Kailash Khemani, Raipur V. Dy. Commissioner of Income Tax, Circle-1(1), Raipur

ITA 93/RPR/2021

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The case involves Kailash Khemani, the appellant, who contested the disallowance of a deduction for delayed payment of employees' contributions to PF and ESIC for the assessment year 2017-18. The AO initially disallowed the deduction, which was upheld by the CIT(A). The main legal contention revolved around the retrospective application of amendments to section 43B of the Income Tax Act and the timing of the contributions' payment relative to the statutory deadlines. The Tribunal referenced a Supreme Court decision in Checkmate Services Pvt Ltd. vs. CIT, which clarified that such contributions are not part of the employer's income and must be paid within the statutory deadlines to qualify for deductions.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 133453 (ITAT-RAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-11-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 31-10-2021
• Other Referred Cases: CIT vs. Alom Extrustions Ltd., in 319 ITR 306(SC), CIT Vs. Vatika Township (P)(Ltd.) (2014) 227 TAXMAN 0121 (SC), CIT Vs. Vatika Township (P)(Ltd.) (2014) 367 ITR 466 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Retrospective amendment
• Section: 43B; 9(1); 9(1); 9(1)

Judgement Text

आयकर अपीलीय अिधकरण Ɋायपीठ रायपुर मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH :: RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.93/RPR/2021 िनधाᭅरण वषᭅ / Assessment Year : 2017-18 Kailash Khemani, City Motors, Near MMI, Pachpedi Naka, Raipur – 492001. V s The DCIT, Circle-1(1), Raipur. Appellant/ Assessee Respondent /Revenue Assessee by Ms.Sheetal Agrawal – CA Revenue by Shri G.N.Singh – Sr.DR Date of hearing 03/11/2022 Date of pronouncement 12/12/2022 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the assessee Kailash Khemani against the order of ld.CIT(A), NFAC dated 01.10.2021 for the A.Y. 2017- 18 emanating from the order of ACIT, Raipur, passed under section 143(3) of the Act on 24.12.2019. The grounds of appeal raised by the assessee are as under: “1. Whether learned CIT(A) is correct in considering the retrospective effect of amendment made by Finance Act 2021 in sec. 43B? 2. Whether learned CIT(A) is correct in making addition of Rs.1,90,959/- on account of delay payment of employees contribution? ITA No.93/RPR/2021 Kailash Khemani [A] 2 3. Whether Learned CIT(A) is correct in mentioning that case laws relied upon by the assessee are no longer valid.” 2. The ld.Authorised Representative(ld.AR) of the assessee filed written submissions as under: “3.1 Appellant made payment of employer and employee contribution under the PF & ESIC Act, however AO and NFAC has disallowed Employee Contribution Rs1,90,959/- on account of delay payment, that it is not paid within the time limit specified u/s.36(l)(va),however it was paid before due date of filing of return u/s 139(1). Below chart showing the details of amount paid in respect of which addition was made:- There are so many contrary decisions by higher authorities in case of allowbility/disallowbility of delay payment of PF/ ESIC. Everyone chooses judgements in accordance for their sake whether it is Revenue or assesse. But we need to understand the intention of legislature behind this, instead of barely punishing the genuine employer. 3.2 Allowability and disallowability of employee contribution was always a matter of dispute so to put the dispute at rest explanation 5 has been inserted in sec. 43B, simultaneously in memorandum it is further clarified that "These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years." 