M/s. Aquasns Fashions Private Limited, Bangalore V. Assistant Director of Income Tax, CPC, Bangalore

ITA 586/BANG/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6254 (ITAT-BANGALORE)
• Duration Of Justice: 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2019-2020
• Appeal Filed On: 25-07-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 43B; 139; 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “SMC-B”, BANGALORE Before Shri Chandra Poojari, Accountant Member ITA No.586/Bang/2022 : Asst.Year 2019-2020 M/s.Aquasns Fashions Pvt.Ltd. No.81, Old Mangammanapalaya Road, Garvebhavi Palya Off Hosur Main Road Bangalore – 560 068. PAN : AANCA7991G. v. The Assistant Commi9ssioner of Income-tax, CPC, Bangalore. (Appellant) (Respondent) Appellant by : Sri.Siddesh Nagaraj Gaddi, CA Respondent by : Sri.Ganesh R.Ghale, Standing Counsel Date of Hearing : 17.08.2022 Date of Pronouncement : 17.08.2022 O R D E R This appeal filed by the assessee is directed against the order of the CIT, NFAC dated 23.03.2022 for the assessment year 2019-2020. 2. The whole issue in this appeal is with regard to disallowance u/s 36(1)(va) r.w.s. 2(24)(x) of the I.T.Act amounting to Rs.18,74,999 on account of belated payment of Employees’ contribution to PF and ESI. 3. There was a delay of 60 days in filing this appeal before the Tribunal. The assessee has filed a condonation petition explaining the reasons for delay in filing the appeal before the Tribunal. It was submitted that the assessee has misunderstood the amendment made by the Finance Act, 2021, which appeared to be retrospective. However, going through certain judgment of the higher forum, it came to the ITA No.586/Bang/2022. M/s.Aquasns Fashions Private Limited. 2 knowledge of the assessee that the amendment is only prospective in nature for the assessment year under consideration, which is relating to assessment year 2019- 2020, the said amendment is not applicable. Being so, the assessee opted to file the appeal belatedly before the Tribunal. 4. After perusing the condonation petition, I find that there is good and sufficient reasons for filing the present appeal belatedly by 60 days before the Tribunal. Accordingly, the delay is condoned and the appeal is admitted for adjudication. 5. As regards the merits of the issue, I find there is catena of orders rendered by the Tribunal on this issue. One of the latest orders being rendered by the co-ordinate Bench of the Tribunal in the case of M/s.L.K.Trust v. DCIT in ITA No.409/Bang/2022 (order dated 25.07.2022). The relevant finding of the Tribunal in case of M/s.L.K.Trust v. DCIT (supra) reads as follows:- “10. We have heard the 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 ITA No.586/Bang/2022. M/s.Aquasns Fashions Private Limited. 3 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?" 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 ITA No.586/Bang/2022. M/s.Aquasns Fashions Private Limited. 4 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. 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.” 10.1 Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years 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.” 6. In the present case, the assessment year involved in this appeal is A.Y. 2019-2020. Being so, the amendment by Finance Act, 2021 to sections 36(1)(va) and 43B of the Act will not have application to relevant assessment year. Accordingly, I direct the A.O. to grant deduction in respect of ITA No.586/Bang/2022. M/s.Aquasns Fashions Private Limited. 5 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. In the result, the appeal filed by the assessee is allowed. Order pronounced on this 17 th day of August, 2022. Sd/- (Chandra Poojari) ACCOUNTANT MEMBER Bangalore; Dated : 17 th August, 2022. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A)-NFAC Delhi 4. The Pr.CIT, Bengaluru. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore