Income Tax Appellate Tribunal - Delhi
Mithila And Mithila Enterprise, New ... vs Ward- 49(4), New Delhi on 31 March, 2022
I.T.A.Nos. 1904 TO 1906/Del/2021
IN THE INCOME TAX APPELLATE TRIBUNAL
[ DELHI BENCH "E"NEW DELHI ]
BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER,
AND
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
(Through Video Conferencing)
आ.अ.सं/.I.T.A Nos. 1904, 1905 & 1906/Del/2021
िनधारणवष/Assessment Years: 2017-18, 2018-19 & 2019-20
Mithila and Mithila Enterprises, Assessing Officer,
C-22, New Krishna Park, बनाम Ward : 49 (4),
Vikas Puri, Vs. New Delhi.
New Delhi - 110 018.
PAN No. AASFM1647F
अपीलाथ /Appellant यथ /Respondent
िनधा रतीक ओरसे /Assessee by : Shri Baldev Raj, C. A.;
राज वक ओरसे /Revenue by : Shri Gaurav Pundir, Sr. D.R.;
सुनवाईक तारीख/ Date of hearing: 24/02/2022
उ ोषणाक तारीख/Pronouncement on : 31/03/2022
आदेश /O R D E R
PER C.N. PRASAD, J.M. :
1. These three appeals are filed by the assessee against the order of the National Faceless Appeal Centre (hereinafter referred to NFAC) dated 25.11.2021 for assessment years 2017-18, 2018-19 and 2019-20.
1I.T.A.Nos. 1904 TO 1906/Del/2021
2. The assessee in its appeals has raised the following common grounds (except for the amounts) of appeal:-
"1.That on the facts and circumstances of the case, the order dated as 27.01.2020passed by the Assistant Director of Income Tax, CPC - Bangalore [hereinafter for the sake of brevity referred to as "The Ld. A.O."] under section 143(1) of the Income-tax Act, 1961 [hereinafter for the sake of brevity referred to as "The Act"] and as upheld by the Ld. Commissioner of Income-tax (Appeals) - NFAC [hereinafter for the sake of brevity referred to as "The CIT(A)"] is bad at law and void ab initio.
2. That on the facts and in circumstances of the case, the Ld. CIT(A) erred in upholding the addition to the tune of Rs.29,76,856/- on account of employee's contribution of PF under section 36(l)(va) of the Act and the same is not sustainable on various legal and factual ground.
3. That on the facts and in circumstances of the case, the Ld. CIT(A) erred in upholding the addition to the tune of Rs.3,50,792/- on account of employee's contribution of ESI under section 36(l)(va) of the Act and the same is not sustainable on various legal and factual ground.
4. That on the facts and in circumstances of the case, the Ld. CIT(A) erred in Law in holding that explanation 2 to u/s 36(i)(va) is applicable in A.Y. 2017-18 when its provided is applicable w.e.f. A.Y. 2021-22. "
3. Brief facts are that for all these assessment years returns were processed under Section 143(1) of the Act by CPC, Bangalore on various dates by disallowing the employees' contribution to PF and ESI. Assessee preferred appeal before the National Faceless Appeal Centre and contended that the adjustment is made while processing the return under Section 143(1) of the Act disallowing employees' contributions to PF and ESI is outside the scope of Section 143(1) of the Act. However, the ld. CIT (Appeals) - NFAC sustained the disallowance made by the DCIT, CPC, Bangalore, holding that the amendment introduced by the Finance Act, 2021 by way of Explanation 5 to Section 43B and Explanation 2 to 2 I.T.A.Nos. 1904 TO 1906/Del/2021 Section 36(1)(viia) are retrospective in nature. The ld. CIT (Appeals) placed reliance on the decision of Hon'ble Delhi High Court in the case of CIT Vs. Bharat Hotels Ltd. (2019) 410 ITR 417; Hon'ble Kerala High Court in the case of CIT Vs. Merchem Ltd. 378 ITR 443 (Ker.); Hon'ble Madras High Court in the case of Unifac Management Services India Pvt. Ltd. Vs. DCIT 409 ITR 225; Hon'ble Madras High Court in the case of B. S. Patel Vs. DCIT 326 ITR 457.
