supreme Court in the recen t judgment in the case of M.M.Aqua Technologies Limited v. C IT reported in (2021) 436 ITR 582 (SC) had held that retrospective provision in a taxing Act ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 8 - which is "f or the remov al of doubts" cannot be presumed to be retro spective, if it al ters 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. DC IT (supra) th e assessee would have been entitled to deduction of employees' contribu tion of PF and ES I if the payment was made prior to d ue d ate of f iling of the return of income u/s 139(1) of the I.T .Act. Theref ore, the amendment brought about by the Finance Act, 2021 to sec tion 36(1 )(v a) and 43B of the I.T.Act, al ters the position of law adversely to the assessee. Theref ore, such amendment cannot be held to be retro spective in nature. Even otherwise, the amendment has been mentioned to be eff ective f rom 01.04.2021 and will appl y f or and f rom assessmen t year 2021-2022 onward s. The f ollowing ord ers of the Tribunal had categorical ly held that the amendment to section 36(1)(va) and 43B of the I.T.Act by Finance Act, 2021 is only prospecti ve in nature and no t retro spective. (i) Dhabriya Polywo od Limited v. AC IT reported in (2021 ) 63 CCH 0030 Jaipur Trib. ii) NCC Limi ted v. AC IT reported in (2021) 63 CCH 0060 Hyd Tribunal. (iii) Indian Geotechnical S ervices v. AC IT in ITA No.622/Del /2018 (order dated 27.08.2021 ). (iv) M/s.Jana Urban Services f or Transf ormation Private Limited v. DC IT in ITA No.307/Bang/2021 (order dated 11 th October, 2021) 7.3 In vie w of the af oresaid re asoning and the jud icial pronouncements cited supra, the amend ment to section 36(1)(va) and 43B of the I.T.Act by Finance Act, 2021 will not have applic ation f or the relevant ass essment ye ar, namel y A.Y. 2019-2020. Accordingl y, I d irect the A.O. to gran t deduction in respect of employees' contribution to PF and ESI since the assessee has mad e payment bef ore the due date of f iling of the re turn of income u/s 139(1) of the I.T.Act, It is ordered accordingly. 8. In the resul t, the appe al f iled by the assessee is allowed." ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 9 - 10. In vie w of the judicial pronouncements cited supra, we hold that the amendment to section 36(1)(va) and 43B of the Act will not have application f or the relev ant assessment ye ar, namely assessment year 2018-2019. Accordingly, we direct the A.O. to grant d eduction in respect of employees' contribution to PF and ES I since the assessee mad e the payment bef ore the due d ate of f iling of return u/s 139(1) on 30.11.2018 of the Act. Accord ingly, grounds raised by asse ssee stands allowed . 9. Similarly in the case of Adyar Ananda Bhavan Sweets India Pvt Ltd Vs. ACIT in ITA No. 402 & 403/CHNY/2021, A.Y 2018-19 & 2019-20 order dated 08.12.2021, the Honble Tribunal has observed at page 6 Para 6 & 7 as under: 6. We have heard riv al contentions and perused the relevan t material on record. Admitted f acts are that the payment of ESI & PF contribution regard ing employees’ contribution is made within the due date of f iling of return of income. The Revenue has dispu ted th at the employees’ contribution received by the asse ssee would be tre ated as income of the assessee because the same has no t been deposited in the Government account within the due date as prescribed under the respective acts. We noted th at this issue is covered by the decision of Hon’ble High C ourt of Mad ras in the case of M/s. Industrial Security and In telligence In dia P Ltd., supra, wherein it is held as under:- “5. We f ind that the Tribunal has righ tl y rel ied on the decision of the Supreme Court in the case of C IT V. Alom Ex trusions L td. reported in 319 ITR 306, whereby, the Supreme Court held th at omission of second proviso to Section 43B and amendment to f irst proviso by Finance Act, 2003 are curative in nature and are eff ective retro spec tively, i.e., with eff ect f rom 1.4.1988 i.e., the d ate of insertion of f irst proviso. The Delhi High Court in the case of C IT V. Amil Ltd. reported ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 10 - in 321 ITR 508 held th at if the assessee had deposited empl oyee's contribution to wards Prov ident Fund and ES I af ter due date as prescribed under the relevan t Ac t, bu t bef ore the due d ate of f iling of return under the Income Tax Act, no disallo wance could be mad e in vie w of the provisions of Section 43B as ame nded by Fin ance Act, 2003. 6. In the presen t case, the assessee had remitted the empl oyees contribution be yond the due d ate f or payment, but within the due date f or f iling the re turn of income. Hence, f ollowing the above said decisions, we f ind no reason to dif f er with the f indings of the Tribunal . Accordingly, we f ind no question of law much less an y substan tial question of law arises f or consideration in these appeals. Accordingly, bo th the T ax C ase (Appeals) stand dismissed . No costs. Consequentl y, M.P.N o.1 of 2015 is also dismissed.” 