A.N.R MOTORS PRIVATE LIMITED, JALANDHAR V. DEPUTY COMMISSIONE OF INCOME TAX CIRCLE-4, JALANDHAR

ITA 88/ASR/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7196 (ITAT-AMRITSAR)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2019-2020
• Appeal Filed On: 22-09-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Set aside
• Section: 43B; 250; 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER I.T.A Nos. 87 & 88/ASR/2021 (ASSESSMENT YEARS: 2018-19 & 2019-20) A.N.R. Motors Pvt. Ltd., Paragpur, G.T. Road, Jalandhar [PAN: AACCA 9957F] (Assessee) Vs. D. C. I. T., Circle-4, Jalandhar (Revenue) Assessee by Sh. J. S. Bhasin, Adv. Revenue by Sh. S. M. Surendranath, D. R. Date of Hearing 29.11.2021 Date of Pronouncement 01.12.2021 ORDER Per Manish Borad, A. M.: Both appeals are filed by the assessees feeling aggrieved by the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Years 2018-19 & 2019-20 u/s. 250 of the Income Tax Act, 1961 (hereinafter referred as the ‘the Act’). I.T.A Nos. 87 & 88/ASR/2021 2 2. The assessee has raised the following grounds of appeal in ITA No. 87/Asr/2021 is as under: “1. That the ld. CIT(A)/NFAC erred in mechanically upholding the addition of Rs.29,00,790/- made by CPC by disallowance u/s 36(1)(va), in total disregard to the assessee’s claim made u/s 43B(1)(b), duly supported by Hon’ble Apex Court and jurisdictional High Court’s decisions. 2. That the order of ld. CIT(A)/NFAC, to uphold the addition, contrary to the binding decisions of Hon’ble Apex Court and jurisdictional High Court of P&H, are against judicial discipline besides being contemptuous and hence unsustainable per se. 3. That the ld. CIT(A)/NFAC, further erred to hold that emendments made in section 36(1)(va) and 43B, by the Finance Act, 2021, being clarificatory, had retrospective effect, to disallow the assessee’s claim under dispute. 4. That the ld. CIT(A)/NFAC, failed to appreciate that impugned disallowance, involving intese legal debate, could not made under the limited scope of section 143(1), and ought to have been deleted on this very premise. 5. That the ld. CIT(A)/NFAC erred in skipping the last gorund of appeal and impliedly confirming a mechanical addition made by CPC by disallowance of Cow cess of Rs.538669/- & Labour Welfare fund of Rs.20610 = Rs.559279/-, when the said disallowance had already been made in computation of income by assessee, thus resulting in double addition of same amount. 6. That the impugned order, being totally de hors the facts and the legal positon, is liable to be set aside and quashed.” I.T.A Nos. 87 & 88/ASR/2021 3 3. The assessee has raised the following grounds of appeal in ITA No. 88/Asr/2021 is as under: “1. That the ld. CIT(A)/NFAC erred in mechanically upholding the addition of Rs.23,73,308/- made by CPC by disallowance u/s 36(1)(va), in total disregard to the assessee’s claim made u/s 43B(1)(b), duly supported by Hon’ble Apex Court and jurisdictional High Court’s decisions. 2. That the order of ld. CIT(A)/NFAC, to uphold the addition, contrary to the binding decisions of Hon’ble Apex Court and jurisdictional High Court of P&H, are against judicial discipline besides being contemptuous and hence unsustainable per se. 3. That the ld. CIT(A)/NFAC, further erred to hold that emendments made in section 36(1)(va) and 43B, by the Finance Act, 2021, being clarificatory, had retrospective effect, to disallow the assessee’s claim under dispute. 4. That the ld. CIT(A)/NFAC, failed to appreciate that impugned disallowance, involving intese legal debate, could not made under the limited scope of section 143(1), and ought to have been deleted on this very premise. 5. That the impugned order, being totally de hors the facts and the legal positon, is liable to be set aside and quashed.” 4. First we will take up in ITA No. 87/Asr/2021. Brief facts of the case as culled out from the record are that the assessee is a Private Ltd. Company. The return of income for AY 2018-19 was filed on 19.8.2018 declaring total income of Rs. 9,88,84,430/-. Return processed u/s 143(1)(a) of the Act by the Centralized I.T.A Nos. 87 & 88/ASR/2021 4 Processing Centre and vide order dated 12.01.2020 income computed at Rs.10,23,44,500/- after making following disallowances of Rs.34,60,071/- 1. Disallowances u/s 36(1)(va) for employee’s contribution towards PF/ESI at Rs. 29,00,790/-. 2. Disallowances of Cow cess of Rs.5,38,669/- through disallowances of Labour Welfare Fund of Rs.20,610/-. 5. Aggrieved assessee preferred appeal before Ld. CIT(A) against the disallowances low failed to succeed and now the assessee is in the appeal before this Tribunal. 6. Ld. Counsel for the assessee with regard to the disallowance of employee’s contribution towards delayed PF/ESI submitted that the issue is squarely covered in favour of the assessee by the decision of this coordinate bench in the case of Nipun Jain ITA Nos. 71 & 72/Asr/2021 dated 09.11.2021 as the assessee has deposited the alleged employee’s contribution towards PF/ESI with the relevant authority before the due date of filing the return of income u/s 139(1) of the Act. 7. As regards the second issue of disallowance of Cow cess Labour and Welfare Fund, it was submitted that the assessee has already disallowed the alleged sum while computing the income by adding it to the net profit shown in the profit and loss account and offered to tax. 8. Per contra, the Ld. Departmental Representative vehemently argued supporting the orders of both the lower authorities but could not controvert the fact I.T.A Nos. 87 & 88/ASR/2021 5 that the issue of employee’s PF/ESI is covered in favour of the assessee by the decision of this Tribunal. 9. We have heard the rival contention and perused the record placed before us. Apropose to the first issue raised by the assessee in ground nos. 1,2,3 & 4 of the instant appeal relating to the disallowance u/s 36(1)(va) of the Act for delayed employee’s PF/ESI at Rs. 29,00,790/-, we find that the said amount was deposited before due date of filing of return u/s 139(1) of the Act and under these given facts the following finding in decision of the Coordinate Bench in case of Nipun Jain (supra) is squarely applicable: “The CIT(A) while upholding the disallowance/addition qua employees contributions towards PF & ESI mainly focused on two aspects/determinations- (i) non-applicability of the provisions of Section 43B of the Act to the employee’s share qua PF & ESI and (ii) applicability of the amended provisions of Section 36(1)(va) and 43B of the Act wherein Explanations have been inserted by Finance Act, 2021. For better clarification and ready reference the Explanations 2 and 5 inserted in sections 36(1)(va) and Section 43B of the Act respectively, are reproduced herein, which reads 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 purposes of determining the “due date” under this clause.” Section 43B- “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.” 5.1 We may observe that the ld. CIT(A) in its order at para no. 7.15 itself has observed that the issue has been highly contentious and different High Courts have taken divergent views on the same issue, out of which some are in favour of the assessee and some are against the assessee. The ld. I.T.A Nos. 87 & 88/ASR/2021 6 CIT(A) further observed that the judgments and orders relied upon by the assessee have been rendered before the clarificatory amendments made in the Finance Act, 2021 and the Finance Act, 2021 has put an end to this controversy. 5.2 Admittedly there is plethora of judgments in favour of the Assessee’s contention and of the Revenue. The controversy with regard to divergent views of different High Courts, has been settled by the Hon'ble Apex Court in the case of CIT Vs. M/s. Vegetables Products Ltd. (88 ITR 192) by laying the dictum that if two reasonable constructions of a taxing provision are possible that construction which favours the Assessee must be adopted. The Hon’ble jurisdictional High Court in the case of CIT Vs. M/s Hemla Embroidery Mills (P) Ltd. (366 ITR 167) (P&H HC) and in the case of CIT Vs. M/s Mark Auto Industries Ltd. (358 ITR 43) (P&H HC) clearly held that the assessee is entitled to claim deduction of employee’s share of ESI & PF u/s.43B of the Act, if the same has been deposited prior to the filing of return of income u/s.139(1) of the Act. From the above judgments of the Hon’ble jurisdictional High Court, it is clear that the Hon’ble Court has not drawn any distinction between the employee’s and employer’s share qua PF & ESI contributions. Admittedly there are no contrary judgements of the jurisdictional High Court against the assessee on the aspect under consideration hence, first determination of the Ld. CIT(A) qua non- applicability of the provisions of Section 43B of the Act to the employee’s share qua PF & ESI, is unsustainable. 