4. Before us the ld. Counsel for the assessee submits that while processing the return under Section 143(1) of the Act, the Assessing Officer, CPC cannot make any disallowance of employees' contribution to PF and ESI as the issue is highly debatable. Reliance was placed on the following decisions:-
(A) Bajaj Auto Finance Limited Vs. CIT (2018) 93 taxmann.com 63 (Bom.);
(B) ACIT Vs. Haryana Telecom Pvt. Ltd.
14 taxmann.com122 (Del.);
(C) Modern Fibotex India Ltd. Vs. DCIT (1995) 212 ITR 496 (Cal.);
(D) Khatau Junkar Ltd. Vs. K. S. Pathania, DCIT (1992) 196 ITR 55 (Bom.);
(E) SRF Charitable Trust Vs. Union of India (1991) 212 ITR 496 (Cal.);
(F) Mintri Tea Co. Ltd. Vs. CIT (2009) 319 ITR 264 (Cal).
5. The ld. Counsel for the assessee further submits that no disallowance can be made under Section 36(1)(viia) for delayed payment of employees' contribution as per the due date prescribed under the PF / ESI legislature if the amounts were deposited before 3 I.T.A.Nos. 1904 TO 1906/Del/2021 due date of filing of Income Tax return. Reliance was placed on the following decisions:-
(a) Pr. CIT Vs. Pro Interactive Service (India) Pvt. Ltd.
(ITA. 983/2018 dated 10.09.2018) (Delhi HC);
(b) CIT Vs. AIMIL Ltd. (2010) 321 ITR 508 (Delhi HC);
(c) ACIT Vs. Ranbaxy Laboratories Ltd. (2012) 20 taxmann.com 334 (Del.);
(d) Universal Precision Screws Vs. ACIT (2016) 69 taxmann.com 368 (Delhi Trib.);
(e) CIT Vs. Kichha Sugar Co. Ltd. (2013) 356 ITR 351 (Uttarakhand);
(f) CIT Vs. Nuchem Ltd. (2015) 59 taxmann.com 455 (P & H);
(g) CIT Vs. ANZ Information Technology (P.) Ltd. (2009) 319 ITR 123 (Kar.);
(h) H. P. Tourism Development Corpn. Ltd. (2010) 328 ITR 508 (H. P.);
(i) Spectrum Consultants India Pvt. Ltd. Vs. CIT (2013) 215 Taxman 597 (Kar.);
(j) Rajasthan State Ganganagar Sugar Mills Ltd. (2020) 114 taxmann.com 573 (SC);
(k) Salzgitter Hydraulics (P.) Ltd. Vs. ITO (2009) (ITA. No. 644/Hyd/2020) (Hyd. Trib.);
(l) Adma Solution P. Ltd., New Delhi Vs. ACIT (2009) (ITA. No. 1800/Del/2020) (Del. Trib.) [order dated 13.10.2021];
(m) Indian Geotechnical Services Vs. ACIT [order dated 27.08.2021];
(n) Yogi Technoequip Pvt. Ltd. Vs. DCIT 4 I.T.A.Nos. 1904 TO 1906/Del/2021 (ITA. No. 1609/Del/2020) (Del. Trib.);
[order dated 30.07.2021];
(o) Azamgarh Steel & Power Pvt. Ltd. Vs. CPC, Bangalore (ITA. No. 1626/Del/2020) (Del. Trib.);
[order dated 31.05.2021].
6. The ld. Counsel for the assessee relying on various decisions of this Tribunal submitted that the amendment introduced by the Finance Act, 2021 is prospective in nature and applies for the assessment year 2021-22 onwards. The ld. Counsel submits that as the assessee has remitted ESI and PF contributions before the due date of filing of return of income and since the amendment is not applicable for the assessment year under consideration, the same cannot be disallowed.