3.3 In spite of such clarity in law one school of law says that amendment made in section 36(l)(va) and section 43B has retrospective Month Fund Name Amount Due date Date of Payment Apr Provident Fund 10,374.00 15/05/2016 20/05/2016 May Provident Fund 10,934.00 15/06/2016 30/06/2016 Jun 2016 Provident Fund 10,977.00 15/07/2016 18/07/2016 July Provident Fund 9,208.00 15/08/2016 18/08/2016 Aug Provident Fund 9,260.00 15/09/2016 17/09/2016 Oct 2016 Provident Fund 9,719.00 15/11/2016 18/11/2016 Nov Provident Fund 8,966.00 15/12/2016 20/12/2016 Dec Provident Fund 22,983.00 15/01/2017 19/01/2017 Jan 2017 Provident Fund 31,001.00 15/02/2017 18/02/2017 Feb Provident Fund 32,717.00 15/03/2017 17/03/2017 Mar Provident Fund 30,270.00 15/04/2017 20/04/2017 Sep 2016 Supp. Challan of 250.00 15/10/2016 18/02/2017 Oct 2016 Supp. Challan of 912.00 15/11/2016 18/02/2017 Nov Supp. Challan of 1,038.00 15/12/2016 18/02/2017 Dec Supp. Challan of 1,038.00 15/01/2017 18/02/2017 Nov 2016 ESIC 1,312.00 21/12/2016 24/12/2016 ITA No.93/RPR/2021 Kailash Khemani [A] 3 effect while some says that it has prospective effect, to understand the same I am producing some findings here ,  Sec 10(23C)(iiiaaaa) is inserted by Finance Act 2017,with retrospective effect from 01.04.1998 • First proviso of explanation 5 of Sec 9(1) is inserted via Finance Act 2017, with retrospective effect from 01.04.2012 • Explanation 4 of Sec 9(1) is inserted via Finance Act 2012, with retrospective effect from 01.04.1962 3.4 If intention law is to make it retrospective, then they could have inserted the proviso with some retrospective date. 3.5 Various tribunals in their recent judgements make it clear that amendment will take effect from 01.04.2021.” 3. The ld.AR further relied upon the following case laws are as under:  “CIT vs. Alom Extrustions Ltd., in 319 ITR 306(SC)  CIT Vs. Vatika Township (P)(Ltd.) (2014) 227 TAXMAN 0121 (SC)  CIT Vs. Vatika Township (P)(Ltd.) (2014) 367 ITR 466 (SC), (2014) 227 TAXMAN 0121 (SC) 4. We have heard both the parties and perused the records. The Assessing Officer(AO) during the assessment proceedings has observed that as per the Audit Report of the assessee, assessee had paid Employees Contribution towards PF and ESIC beyond the due date mentioned in the ESIC Act, PF Act, but before the date of filing of return of income. The said amount was Rs.1,90,959/-. The AO disallowed the said amount and added back to the total income. Aggrieved by the same, assessee filed appeal before the ld.CIT(A). The ld.CIT(A) upheld the addition. ITA No.93/RPR/2021 Kailash Khemani [A] 4 5. This issue of delayed payment of Employees Contribution towards ESI and PF has been settled by Hon’ble Supreme Court in the case of Checkmate Services Pvt Ltd., vs. CIT vide order dated 12.10.2022. The Hon’ble Supreme Court has held as under: Quote, “ That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees’ contributions- which are deducted from their income. They are not part of the assessee employer’s income, nor are they heads of deduction per se in the form of statutory pay out. They are others’ income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. ” Unquote. 6. Thus, Hon’ble Supreme Court has held that assessee had to deposit Employees Contribution towards ESI, PF within the due date mentioned in the respective statute. Then only, it was an allowable expenditure under section 36(1) of the Act. However, in this case, it is an admitted fact that assessee has not paid Employees Contribution towards ESI and PF within the due date mentioned in the ESIC Act and PF Act. Therefore, the AO has rightly disallowed the amount of Rs.1,90,959/-. Thus, we uphold the order of ACIT, Raipur on the said issue. Accordingly, grounds of appeal raised by the assessee are dismissed. ITA No.93/RPR/2021 Kailash Khemani [A] 5 7. In the result, appeal of the Assessee is Dismissed. Order pronounced in the open Court on 12 th December, 2022. Sd/- Sd/- (RAVISH SOOD ) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 12 th Dec, 2022/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Applicant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-I, Raipur. 4. The Pr. CIT-I, Raipur. 5. DR, ITAT, “Raipur” Bench. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.