6.1 Further, we no ted that a simil ar case l aw of Hon’ble Delhi High Court in the case of CIT vs. Aimil Ltd., (2009) 321 ITR 508 has considered this issue and held in Para 14 to 19 as under:- 14. When we keep that proposition in mind and also take into consideration various judgments where Vinay C emen t (su pra) is applied and f ollowed, it will not be possibl e to accept the contention of the Revenue. 15. In C IT v. Dharmendra Sharma, 297 ITR 320, this C ourt specif icall y d eal t with this issue and relying upon the af oresaid jud gmen t of the Guwah ati High Court, as af f irmed by the Su preme C ourt in Vinay C ement ( supra), the appeal of the Revenue was dismissed. More detailed discussion is contained in another judgment of this Court in C IT v. P.M. Electronics Ltd. (ITA No. 475/2007 decided on 3.11.2008). Specif ic questions of law which were proposed by the Revenue in that case were as under :- " (a) Whe ther amounts paid on account of PF/ES I af ter due date are allo wable in vie w of S ection 43B, read with Section 36(1)(va) of the Act? ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 11 - (b) Whether the deletion of the 2nd proviso to Section 43B by way of amendment by the Finance Act, 2003 is retrospec tive in nature?" 16. These questions were answered by the Division Bench in the f ollowing manner :- "7. Having he ard the learned counsel f or the Revenue, as well as, the asse ssee, we are of the view that the v ie w taken by the T ribunal deserves to be sus tained as it is no longer res inte gra in view of the decision of the Supreme Court in the case of CIT v Vinay Cement L td: 213 ITR 268 which has been f ollowed by a Division Bench of this Court in the case of CIT v. Dharmendra S harma: 297 ITR 320. 8. Despite the af oresaid judgments, the learned counsel f or the Tribunal has contended th at in view of the jud gmen t of the Division Bench of th e Madras High Court in the case of C IT v. Synergy Fin ancial Exchange Ltd: (2007 )288 ITR 366 and th at of the Division B ench of the Bombay High Court in the case of C IT v. M/s Pamwi Tissues Ltd: (2008 ) Tax ind iaonline.com 104 (T IOL) the issue requires consideration. According to us, in view of the dismissal of the S pecial Leave Pe tition in the case of Vinay C emen t (supra) by the Supreme Court by a speaking order, the submission of the learned counsel for the Revenue has to be rejected at the very threshold. The reason f or the same is as f oll ows:- 9. The Gauhati High C ourt in the case of CIT v. George Williamson (Assam) Ltd : (2006 ) 284 ITR 619 (Gauh ati) deal t with the very same issue. In the said jud gmen t the Division Bench of the Gauhati High Court noted a contrary vie w taken by the Keral a High Court in the case of C IT v. South Ind ia Corporation Ltd: (2000) 242 ITR 114. Af ter noting the said jud gmen t the f act that the amend ments had been made to the provisions of Sectio n 43B of the Act by virtue of Finance Act, 2003 w.e.f 1.4.2004 it agreed with the submission of the learned counsel f or the assessee th at by virtue of the omission of the second proviso and the omission of Cl auses (a), (c), (d), (e) and (f ) without any saving cl ause would mean that the provisions were never in existence. For this purpose, in the ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 12 - said case the assessee had pl aced reliance on the judgment of a Constitution Bench of the Supreme Court in the case of Kolhapur C anesugar Works Ltd v. U nion of India: (2000) 2 SCC 536 and Rayal a Corporation P. Ltd v. Director of Enf orcement (1969) 2 SCC 412 and General Finance Co. v. Asst. C IT: (2002) 257 ITR 338 (SC) . The said submissions f ound f avour with the Division Bench of the Guahati High Court and relying on earlier decisions of its o wn Court in C IT v. Assam Tribune: (2002) 253 ITR 93 and CIT v. Bharat Bamboo and Tiber Su ppl iers: (1996) 219 ITR 212 the Division Bench dismissed the appe al of the Revenue. It transpire s that the af oresaid matte r was taken up in appe al al ongwith other matters incl uding Vinay Cemen t (supra). The order in Vinay Cement (supra) was passed by the Supreme Court on 7.3.2007 wherein it observed as f ollo ws:- "Delay condoned. In the present case we are concerned with the l aw as it stood prior to the amend ment of Section 43-B. In the circumstances, the asse ssee was entitl ed to cl aim the benef it in Section 43-B f or that period particu larly in vie w of the f act that he has contributed to pro viden t fund bef ore f iling of the retu rn. Special Leave Pe tition is dismissed." 