7. The ld. DR strongly placed reliance on the orders of the authorities below.
8. We have heard the rival submissions, perused the orders of the authorities below. We find force in the submissions of the ld. Counsel for the assessee that while processing the return under Section 143(1) of the Act, no disallowance towards contribution to employees' PF and ESI is warranted as this issue is highly debatable in nature. The case laws relied upon by the ld. Counsel supports the contention of the assessee that disallowance is not warranted as the issue is highly debatable. Even otherwise we find that the issue in appeal is squarely covered by the decision of the jurisdictional High Court in the case of CIT Vs. AIMIL Ltd. (supra). Ratio of this decision squarely applies to the facts of the assessee's case. The decision relied on by the ld. CIT (Appeals) as has been considered by the Tribunal in this case and following the decision 5 I.T.A.Nos. 1904 TO 1906/Del/2021 of the jurisdictional High Court in the case of CIT Vs. AIMIL Ltd. (supra) and also ratio of the decision of the Hon'ble Supreme Court in the case of Vegetable Products Ltd. 82 ITR 192 (SC) the Tribunal decided the issue in favour of the assessee.
9. Further we also observe that recently this Tribunal in a batch of appeals in the cases of Raj Kumar Vs. ITO CPC Bangaluru in ITA. No. 1392/Del/2021 and other appeals by order dated 28.02.2022 considering various decisions rendered by various High Courts and the Tribunals held that the amendment brought in by Finance Act, 2021 is effective from 1.04.2021 and no disallowance is called for, on belated payment of employees' contribution to ESI and PF in case the assessee deposited the said contribution before due date for filing of return of income under Income Tax Act. While holding so the Tribunal observed as under:-
"21. In thi s background, the various decisions of the Hon'ble Jurisdictional High Courts have been perused.
22. In the case of CIT Vs. Bharat Hotels Ltd. 410 ITR 417, the question of law at serial no. 2 framed by the Hon'ble High Cour t reads as under: (order dated 06.09. 2018) "2. Whether the payment of provident fund and employees state insurance dues deposi ted by the assessee within the grace period would qualify for deducti on under S ection 43B of the Inc om e T ax Act, 1961?"
23. The said questi on was dealt at para 7 & 8 of the order, it has been held that the assessee undoubtedly was entitled to claim the benefit and properly treat such amounts as having been duly deposited, which were infact deposited within the period pr escribed (i.e. 15+5 days in the case of EPF and 21 days + any other grace period in terms of extent notifi cation).
24. Thus, the Hon'ble C ourt has held that the employers contribution is an all owabl e deducti on, if paid befor e the due date answering the question of law framed. The Hon'bl e Court went further and held that 6 I.T.A.Nos. 1904 TO 1906/Del/2021 as far as the amounts c onsti tuting deduc tions fr om employee's sal aries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deducti on from its r eturns.
25. We hav e perused the order of the Hon'ble Jurisdictional High Court in the case of CIT Vs. AIMIL Ltd. 321 ITR 508 v ide or der dated 23.12.2009 held that if the employees' contribution is not deposited by the due date prescribed under the relevant Ac ts and is deposited late, the empl oyer not only pays i nterest on delayed payment but can i nc ur penalties also, f or which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. I nsofar as the Income- tax Act is c oncerned, the assessee can get the benefit if the actual payment is made before the ret urn is filed, as per the princi ple laid down by the Hon'ble S upreme Court i n the c ase of Vinay Cement Ltd.
26. The brief facts of such c ase ar e as under:
"2. The case relates to the assessm ent year 2002-03. The respondent assessee had filed its return on 30-10- 2002 declaring i ncome at Rs. 7,95,430. During the assessment proceedings, the Assessing Officer (A O) found that the assessee had deposited em ployers' contributi on as well as empl oyees' contri bution towards provident fund and ESI after the due date, as prescribed under the relev ant Act/Rules. Accordingly, he made addition of Rs. 42,58,574 being employees' contribution under section 36(1)(va) of the Act and Rs. 30,68,583 being empl oyers' contribution under section 43B of the Act. Felt aggriev ed by this assessment or der, the assessee preferred appeal before the CIT(A) who decided the same vide orders dated 15-7- 2005. Though the C IT(A) accepted the c ontention of the assessee that if the payment is made bef ore the due date of filing of retur n, no disallowance could be m ade in vi ew of the provisions of section 43B, as amended vide Financ e Ac t, 2003, he still c onfirmed the addition made by the Assessing Officer on the ground that no docum entary proof was given to support that payment was in fact made by the assessee. The assessee filed an application under sec tion 154 of the Act before the CIT(A) for rectification of the mistake. After having satisfied that payment had, in fact, been made, the CIT(A) rec tified the mi stake and deleted the addi tion by hol ding that the assessee had made the payment bef ore the due date 7 I.T.A.Nos. 1904 TO 1906/Del/2021 of filing of the return, which was a fac t apparent from the rec ord."
