Focus Consultancy Services, Bengaluru V. Asst. Director of Income Tax (CPC), Bangalore

ITA 60/BANG/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3537 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-10-2021
• Assessment Year: 2018-2019
• Appeal Filed On: 19-03-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Assessee Lawyers: SHREEHARI KUTSA
• Keywords: Question of law; Set aside
• Section: 43B; 139(1); 139

Judgement Text

ITA NO.60 /BANG/2021 FOCUS CONSULTANCY SERVICES, BENGALURU IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.60/BANG/2021 ASSESSMENT YEAR: 2018-19 FOCUS CONSULTANCY SERVICES NO.48, 1 ST FLOOR, 100 FEET ROAD KORAMANGALA 2 ND BLOCK BENGALURU 560 034 PAN NO :AABFF7898L VS. ASST. DIRECTOR OF INCOME TAX (CPC) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI SHREE HARI KUTSA, A.R. RESPONDENT BY : SHRI PRIYADARSHI MISHRA, D.R. DATE OF H EARING : 07.10.2021 DATE OF PRONOUNCEMENT : 14.10.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 02.3.2021 PASSED BY LD. CIT(A), NATIONAL FACELESS A PPEAL CENTRE AND IT RELATES TO THE ASSESSMENT YEAR 2018-19. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN CONFIRMI NG THE DISALLOWANCE OF RS.35.06 LAKHS MADE U/S 36(I)(VA) O F THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT] RELATING TO EMPLOYEE S CONTRIBUTION TO PF WHILE PROCESSING RETURN U/S 143(1)OF THE ACT. 2. THE FACTS RELATING TO THE ABOVE SAID ISSUE ARE S TATED IN BRIEF. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE R EMITTED EMPLOYEES CONTRIBUTION OF ESI AMOUNTING TO RS.35,06 ,231/- BEYOND ITA NO.60 /BANG/2021 FOCUS CONSULTANCY SERVICES, BENGALURU PAGE 2 OF 6 THE DUE DATE PRESCRIBED UNDER THE ESI ACT. HOWEVER , IT WAS PAID BEFORE THE DUE DATE FOR FILING RETURN OF INCOME U/S 139(1) OF THE ACT. HENCE, THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE U /S 36(1)(VA) OF THE ACT. WHILE PROCESSING RETURN OF INCOME FILED B Y THE ASSESSEE, THE CPC DISALLOWED THE ABOVE SAID AMOUNT. AGGRIEVE D, THE ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT(A). 3. BEFORE LD. CIT(A), THE ASSESSEE PLACED RELIAN CE ON THE DECISION RENDERED BY HONBLE KARNATAKA HIGH COURT IN THE CAS E OF CIT VS. SPECTRUM CONSULTANTS INDIA PVT. LTD. (2014) 2 TMI 1 27 DATED 9.12.2013), WHEREIN IT WAS HELD THAT THE CONTRIBUTI ONS, IF PAID BEFORE THE DUE DATE PRESCRIBED U/S 139(1) OF THE AC T, THE SAME IS ALLOWABLE U/S 36(1)(VA) OF THE ACT SINCE THE PROVIS IONS OF SECTION 43B OF THE ACT OVERRIDE SECTION 36(1)(VA) OF THE AC T. THE LD. CIT(A), BY PLACING RELIANCE ON THE DECISION RENDERED BY HON BLE GUJARAT HIGH COURT IN THE CASE OF STATE ROAD TRANSPORT CORP ORATION (366 ITR 170), UPHELD THE DISALLOWANCE. AGGRIEVED THE A SSESSEE HAS FILED THIS APPEAL BEFORE US. 4. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE DECISION RENDERED BY HONBLE JURISDICTIONAL KAR NATAKA HIGH COURT IN THE CASE OF M/S. SPECTRUM CONSULTANTS INDI A PVT. LTD. (SUPRA) AND ALSO IN THE CASE OF M/S. ESSAETEROKA PV T. LTD. VS. DCIT 366 ITR 408 SUPPORTS THE CASE OF THE ASSESSEE. THE RE SHOULD NOT BE ANY DISPUTE THAT THE DECISION RENDERED BY THE JU RISDICTIONAL HIGH COURT IS BINDING ON ALL AUTHORITIES BELOW IT. HENC E, THE LD CIT(A) WAS NOT JUSTIFIED IN PLACING RELIANCE ON THE DECISI ON RENDERED BY NON-JURISDICTIONAL HIGH COURT, WHEN THERE IS A DECI SION OF JURISDICTIONAL HIGH COURT ON THE VERY SAME ISSUE. 