10. In view of the above, it is quite evident that the spe cial leave petition was dismissed by a spe aking ord er and while doing so the Supreme Court had noticed the f act th at the matter in appe al bef ore it pertain to a period prior to the amendment brought about in Section 43B of the Act. The af oresaid position as regards the s tate of the law f or a period prior to the amendment to S ection 43B has been no ticed by a Division Bench of this Court in Dharmendra Sharma (supra). Applying the ratio of the decision of the Supreme Court in Vin ay Cement (supra) a Division Bench of this Court d ismissed the appeal s of the Revenue. In the passing we may al so note that a Division Bench of the Madras High Court in the case of C IT v. Nexus Computer (P) Ltd by a jud gmen t dated 18.8.08 passed in T ax Case (A) No. 1192/2008 discussed the impac t of both the dismissal of the special l eave petition in the case of George Williamson (Assam) Ltd (supra) and Vinay Cement (supra) as well as a contrary vie w of the Division Bench of its ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 13 - own Court in Synergy Financial Exchange (su pra). The Division Bench of the Madras High Court has explained the eff ect of the d ismissal of a special l eave petition by a speaking order by relying u pon the judgment of the Supreme Court in the case of Kunhayammed and Others v. State of Keral a and ano ther: 119 STC 505 at page 526 in Paragr aph 40 and noted the f ollo wing observ ations:- "It the order ref using l eave to appeal is a spe aking order, ie., give s reasons f or ref using the grant of leave, then the ord er has two implications. Firstl y, the state ment of law contained in the ord er is a declaration of l aw by the S upreme Court within the meaning of Article 141 of the Constitution. Secondl y, o ther than the declaration of l aw, wh atever is stated in the order are the f indings recorded by the Supreme Court wh ich would bind the par ties the reto and also the Court, Tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex C ourt of the country, But, th is d oes not amount to saying that the order of the Court, T ribun al or authority belo w has stood merged in the ord er of the Supreme C ourt re jectin g special leave petition or that the order of the Su preme Court is the only order binding as res judicata in subsequent proceed ings betwee n the par ties." 9. Upon noting the observ ations of the Supreme Court in Kunhayammed and Others (supra) the Div ision Bench of the 10. Madras High Court in the case of Nexus Computer Pvt Ltd (supra) came to the conclusion that the vie w taken by the Supreme Court in Vinay Cement (su pra) would bind the High Court as it was non d eclared by the Supreme Court under Article 141 of the Consti tution. 12. We are in respectf ul agreemen t with the reasoning of the Madras High Court in Nexus Computer Pvt Ltd (supra). Judicial d iscipline requires us to follo w the vie w of the Supreme Court in Vinay Cement (supra) as al so the vie w of the Division Bench of this Court in Dh armend ra Sharma (supra). 13. In these circumstances, we respec tf ull y disagree with the approach ad opted by a Division Bench of the Bombay High Court in M/s Pamwi T issues L td (supra). ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 14 - 14. In these circumstances indicated above, we are of the opinion th at no substan tial question of law arises f or our consideration in the present appeal . The appeal is, thus, dismissed. " It al so become s clear that d ele tion of the 2nd proviso is treated as retro spective in nature and would not apply at all. The case is to be governed with the appl ication of the 1st proviso. 17. We may only ad d that if the employees‟ con tribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penal ties al so, f or which specif ic provisions are made in the Provident Fund Act as well as the ES I Act. T heref ore, the Act permits the employer to make the deposit with some delays, subject to the af oresaid consequences. Insof ar as the Inco me Tax Act is concerned, the asse ssee can ge t the benef it if the actual payment is mad e bef ore the re turn is f il ed, as per the principle laid down by the Supreme Court in Vinay Cement (su pra). 18. We, thus, answer the question in favour of the assessee and against the Revenue. As a consequence, the appeal s f iled by the assessees s tand allo wed and those f iled by the Revenue are dismissed. 6.2 From the above, it is cle ar that there are series of decisions of various High Courts on this issue and even Hon’ble Jurisdictional High Court in the case of M/s. Industrial Security & Intelligence India P Ltd., supra held that the payment of employees contribution in regard to PF & ES I if made bef ore the due date of f il ing of return of income u/s.139(1) of the Act, the same is allowable as deduction as per the provisions of Section 2(24)(x) r.w.s. 36(1)(va) r. w.s. 43B of the Act 6.3 Now, the question arises, whether by the Finance Act, 2021, the provisions of Section 36(1)(va) by inserting the Expl anation 2 r.w.s. 43B of the Act have been amended, whereby it is cl arif ied that the provisions of S ection 43B of the Act shall not apply and shall be deemed ought to have been applied f or the purpose of determining the due date under this cl ause. This ame ndment h as brought in the statu te book to provide certainty about the applicability of ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 15 - provisions of Section 43B of the Act inspite of belated payment of employees co ntribution. We also noted f rom the memorandum explaining the provisions to Finance Act, 2021, wherein relevan t Clause s to said me morandum clearly intended that the amendment shall take ef f ect f rom 01.04.2021 and will accordingly apply to assessmen t ye ar 2021-22 and subsequent asse ssment years. The relevan t Clause s 8 & 9 of the memorandum explaining the provisions are reproduced as und er:- “Rational isation of various Provisions Payment by e mployer of employee contribution to a fund on or bef ore due date Clause (24 ) of section 2 of the Act provides an inclusive def inition of the income. Sub-clause (x) to the said cl ause provid e that income to includ e any sum received by the asse ssee f rom his employees as con tribution to any prov ident f und or superannuation f und or any f und se t u p under the provisions of ES I Act or any o ther f und for the welf are of such empl oyees. Section 36 of the Act per tains to the other deductions. Sub- section (1) of the said section provides f or various deductions all owed while computing the income under the head ̳Prof its and gains of business or prof ession‘. Clause (v a) of the said sub-section provides f or deduction of any sum received by the asse ssee f rom an y of his e mployees to which the provisions of sub-clause (x) of cl ause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant f und or f unds on or bef ore the due date. Expl an ation to the said clause provides that, f or the purposes of this clause, "d ue d ate‖ to mean the d ate by which the assesse e is required as an e mployer to cred it an employee's contribution to the e mployee's account in the relevant f und under any Act, rule, order or no tif ication issued there-under or under an y standing order, award, con tract of service or otherwise. Section 43B specif ies the list of deductions th at are ad missible und er the Act only upon their actu al payme nt. Employer's contribution is covered in clause (b) of section 43B. According to it, if any sum to wards employer's contribu tion to ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 16 - an y provid ent f und or su perannuation fund or gratuity f und or an y o ther f und f or the welf are of the empl oyees is actual ly paid by the assesse e on or bef ore the due d ate f or f urnishing the re turn of the income under sub-section (1) of section 139, asse ssee would be en titled to deduction under section 43B and such deduction would be ad missible f or the accounting ye ar. This provision does not cover employee contribution ref erred to in clause (va) of sub-section (1 ) of section 36 of the Act. Though section 43B of the Act covers only employer‘s contribution and does not cover employee contribution, some courts have applied the provision of section 43B on employee contribution as well. There is a distinction between employer 40 contribution and employee‘s contribu tion to wards welf are f und. It may be noted th at e mployee‘s con tribution to wards welf are f unds is a mech anism to ensure the compliance by the empl oyers of the l abour welf are l aws. Hence, it needs to be stre ssed that the employer‘s contribution to wards welf are f unds such as ESI and PF need s to be clearly distinguished f rom the employee ‘s con tribution toward s welf are funds. Employee‘s contribution is employee own money and the empl oyer deposits this con tribution on behalf of the employee in f iduciary capacity. B y l ate deposit of employee contribution, the employers ge t un justl y enriched by keeping the money belonging to the e mployees. Cl ause (va) of sub-section (1 ) of Section 36 of the Act was inserted to the Act v ide Finance Act 1987 as a me asures of penalizing employers who mis-utilize empl oyee‘s con tributions. Accordingly, in order to provid e certain ty, it is proposed to – (i) amend clause (v a) of sub-section (1) of section 36 of the Act by inserting ano ther expl anation to the said cl ause to cl arif y that the provision of section 43B does not apply and d eemed to never have been applied f or the purposes of determining the ―due date‖ under this cl ause; and (ii) amend section 43B of the Act by inserting Explan ation 5 to the said sec tion to cl arif y that the provisions of the said section do not apply and deemed to never have been applied to a sum received by the asse ssee f rom any of his employees to which provisions of sub-clause (x) of cl ause (24) of section 2 appl ies. These ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 17 - amendments will take eff ect f rom 1st April, 2021 and will accordingly apply to the asse ssment ye ar 2021-22 and subsequen t assessment years. 