The decision of ITAT:
27. The Co-ordi nate Bench of ITAT relied on the judgment of Hon'ble Supr eme C ourt in the case of CIT Vs. Vinay Cements L td. 213 CTR 268 to support its decision to the eff ect that if the em pl oyers' as well as employees' c ontribution towards prov ident fund and ESI is paid bef ore the due date of filing of return, no disallowanc e can be made by the Assessing Of ficer.
28. The r elevant part of the or der of the ITAT relyi ng on the CIT Vs. Vinay C ements L td. (supra) is as under:
"11. We hav e c arefully considered the ri val submissi ons in the light of material placed before us. In the assessment order ld. Assessi ng Officer has categorically stated that what the amount due was for whic h m onth in respec t of EPF, Family Pension, PF inspection c harges and ESI deposits and what were the due dates for these deposits and on whic h date these deposits were made. The dates of deposits are mentioned between 23rd May, 2001 to 23rd Apri l, 2002. The latest payment is made on 23rd A pril, 2002 and assessee being limited company had filed i ts return on 20th October, 2002 whic h is a date not beyond the due date of filing of the return. Thus, it is clear beyond doubt that all the paym ents which hav e been disallowed were made much earlier to the due date of filing of the return. The disallowance is not made by the Assessing Officer on the ground that there is no proof of maki ng suc h payment but disallowance is m ade only on the ground that these payments have been made beyond the due dates of making these payments under the respectiv e statute. Thus, i t was not an i ssue that the payments were not made by the assessee on the dates which have been stated to be the dates of deposits in the assessm ent order. If suc h i s a factual aspect then according to latest positi on of law clarified by Hon' ble S upreme Court in the c ase of CIT v. Vinay Cement Ltd. that no disallowance could be made if the payments are made before the due date of filing the return of income. T his issue came before Hon'ble Suprem e Court i n the case of CIT v. Vinay Cement Ltd. which was a special l eave petition fil ed by the department against the High Court Order of 26th J une, 2006 in ITA No. 2/05 and ITA No. 56/03 and ITA No. 80/03 of the Hi gh Court of Guwahati, Assam and it is order dated 7th March, 2007. A copy of 8 I.T.A.Nos. 1904 TO 1906/Del/2021 the said order is placed on rec ord. The observati ons of their Lordships on the i ssue are as under :--
'In the present case we are concerned with the l aw as it stood prior to the amendment of sec tion 43B. In the circumstances the assessee was entitl ed to c laim the benefit in secti on 43B for that period partic ul arly in view of the fact t hat he has contri buted to provident fund before filing of the return.
The speci al leave petition i s dismissed."
29. Thus, we find that the Co-ordi nate benc h of ITAT and the H on'ble Jurisdictional high Court of Del hi have relied on the judgment of Vinay Cem ents Ltd. (supra).
30. Further, the H on'ble Juri sdic tional High Court of Delhi in the case of PCIT V s. Pro Interactiv e S ervices (India) Pv t. Ltd. in ITA 983/2018 dated 10.09.2018 while dismissing the appeal of the Rev enue hel d that "the legisl ative i ntent was/is to ensure that the am ount paid is all owed as an expendi ture only when paym ent is actually made. We do not think that the legislative intent and objec tive is to treat belated paym ent of Employee's Provi dent Fund ( EPD) and Empl oyee's State Insurance Scheme (ESI) as deemed i ncom e of the employer under Secti on 2(24)(x) of the Ac t."