5. WE NOTICE THAT THE COORDINATE BENCH HAS CON SIDERED AN IDENTICAL ISSUE IN THE CASE OF NIRMAL ENVIRO SOLUTI ONS PVT. LTD. VS. ITA NO.60 /BANG/2021 FOCUS CONSULTANCY SERVICES, BENGALURU PAGE 3 OF 6 CIT (ITA NO.315/BANG/2021 DATED 12.10.2021) RELATIN G TO ASSESSMENT YEAR 2018-19, WHEREIN THE TRIBUNAL FOLLO WING THE DECISION RENDERED BY ANOTHER COORDINATE BENCH IN TH E CASE OF THE CONTINENTAL RESTAURANT & CAF COMPANY VS. ITO (ITA NO.388/BANG/2021 DATED 11.10.2021) HAS HELD THAT DI SALLOWANCE U/S 36(1)(VA) R.W.S. 43B OF THE ACT CANNOT BE MADE FOR ASSESSMENT YEAR 2018-19. FOR THE SAKE OF CONVENIENCE, WE EXTR ACT BELOW THE OPERATIVE PORTION OF THE ORDER PASSED BY THE COORDI NATE BENCH IN THE CASE OF NIRMAL ENVIRO SOLUTIONS PVT. LTD. (SUPRA). 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL IN T HE CASE OF THE CONTINENTAL RESTAURANT & CAF CO. V. ITO (SUPRA). THE RELEVANT FINDING OF THE TRIBUNAL READS AS FOLLOWS:- 7. I HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, THE ASSESSEE HAS NOT REMITTED T HE EMPLOYEES CONTRIBUTION OF PF OF RS.1,06,190 AND ESI OF RS.16, 055 TOTALING TO RS.1,22,245 BEFORE THE DUE DATE SPECIFIED UNDER THE RESPECTIVE ACT. HOWEVER, THE ASSESSEE HAD PAID THE SAME BEFORE THE DUE DATE OF FILING OF THE RETURN U/S 139(1) OF THE I.T.ACT. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ESSAETERAO KA (P.) LTD. V. DCIT REPORTED IN 366 ITR 408 (KAR.) HAS CATEGORICAL LY HELD THAT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION OF EMPLOYEE S CONTRIBUTION TO PF AND ESI PROVIDED THE PAYMENT WAS MADE PRIOR T O THE DUE DATE OF FILING OF RETURN OF INCOME U/S 139(1) OF THE I.T .ACT. THE HONBLE JURISDICTIONAL HIGH COURT DIFFERED WITH THE JUDGMEN T OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. GUJARAT ST ATE ROAD TRANSPORT CORPORATION REPORTED IN 366 ITR 170 (GUJ. ). IN HOLDING SO, THE HONBLE HIGH COURT WAS CONSIDERING FOLLOWIN G SUBSTANTIAL QUESTION OF LAW:- WHETHER IN LAW, THE TRIBUNAL WAS JUSTIFIED IN AFF IRMING THE FINDING OF ASSESSING OFFICER IN DENYING THE APPELLA NTS CLAIM OF DEDUCTIONS OF THE EMPLOYEES CONTRIBUTION TO PF/E SI ALLEGING THAT THE PAYMENT WAS NOT MADE BY THE APPEL LANT IN ACCORDANCE WITH THE PROVISIONS U/S 36(1)(VA) OF THE I.T.ACT? 7.1 IN DECIDING THE ABOVE SUBSTANTIAL QUESTION OF L AW, THE HONBLE HIGH COURT RENDERED THE FOLLOWING FINDINGS: - 20. PARAGRAPH-38 OF THE PF SCHEME PROVIDES FOR MO DE OF PAYMENT OF CONTRIBUTIONS. AS PROVIDED IN SUB PAR A (1), THE EMPLOYER SHALL, BEFORE PAYING THE MEMBER, HIS WAGES , DEDUCT HIS CONTRIBUTION FROM HIS WAGES AND DEPOSIT THE SAM E ITA NO.60 /BANG/2021 FOCUS CONSULTANCY SERVICES, BENGALURU PAGE 4 OF 6 TOGETHER WITH HIS OWN CONTRIBUTION AND OTHER CHARGE S AS STIPULATED THEREIN WITH THE PROVIDENT FUND OR THE F UND UNDER THE ESI ACT WITHIN FIFTEEN DAYS OF THE CLOSURE OF E VERY MONTH PAY. IT IS CLEAR THAT THE WORD CONTRIBUTION USED IN CLAUSE (B) OF SECTION 43B OF THE IT ACT MEANS THE CONTRIBU TION OF THE EMPLOYER AND THE EMPLOYEE. THAT BEING SO, IF THE CO NTRIBUTION IS MADE ON OR BEFORE THE DUE DATE FOR FURNISHING TH E 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 TH E 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 WIT HIN THE MEANING OF SECTION 2(24)(X) OF THE IT ACT AND IN WH ICH CASE, THE ASSESSEE IS LIABLE TO PAY TAX ON THE SAID AMOUN T 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 ANSWERE D IN FAVOUR OF THE APPELLANT-ASSESSEE AND AGAINST THE RE SPONDENT- REVENUE. THERE SHALL BE NO ORDER AS TO COSTS. 