6.4 In this regard, we have gone through observation of C IT(A), which are re corded in Para 7.17 to 7.19 and the same reads as under:- “7.17 From above o bserv ations of the Apex Court, it is cle ar that if a statu te is curative in nature or merel y declaratory of the previous law, re trospective operation is generally intended. If the objective of the amendment is to cle ar the mean ing of the principal act, which was al re ady implicit, such amendment will necessarily have re trospective ef f ect because it would be without object unless construed re trospectivel y. If the amendments in S ec. 36(1 )(va) are v iewed f rom this perspective, there will not be any room f or doubt about its nature be ing cl arif icatory. This matte r has been clarif ied in the amendment i.e. the true import of ‘due date ‘was very much implicit in the exis ting expl anation 1 of Sec 36(1 )(v a) even prior to the amendment. More clarity has been. brought about and the existing interpretation is reconf irmed through this amendment by way of insertion of explanation 2. A harmonious construction will not emerge if these amendments were to be construed as prospective. Theref ore, relying on the principles of inte rpre tation of statutes as h as been ad umbrated by Hon’b1e Apex Court supra, it is to be held that the cl arif ication brought out by Expl anation 2 to Sec.36(1 )(v a) will equally hold good f or the AYs prior to 2021-22. 7.18 The appellant has placed rel iance on the d ecisions of Hyderabad Bench of the Income Tax Appellate in the case of M/s Crescent Roadways P Ltd in ITA No. 1952/HYD/2018 and of Delhi Bench of the Income Tax Appellate Tribunal in the case of Indian Geotechnical Services in ITA No. 622/DEL/2018 to ad vance its plea that the above amendment is prospective. However, i t apposite to ref er to the late st decision of the Hon’b1e ITAT Delhi in ITA NO.1312/Del/2020 :Asstt. Ye ar : 2018-19 in the case of Vedv an Consultan ts Pv t. Ltd ., Vs DC IT, CPC, Bengaluru vid e ord er dated 26/08/2021 has, af ter consid ering most of the jud gmen ts cited by the ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 18 - appellant includ ing that of the d ecion of the Hon’ble High Court of Madras in the case of C IT Vs. Ind ustrial Security and Intelligence India Ltd.(su pra) considered the clarif icato ry amendment in the Finance Act 2021 and d ecided the issue in f avour of Revenue. 7.19 Thus, the af oresaid Expl anations inserted by Finance Act, 2021 have cl arif ied that def inition of ‘due d ate’ as per Sec 43B is deemed never to h ave been applied f or the purpose of employee's contribution. As discussed above, the said amendments are cl arif icatory in nature and are retrospective in operation. Hence, I am of the view that this provision is re trospec tive applies to the current AY under consideration as the law is no w clear i.e employees' contribution to specif ied f und will not be allo wed as deduction if there is delay in deposit even by a singl e day as per the due dates mentioned in the respective legisl ation and an y ad justment to the income on the impugned coun t is in ord er. The case l aws relied on by the appellan t including th at of the Hon’ble High Court of Madras in the case of C IT Vs. Industrial Security and Intelligence Ind ia Ltd.(supra) were rendered prior to the above amendment. Therefore, the paymen t of empl oyee's contribution made af ter the due date, by which the appellant is required as an employer to credit an employee's contribution to the employee's account in the relevant f und as per the Employee Provident Fund S cheme/ ESI Act, is liable to be added to the income of appell ant 6.5 In vie w of the above f indings of C IT(A), no w we have gone through the decisio n of Hon’ble Su preme Court in the case of C IT vs. Vatika To wnship Pv t. Ltd., 367 ITR 466, wherein the Hon’ble Su preme Court held th at unless contrary intention appears, a legisl ation is presumed no t to be intended to have a retrospec tive operation. The idea behind the rule is th at a current l aw should govern current ac tiv ities. The law passed tod ay cannot be appl ied to the even ts of the pas t. The Hon’bl e Supreme Court held th at if somebody does some thing today, he do it keeping in vie w the l aw of today and in f orce and no t tomorro w’s backward ad justment of it. Accord ing to Hon’ble Apex court every human being is entitled to arrange his affairs by relying on the exis ting l aw and should not f ind that his ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 19 - plans have been retrospectively u pse t. This principle of law is known as lex prospicit non respicit, wh ich me ans l aw l ooks f orward not backward. In the case of V atika T ownship Pv t. Ltd ., supra, the issue bef ore Hon’ble Su preme Court was the insertion of proviso to section 113 of the act by the Finance Act 2002 f or charging of surcharge was under challenge. Hon’ble Supreme Court no ted though provision f or surcharge under the Finance Acts have been in existence since 1995, the charge of surcharge with re spect to block assessment years, having been create d f or the f irst time by the insertion of proviso to S ection 113 of the Act, by Finance Act, 2002, it is clearl y a substan tive provision and is to be construed as prospective in operation. The Hon’ble Supreme Court held that the amend ment neither purports to be merely cl arif icatory nor