31. Further, this issue has been examined in the Finance Act, 2021 which are as under:
"Section 2 (24) (x) of the Income Tax Act, 1961 reads:
"any sum rec eived by the assessee f rom his empl oyees as contributions to any provident fund or superannuation fund or any f und set up under the provisions of the Empl oyees' State Insurance Ac t, 1948 (34 of 1948), or any other fund for the welf are of such employees."
FINANCE ACT, 2021 [13 OF 2021] An Act to give effec t to the financi al proposals of the Central Gov ernment for the fi nancial year 2021-2022.BE it enacted by Parli ament in the Sev enty-second Year of the Republic of India as foll ows: --
CHAPTER I PRELI MINARY Short ti tle and commencement.
9I.T.A.Nos. 1904 TO 1906/Del/2021
1. (1) This Act may be called the Financ e Act, 2021. (2) Sav e as otherwise provi ded in thi s Act,--
(a) sec tions 2 to 88 shall come into f orce on the 1st day of April, 2021;
(b) sec tions 108 to 123 shall come into force on such date as the C entral Government may, by notification i n the Offi cial Gazette, appoi nt.
Amendmen t of section 36.
9. In secti on 36 of the Inc ome-tax Act, in sub-sec tion (1), in clause (va), the Explanati on shall be numb ered as Explanati on 1 thereof and after Expl anation 1 as so numbered, the fol lowing Explanation shall be inser ted, namel y:--
'Ex pl anation 2. --For the r emoval of doubts, it is hereby clarified that the provisi ons of section 43B shall not apply and shall be deemed nev er to hav e been applied for the purposes of determining the "due date" under this clause;'.
Amendmen t of section 43B.
11. In secti on 43B of the Inc ome-tax Act, after Expl anati on4, the foll owing Expl anation shall be inserted, namel y: --
"Explanation5.--For the remov al of doubts, i t is hereby clarified that the provisions of this section shall not apply and shall be deemed nev er to hav e been applied to a sum rec eived by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of sec tion 2 applies.".
32. We have also perused the Mem orandum Ex plaining the Provisions in the Fi nance Bill, 2021. Under the head "Provisi on relating to Direct Taxes" wi th to rationalization of vari ous pr ovi sions, the i ssue of clause (24) of Section 2 sub-clause (x), Section 36(1) clause (va), Section 43B with regard to pr ovisions of sub- Section (1) of Sec tion 139 have been deal t at length. The gist i s as under:
"Rati onalization of various Provisions Payment by employer of employee contributi on to a fund on or before due date 10 I.T.A.Nos. 1904 TO 1906/Del/2021 Clause (24) of section 2 of the Act pr ovi des an inclusive definition of the income. Sub-cl ause (x) to the said clause provi de that income to include any sum r eceiv ed by the assessee fr om his employees as c ontribution to any provident f und or superannuati on fund or any f und set up under the provisions of ESI Act or any other fund for the welf are of such empl oyees.
Section 36 of the Act pertains to the other deductions. Sub-sec tion (1) of the said section provides for various deducti ons allowed while computing the incom e under the head Profits and gains of business or profession'. Clause (va) of the sai d sub-secti on provi des for deducti on of any sum received by the assessee from any of his employees to which the provisions of sub-clause
(x) of clause (24) of s ection 2 apply, if such sum is credi ted by the assessee to the employee's account in the relev ant fund or funds on or bef ore the due date.
Explanation to the said clause provides that, for the purposes of this clause, "due date to mean the date by which the assessee is required as an empl oyer to credit an employee's contribution to the empl oyee's acc ount in the relevant fund under any Act, rule, order or notific ati on issued there-under or under any standi ng order, awar d, contrac t of service or otherwise. Section 43B specifies the li st of deductions that are admissible under the Act only upon their ac tual payment. Employer's contribution is cov ered i n clause
(b) of sec tion 43B. Accordi ng to it, i f any sum towards employer's contri bution to any provident fund or superannuation fund or gratui ty fund or any other fund for the welfare of the employees is actually pai d by the assessee on or before the due date for furnishing the retur n of the inc ome under sub-section (1) of sec tion 139, assessee would be enti tled to deduc tion under section 43B and such deducti on would be admissi bl e for the accounting year. This provision does not cover employee contribution r eferred to in clause (va) of sub- section (1) of section 36 of the Act.