7.2 THE FURTHER QUESTION IS WHETHER THE AMENDMENT T O SECTION 36(1)(VA) AND 43B OF THE I.T.ACT BY FINANCE ACT, 20 21 IS CLARIFICATORY AND DECLARATORY IN NATURE. THE HONBL E SUPREME COURT IN THE RECENT JUDGMENT IN THE CASE OF M.M.AQUA TECH NOLOGIES LIMITED V. CIT REPORTED IN (2021) 436 ITR 582 (SC) HAD HELD THAT RETROSPECTIVE PROVISION IN A TAXING ACT WHICH IS F OR 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 HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ESSAETERAOKA (P.) LTD. V. DCIT (SUPRA) THE ASSES SEE WOULD HAVE BEEN ENTITLED TO DEDUCTION OF EMPLOYEES CONTRIBUTI ON OF PF AND 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 AM ENDMENT 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 TH E ASSESSEE. THEREFORE, SUCH AMENDMENT CANNOT BE HELD TO BE RETR OSPECTIVE IN NATURE. EVEN OTHERWISE, THE AMENDMENT HAS BEEN MENT IONED TO BE EFFECTIVE FROM 01.04.2021 AND WILL APPLY FOR AND FR OM ASSESSMENT YEAR 2021-2022 ONWARDS. THE FOLLOWING ORDERS OF THE TRIBUNAL HAD CATEGORICALLY HELD THAT THE AMENDMENT TO SECTION 36 (1)(VA) AND 43B ITA NO.60 /BANG/2021 FOCUS CONSULTANCY SERVICES, BENGALURU PAGE 5 OF 6 OF THE I.T.ACT BY FINANCE ACT, 2021 IS ONLY PROSPEC TIVE IN NATURE AND NOT RETROSPECTIVE. (I) DHABRIYAPOLYWOOD LIMITED V. ACIT REPORTED IN ( 2021) 63 CCH 0030 JAIPUR TRIB. II) NCC LIMITED V. ACIT REPORTED IN (2021) 63 CCH 0 060 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 PR IVATE LIMITED V. DCIT IN ITA NO.307/BANG/2021 (ORDER DATED 11 TH OCTOBER, 2021) 7.3 IN VIEW OF THE AFORESAID REASONING AND THE JUDI CIAL PRONOUNCEMENTS CITED SUPRA, THE AMENDMENT TO SECTIO N 36(1)(VA) AND 43B OF THE I.T.ACT BY FINANCE ACT, 2021 WILL NO T HAVE APPLICATION FOR THE RELEVANT ASSESSMENT YEAR, NAMEL Y A.Y. 2019- 2020. ACCORDINGLY, I DIRECT THE A.O. TO GRANT DEDUC TION IN RESPECT OF EMPLOYEES CONTRIBUTION TO PF AND ESI SINCE THE ASS ESSEE 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. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 7.1 IN VIEW OF THE JUDICIAL PRONOUNCEMENTS CITED SU PRA, WE HOLD THAT THE AMENDMENT TO SECTION 36(1)(VA) AND 43B OF THE I.T.A CT WILL NOT HAVE APPLICATION FOR THE RELEVANT ASSESSMENT YEAR, NAMELY ASSESSMENT YEAR 2018-2019. ACCORDINGLY, WE DIRECT THE A.O. TO GRANT DEDUCTION IN RESPECT OF EMPLOYEES CONTRIBUTION TO PF AND ESI SINCE THE ASSESSEE HAS MADE THE PAYMENT BEF ORE THE DUE DATE OF FILING OF RETURN U/S 139(1) OF THE I.T.ACT. IT IS ORDERED ACC ORDINGLY. 6. CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE SAID CASES, WE SET ASIDE THE ORDER PASSED BY L. CIT(A) AND DIRECT THE A.O. TO DELETE THE IMPUGNED DISALLOWANCE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCT, 2021 SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 14 TH OCT, 2021. VG/SPS ITA NO.60 /BANG/2021 FOCUS CONSULTANCY SERVICES, BENGALURU PAGE 6 OF 6 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.