is there an y material to suggest that it was intended by parl iamen t. 6.6 The Hon’ble Supreme Court f inally held that the proviso to Section113 of the Act is prospective and not re trospec tive. For this Hon’ble Su preme Court held as under:- ““Note s on Clause s” appended to Finance Bill, 2002 while proposing insertion of proviso categorically states that “ this amendment will take eff ect f rom 1st June, 2002”. These become epigraphic wo rd s, when seen in contrad istinction to other amendmen ts specif ically stating those to be clarif icatory or re trospec tively depic ting cl ear in tention of the legisl ature. It can be seen f rom the same no tes th at f ew other amendments in the In come T ax Act were made by the same Finance Act specif icall y making those amendments retro spectively. For ex ample, clause 40 seeks to amend S.92F. Clause iii ( a) of S.92F is amended “so as to cl arify th at the activ ities mentioned in the said cl ause includ e the carrying out of an y work in pursuance of a contract.” T his amendment take s effect retro spectively f rom 01.04.2002. Various o ther amendments al so take pl ace retrospectively. The Note s on Clauses show that the legisl ature is f ully aware of 3 concepts: (i) prospective amend ment with eff ect f rom a f ixed d ate; (ii) re trospec tive amendment with eff ect f rom a f ixed anterior date; and ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 20 - (iii) cl arif icatory amend ments which are retro spec tive in nature. Thus, it was a conscious decision of the legisl ature, even when the l egisl ature kne w the implication thereof and took note of the reasons which led to the insertion of the proviso, that the amendmen t is to operate prospectively. Le arned counsel appe aring f or the assessees sag aciously contrasted the af oresaid stipulation while eff ecting amend ment in Section 113 of the Act, with various other provisions not only in the same Finance Act but Fin ance Acts pertaining to other years where the legisl ature specif ically provided such amendment to be either re tro spective or clarif icatory. In so f ar as amendment to Section 113 is concerned, there is no such l anguage used and on the contrary, specif ic stipul ation is added making the provision eff ective f rom 1st June, 2002. (e) There is ye t ano ther very intere sting piece of evidence that clarif ies the provision beyond any pale of doubt, viz. understand ing of CBDT itself regarding this provision. It is contained in CBDT circular No.8 of 2002 d ated 27th August, 2002, with the subject “Fin ance Act, 2002 – Explanatory N ote s on provision rel ating to Direc t Taxe s”. This circular h as been issued af ter the passing of the Finance Act, 2002, by which amendment to Secti on 113 was made. In this circul ar, various amendments to the Income Tax Act are d iscussed amply demonstrating as to which amendments are clarif icatory/re trospective in operation and which amendments are prospective. For example, explanation to Section 158BB is stated to be cl arif icatory in nature. Like wise, it is mentioned that amendmen ts in Section 145 whereby provisions of that section are mad e applicabl e to block asse ssments is made cl arif icatory and would take effect retro spectively f rom 1st d ay of July, 1995. When it comes to amendment to Section 113 of the Act, this very circular provid es th at the said amend ment al ong with amend ments in Section 158BE, wo uld be prospective i.e. it will take effect f rom 1st June, 2002. (f ) Finance Act, 2003, again make s the position clear that surcharge in respect of block assessmen t of und isclosed ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 21 - income was made prospective. Such a stipul ation is contained in second proviso to sub-section (3) of Section 2 of Finance Act, 2003. This proviso reads as under: “Provided further that the amount of income-tax computed in accord ance with the provisions of section 113 shall be increased by a surcharge f or purposes of the Union as provided in Paragraph A, B, C, D or E, as the case may be, of Par t III of the First Schedule of the Finance Act of the year in wh ich the search is initiated und er section 132 or requisition is made under section 132A of the income-tax Act.” Addition of this proviso in the Fin ance Act, 2003 f urther makes it clear that s uch a provision was necessary to provid e f or surcharge in the case s of block asse ssments and thereby making it prospective in nature. The charge in respect of the surcharge, hav ing been created f or the f irst time by the insertion of the proviso to Section 113, is clearl y a substantive provision and hence is to be construed prospective in operation. The amend ment neither purports to be merely cl arif icatory nor is there any material to suggest that it was intended by Parliament. Furthermore, an amendment made to a tax ing statute can be said to be intended to remove 'hard ships' only of the asse ssee, no t of the Depar tment. On the contrary, imposing a retrospective levy on the assessee would have caused undue hardship and for that reason Parl iament specif ically chose to make the proviso eff ective f rom June 1, 2002. 