Though section 43B of the Act covers onl y em ployer's contributi on and does not cover em ployee c ontribution, som e c our ts have applied the provision of sec tion 43B on employee c ontribution as well. T here is a disti nction between employer contribution and em ployee's contributi on towards welfare fund. It may be noted that employee's contri buti on towar ds welfare f unds is a mec hanism to ensure the complianc e by the empl oyers 11 I.T.A.Nos. 1904 TO 1906/Del/2021 of the labour welfare laws. Henc e, it needs to be stressed that the empl oyer's contribution towards welfare funds such as ESI and PF needs to be clearly disti nguished from the employee's contri bution towards welfare f unds. Empl oyee's c ontributi on is empl oyee own money and the employer deposi ts thi s contributi on on behalf of the employee in fi duciary capacity. By late deposit of employee contri bution, the em ployers get unjustly enriched by keeping the money belonging to the employees. Clause (va) of sub-secti on (1) of Section 36 of the Act was inserted to the Act vide Finance Act 1987 as a measures of penalizing employer s who mis- utilize employee's contributions.
Accordingly, i n order to provide certainty, it is proposed to -
(i) amend clause (va) of sub-section (1) of sec tion 36 of the Ac t by inser ting another explanation to the said clause to clarify that the provisi on of section 43B does not apply and deemed to nev er have been applied for the purposes of determining the ―due date under this clause; and
(ii) amend sec tion 43B of the Act by inserti ng Explanation 5 to the said sec tion to clarif y that the provisions of the said secti on do not apply and deem ed to never have been appli ed to a sum receiv ed by the assessee from any of his empl oyees to whic h provisions of sub-clause (x) of clause (24) of section 2 appli es.
These amendments will take effec t from 1st April, 2021 and will acc ordingly apply to the assessm ent year 2021- 22 and subsequent assessment years."
[Clauses 8 and 9]
33. Thus, the matter has been finally dec ided and the controv ersy has been put to rest.
34. Havi ng gone through the Order s of the Co-ordinate Bench of Tribunal all owi ng the delayed payment pertaining to employees contribution, Orders of the Co- ordinate Bench of Tribunal disallowing the del ayed payment pertai ning to empl oyees contribution, Judgments of various Hon'bl e Courts disallowing the delayed payment, Judgments of v ari ous Hon' ble Courts disallowing the delayed payment, provi sions of Sec tion 2(24)(x), Section 36( 1)(va), Section 43B, S ecti on 139( 1) of the Income Tax Act, 1961, provisi ons of Finance Act 2021, Memorandum explaining the provisions in Finance 12 I.T.A.Nos. 1904 TO 1906/Del/2021 Bill, 2021 and the specific amendments which will take effect from 01.04.2021, we hereby hold that no disallowanc e is c alled f or belated paym ent of the employee's contri bution to the respec tiv e ESI and EPF fund in the case of assessee who have deposited the same bef ore the due date of filing of I ncome Tax Return. "
Following the said decisions, we direct the Assessing Officer / CPC to delete the disallowance made to employees' contribution to EPF and ESI as the same were remitted before the due date of filing of return of income. Grounds raised by the assessee are allowed.
10. In the result, all the three appeals filed by the assessee are allowed.
Order pronounced in the open court on : 31/03/2022.
Sd/- Sd/-
(PRADIP KUMAR KEDIA) ( C. N. PRASAD )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 31/03/2022.
*MEHTA*
Copy forwarded to
1. Appellant;
2. Respondent;
3. CIT
4. CIT (Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi.
13
I.T.A.Nos. 1904 TO 1906/Del/2021
Date of dictation 30.03.2022
Date on which the typed draft is placed before the dictating 31.03.2022
member
Date on which the typed draft is placed before the other member 31.03.2022
Date on which the approved draft comes to the Sr. PS/ PS 31.03.2022
Date on which the fair order is placed before the dictating 31.03.2022
member for pronouncement
Date on which the fair order comes back to the Sr. PS/ PS 31.03.2022
31.03.2022
Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk 31.03.2022 Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the order 14