5.3 Now, coming to the second aspect/determination made by the CIT(A) to the effect that the amendment made in Section 36(1)(va) and 43B of the Act by Finance Act 2021 has to be considered as clarificatory in nature and having retrospective effects, therefore would be applicable to the previous assessment years as well. We may observe that various benches of the ITAT including Hyderabad Bench in the case of Value Momentum Software Services Pvt. Ltd. (ITA No.2197/Hyd/2017 decided on 19.05.2021), have taken into consideration the identical issue qua applicability of the amendment to Section 36(1)(va) and Section 43B of the Act, by inserting Explanations by the Finance Act, 2021 and clearly held that the amendment shall be applicable from 1 st April, 2021 onwards. It is also relevant to note that the CBDT has also issued I.T.A Nos. 87 & 88/ASR/2021 7 Memorandum of Explanation qua applicability of the amended provisions of Section 36(1)(va) & 43B of the Act w.e.f. 1 st April, 2021, and Assessment Year 2021-21 onwards, hence there is no doubt qua applicability of the amended provisions referred above, prospectively. On the aforesaid discussion, the second aspect as considered/determined by the ld. CIT(A) qua retrospective application of the amended provisions of Section 36(1)(va) and 43B of the Act wherein Explanations have been inserted by Finance Act, 2021 qua employees’ share in respect of PF & ESI Act, is also unsustainable . 5.4 In view of the above discussions, the disallowances of Rs.5,88,203/- for A.Y.2018-2019 and Rs.60,540/- for A.Y.2019-2020 made by the A.O. and confirmed by the CIT(A) are not sustainable and, hence, the same stands deleted. 6. In the result, both the appeals of the assessee are allowed.” 10. In view of the above referred decision and the facts and issue being same we are of the opinion that no disallowance of Rs.2900790/- was called for u/s 36(1)(va) of the Act in the case of assessee. Ground no. 1 to 4 of this appeal are allowed. 11. Apropose to the second issue raised in ground no. 5 of this appeal relating to Cow cess & Labour Welfare Fund, we on perusal of the computation of income filed by the assessee find that the assessee has treated various items inadmissible to be allowed as expenditure and the list includes the alleged amount of Cow cess of Rs.5,38,669/- and Labour Welfare Fund of Rs.20,610/- which remains unpaid. Both of these amount have already been added to the profit before tax as per profit & loss account. Correctness of this computation of income has not been challenged by the Departmental Representative. Since we have already verified this fact, we I.T.A Nos. 87 & 88/ASR/2021 8 find no reasons to set aside this issue to the file of the Assessing Officer merely for verification. We therefore on observing that the said disallowance of Rs.5,59,279/- which includes disallowance of Cow cess at Rs. 5,38,669/- and disallowance of Labour & Welfare Fund of Rs.20,610/- has already been added to the net profit and taxes have been paid accordingly, find no justification in the action of both the lower authorities confirming this disallowance. We accordingly delete the disallowance of Cow cess at Rs.538669/- and also delete the disallowance of Labour & Welfare Fund of Rs. 20,610/- and allow ground no. 5 raised by the assessee. 12. Ground no. 6 is general in nature which needs no adjudication. 13. Now we take up in ITA No. 88/Asr/2021 in which the assessee has raised five grounds of appeal but the sole grievance relates to disallowances u/s 36(1)(va) of the Act at Rs.23,73,308/- for late deposit of employee’s contribution towards PF/ESI. We find that we have already dealt this issue in the preceeding para while adjudicating ITA No. 87/Asr/2021. Since the facts and issues remains the same our decision given in ground nos. 1,2,3, & 4 of ITA No. 87/Asr/2021 shall comply mutatis mutandis on the sole issue raised in the instant Appeal No. 88/Asr/2021. We accordingly set aside the finding of the Ld. CIT(A) and delete the disallowance of Rs.23,73,308/- made by the Assessing Officer u/s 36(1)(va) of the Act. Thus appeal of the assessee in ITA No. 88/Asr/2021 is allowed. I.T.A Nos. 87 & 88/ASR/2021 9 14. In the result, both the appeals of the assessee are allowed. Order pronounced in the open court on 01/12/2021. Sd/- Sd/- (MAHAVIR PRASAD) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 01/12/2021 *GP/Sr. P.S.* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT True Copy By Order