6.7 We noted f rom the judgment of Hon’ble Supreme Court in Vatika Township P. Ltd ., supra, that there canno t be impo sition of any tax without the au thority of law and such law has to be unambiguous and should prescribe the liabil ity to pay taxe s in cle ar terms. In pre sent case bef ore us, as noted by C IT(A) that their exists divergent judgements of various High Courts. The CIT(A) h as noted the case l aws in f avour of Revenue: 1. Popular Vehicl es & Services (P) Ltd . Vs. C IT [2018] 96 tax mann.com 13 (Keral a), 2. C IT v. Gujarat S tate Road Transport Corporation [2014] 41 tax mann.com 100 (Gujarat) ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 22 - 3. C IT v. Merchem Ltd . [2015] 378 ITR 443 (Keral a). The CIT(A) himself noted the ambiguity in para 7.4 of his order, which reads as under: 7.4 While rend ering above decisions the Hon’ble High Courts had the occasion to examine and distinguish a catena of jud gements which are usually relied upon by appellan ts to ad vance the proposition that the pro visions of section 43B encompass within its scope the employees’ Contribution as well and theref ore any such contribution though not remitted by the employer within due date specif ied by the PF/ES I Acts, will still be permissible d eduction if the same is actual ly paid in pursuance of Sec. 43B. The C IT(A) f urther noted the decisions in f avour of assessee in para 7.7, and the same are as under: 1. Alom Extrusions Ltd . (supra) 2. C IT v. Aimil Ltd. [2010] 321 ITR 508/188 T axman 265 (Delhi); 3. CIT v. NispoPolyf abriks Ltd. [2013] 350 IT R 327/213 Taxman 376/30 taxmann.com 90 (HP); 4. C IT v. Alembic Glass Ind ustries l td . [2015] 279 ITR 331/149 T axman 15 (Guj.); 5. CIT v. Sabari En terprises [2008] 298 ITR 141 (Kar.); 6. CIT v. Pamwi Tissues Ltd . [2009] 313 ITR 137 (Bom.); 7. Spectrum C onsultants India (P.) Ltd . V. C IT [2013 ] 215 Taxman 597/34 taxmann.com 20 (Kar.); 8. C IT v. Udaipur Dugdh U tpad ak Shakari S angh Ltd . [2013] 217 Taxman 64/35 taxmann.com 616 (Raj.) and 9. C IT v. Hemla Embroidery Mills (P) Ltd. [2013 ] 217 T axman 207 (Mag.)/37 tax mann.com 160 (Pun j. & Har.). 6.8 In the presen t case also, bef ore insertion of Explanation 2 to Section 36(1)(va) of the Act, there is ambiguity reg arding due date of payment of employees’ contribution on accoun t of provid ent f und and ES I, whe ther the due d ate is as per the respective acts or up to the due d ate of f iling of return of income of the assessee. As noted by Hon’ble Su preme Court an amendment made to a tax ing s tatute can be said to be intended to re move hardship onl y of the assessee and not of the Depar tment. Impo sing of a re trospective levy on the ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 23 - asse ssee would be caused undue hardship and f or that reason Parl iament specif ically chose to make the proviso af f ective f rom a particul ar d ate. In the present case also, the amendment brought out by Fin ance Act, 2021 w.e.f . 01.04.2021 i.e. f or and f rom assessment year 2021-22 of Explan ation-2 to s. 36(1)(va) of the Act and not retrospectively. 6.9 Thus, f rom the above, it is cl ear that the amendment brought in the statute i.e., by Finance Act, 2021, the provisions of S ectio n 36(1 )(va) r.w.s. 43B of the Act amended by inserting Explan ation 2 is prospective and no t retro spective. Hence, the amended provisions of S ection 43B r.w.s. 36(1 )(va) of the Act are not applicable f or the asse ssment year 2018-19 but will apply f rom assessment ye ar 2021-22 and subsequent assessment ye ars. Hence, this issue of assessee’s appe al is allowed 10. Whereas in the case of Shri Satish Kumar Sinha Vs. ITO in ITA No.293/Hyd/2021,A.Y 2019-20 order dated 23.08.2021, the Honble Tribunal has observed at Para 3.5 as under: 3.5. We have he ard both the par ties through video conf erence and gone through the material pl aced on record. In the instan t case, there is no d ispute that the amounts-in-question with regard to EPF and ESI were remitted to the concerned accounts bef ore the due date of f iling the return of income u/sn139(1). This, the Tribunal has consisten tly taken a view that if the PF and ES I are remitted to the respective accounts, the same are required to be allo wed as deduction. In the case of KLR Industries Ltd., Vs. DC IT (2017 ) [83 taxmann.com 322] (Hyd ), the Tribunal held as under: "34. The A.O. d isallowed the expenditure claimed by observing that the assessee has not remitted the employees contribution to PF and ESI within the prescribed d ate as mentioned in ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 24 - section 36(1)(va). Though, the assessee did not challenge the disallo wance bef ore l earned CIT(A) but he raised an additional ground bef ore us challenging the said disallo wance. It is the contention of the assessee that the employees contribu tion to ESI and PF though, was no t paid within the due date as prescribed und er section 36(1)(va) but such dues hav ing been paid bef ore the due d ate of f iling of return of the income as prescribed under section 139(1), the amount is allowable as a deduction as per the provisions of section 43B. We f ind merit in the af oresaid submissions of the assessee. There are a number of judicial precedents on this issue wherein it is held that if the employees contribution to PF and ES I is paid within the due date of f iling of re turn of income under section 139(1 ), then, the amount is allo wable as a deduction in view of the provision of section 43B. In vie w of the af ore said, we delete the add ition of Rs.2,07,209". 3.5.1. Simil arly, Hon'bl e Punjab & Haryan a High Court in the case of Pr.C IT Vs. Rajas tan Beverages Corporation Ltd., (2017) [84 tax mann.com 173] held th at no disallowance can be made in respect of PF and ES I u/s.36(1 )(va) of the Act, if the same are d eposited on or bef ore the due date of f iling the return of income. For the sake cl arity and convenience we extrac t relevant part of the order of the Hon'ble Rajasth an High as under: "5. So f ar as the question rel ating to priv ilege f ees amounting to Rs.26.00 Crores in the ins tant ye ar as well as the deduction of claim of Rs.17,80,765/- on account of Provident Fund (PF) and ESI is concerned, this Court h as ex tensively considered the af oresaid two questions in assessee's own case vid e jud gment and order d t.26.05.2016 ref erred to (supra) and has held that the privilege f ees being a revenue expenditure, is re quired to be allowed as a revenue expenditure. This court in the af oresaid case has al so allo wed the claim of the assessee, in so f ar as paymen t of PF & ESI etc. is concerned, on the f inding of f act that the amounts in question were d eposited on or before the due date of f urnishing of the re turn of income and taking in consideration jud gmen t of this Court in C IT v. State Bank of Bikaner & ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 25 - Jaipur [2014] 363 ITR 70/43 taxmann.com 411/225 Taxman 6 (Mag.) (Raj.) and C IT v. Jaipur Vidhu t Vitaran Nigam Ltd. [2014] 363 ITR 307/49 taxmann.com 540/[2015 ] 228 Tax man 214 (Mag.) (Raj.) and accord ingly both the questions are covered by the af oresaid jud gment and again st the revenue". Against which the revenue has f iled SLP bef ore the Hon'bl e Supreme Court, which was dismissed by the Hon'ble Apex Court in (2017) [85 tax mann.com 185].Theref ore, taking the consistent v iew and respectf ully f ollowing the vie w taken by the C o-ord inate Bench of the IT AT in the case of KLR Ind ustries Ltd., Vs. DCIT (supra), we hold that no disallo wance could be mad e in respect of empl oyee s contribution of PF and ESI if the same are deposited bef ore the due date of f iling the re turn of income. Accordingly, we set aside the order of Ld.C IT (A) and delete the addition made by the AO. The appeal of the assessee on this ground is allo wed”. 5. Respectf ull y f ollowing the same, I set aside the order of the C IT (A) and delete the addition made by the Asse ssing Off icer on this issue”. 2. Respectf ull y f ollowing the same, I hold th at since the asse ssee has deposited the Employees Con tribution to the PF and ESI bef ore the date of f il ing the return of income, as per the ITA No. 293 of 2021 S atish Kumar S inha Hyderabad amended provision applicable to the to the relevant A.Y, the same is not to be disallo wed. Assessee’s appe al is accordingly allo wed. 3. In the result, asse ssee’s appeal is allowed. 11. We considering the ratio of judicial decisions and the facts emanated in the course of hearing find that the amendment was brought in finance Act 2021 w.e.f 1-4-2021.The law was not framed/amended in the relevant Assesseement year and any legal proposition which cast additional burden/liability on the ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 26 - assessee cannot be implemented retrospectively.The Ld.AR submissions are realistic and substantiated with judicial decisions are appreciated.We considering the overall facts, circumstances, judicial decisions, are of the reasoned view that the amendment to section 36(1)(va) of the Act will not be applicable to Assessment Year 2018-19. The assessee has deposited the employees contribution of provident fund before the due date u/sec139(1) of the Act which is not disputed.Accordingly, we set-aside the order of the CIT(A) and direct the assessing officer to delete the disallowance and allow grounds of appeal in favour of the assessee. 12. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 21.02.2022. Sd/- Sd/- ( OM PRAKASH KANT) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 21.02.2022 KRK, PS ITA No. 569/Mum/2021 Pragati Fashions P Ltd, Mumbai. - 27 - /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आ र आ / The CIT(A) 4. आ र आ ( ) / Concerned CIT 5. "#$ % & &' , आ र ) र*, हमद द / DR, ITAT, Mumbai 6. % -. / 0 / Guard file. ान ु सार/ BY ORDER, " & //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai