Income Tax Appellate Tribunal - Chandigarh
Natural Selections, Baddi vs Dcit/Acit, Circle, Parwanoo on 5 September, 2022
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH, "SMC", CHANDIGARH
BEFORE SHRI SUDHA NSHU SRIVASTAVA, JUDICIAL MEMB ER
आयकर अपील सं./ ITA No. 404/C H D / 2 0 2 2
नधारणवष / Assessment Year :2 01 7- 1 8
Natural Selections बनाम The DCIT, CPC,
Plot No. 87, Industrial Area, Banglore /
Lodimajra, Tehsil Nalagarh ITO, Baddi
(Now Baddi)- 174101
Himachal pradesh
थायी लेखा सं./PAN NO: AAJFN0037D
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by : Sh. Ravinder Kumar Sharma, CA
राज व क ओर से/ Revenue by : Sh. Akashdeep, JCIT
सुनवाई क तार$ख/Date of Hearing : 05.09.2022
उदघोषणा क तार$ख/Date of Pronouncement : 05.09.2022
आदे श/Order
Per Sudhanshu Srivastava, Judicial Member:
The above appeal has been preferred by the assessee against the order of the National Faceless Appeal Centre [NFAC], Delhi vide order dated 23.03.2022 relating to assessment year 2018-19, passed u/s 250(6) of the Income Tax Act, 1961 (hereinafter referred to as 'Act').
2. The solitary issue in the present appeal relates to adjustment made to the return of income filed by the assessee in the intimation u/s 143(1) of the Act by adding a sum of Rs. 5,33,986/- on account of failure of the assessee to deposit the employees' contribution to ITA No. 404-Chd-2022 (AY 2018-19) -
Natural Selections, Baddi 2 PF/ESI for having not paid the same on or before the prescribed due dates as per section u/s 36(1)(va) of the Act.
3. The facts which are not disputed in the present case are that the impugned addition had been made in the intimation made to the assessee u/s 143(1) of the Act. The employees' contribution to ESI and PF, though not paid within the due dates prescribed under the respective Acts, had been paid well before the due date of filing of return of income u/s 139(1) of the Act. Various Hon'ble High Courts have interpreted the provisions of section 36(1)(va) of the Act to hold that the employees' contribution to ESI and PF paid before the due date of filing of return of income u/s 139(1) of the Act is allowable as deduction. There is no dispute vis-à-vis the aforesaid. The Revenue Authorities below have made the impugned adjustment on the basis of amendment to section 36(1)(va) and section 43B of the Act, which deals with the allowability of the employees' and employers' contribution respectively to ESI and PF, effected by Finance Act, 2021 to the effect that the due date for payment of employers' contribution prescribed u/s 43B of the Act before the due date of filing of return of income u/s 139(1) of the Act, would not apply to the allowability of employees' contribution as per section 36(1)(va) of the Act. Post the amendment, for allowability of employees' contribution to ESI and PF u/s 36(1)(va) of the Act, the same is to be paid by the due date specified in the respective Acts. However, the impugned assessment ITA No. 404-Chd-2022 (AY 2018-19) -
Natural Selections, Baddi 3 year before me is well before the amendment was brought on the Statute i.e. assessment year 2019-20. The Revenue has contended that the amendment is clarificatory and hence, retrospective in operation.
4. Now the assessee is in appeal.
5. The contention of the Ld. Counsel for the assessee was that the issue under consideration is squarely covered vide common order dated 20/10/2021 passed by the ITAT, Chandigarh Bench in ITA Nos.191 & 192/Chd/2021 for the assessment years 2017-18 & 2018- 19 in the case of Raja Ram Vs. ITO, Yamunanagar and in the case of Sanchi Management Services Private Limited Vs. ITO, Chandigarh in ITA No. 190/Chd/2021 for the A.Y. 2018-19.
6. In his rival submissions, the Ld. DR strongly supported the orders of the authorities below and reiterated the observations made by the Ld. NFAC in the impugned order.
7. I have considered the submissions of both the parties and perused the material available on record. In the present case, it is noticed that an identical issue, having similar facts, has already been adjudicated by the ITAT, Chandigarh Bench in the aforesaid referred to cases, wherein in the said order it has been held vide paras 8 to 10 (in ITA Nos.191&192/Chd/2021 in case of Raja Ram Vs. ITO, Yamunanagar) as under:-
ITA No. 404-Chd-2022 (AY 2018-19) -
Natural Selections, Baddi 4
"8. I have considered the submissions of both the parties and perused the material available on record.
9. In the present cases, it is noticed that an identical issue having similar f acts has already been adjudicated by the IT AT , Jodhpur Bench in the af oresaid ref erred to case, wherein the undersigned is author of the order dated 28.09.2021 and it has been held vide paras 7 to 10 in IT A in IT A Nos.71 & 72/Jodh/2021 as under:-
"7. We have considered the submission of both the parties and perused the material available on record.
8. In the present cases, it is not in dispute that the assessees deposited the con tribution of PF & ES I belated in terms of section 36(1)(va) of the Act, however, the said deposits were made prior to f iling of return of income u/s 139(1) of the Ac t.
8.1 Identical issue with the similar f acts have already been adjudicated by the various Benches of the IT AT .
8.2 In the case of HarendraNathB iswasvs DC IT Koltaka, IT A No. 186/Kol/2021 f or the A.Y. 2019- 20, similar issue has been decided vide order dated 16.7.2021 by the ITAT 'B' Bench, Kolkata. T he Relevan t f indings have been given in para 4 of the said order, which read as under;-
"4. We have heard both the parties and perused the record. Fir st of all we do not countenance this action of the Ld. C IT (A) f or the simple reason that the Explanation 5 was inserted by the Finance Act, 2021, with eff ect f rom 01.04.2021 and relevan t assessment year bef ore us is AY 2019-20. T heref ore the law laid do wn by the J urisdictional Hon'ble High Court will apply and since this Explanation-5 has not been made retrospectively. So we are inclined to f ollow the same and we reproduce the order of Hon'ble Calcutta High Court in the case of Vijayshree L td. supra wherein the Hon'ble Calcutta High Court has taken note of the Hon'ble Supreme Court decision in C IT vs. Alom Extrusion L td. reported in 390 IT R 306. The Hon'ble Calcutta High Court's decision in Vijayshree L td. supra is reproduced as under:
"This appeal is at the instance of the Revenue and is directed against an order dated 28th April, 2011 passed by the Income T ax Appellate Tribunal, "A"
Bench, Kolkata in IT A No. 1091/Kol/2010 relating ITA No. 404-Chd-2022 (AY 2018-19) -
Natural Selections, Baddi 5 to assessment year 2006-07 by which the T ribunal dismissed the appeal pref erred by the Revenue against the order of C IT (A).
T he only issue involved in this appeal is as to whether the deletion of the addition by the AO on account of Employees 'Contribution to ESI and PF by invoking the provision of Section 36(1)(va) read with Section 2(24)(x) of the Ac t was correct or not.
It appears that the T ribunal below, in view of the decision of the Supreme Court in the case of Commissioner of Income T ax vs. Alom Extrusion L td., repor ted in 2009 Vol.390 IT R 306, held that the deletion was justif ied.
Being dissatisf ied, the Revenue has come up with the presen t appeal.
Af ter hear ing Mr.Sinha, learned advocate, appearing on behalf of the appellant and af ter going through the decision of the Supreme Court in the case of Commissioner of Income T ax vs. Alom Extrusion L td., we f ind that the Supreme Court in the af oresaid case has held that the amendment to the second proviso to the Sec 43(B) of the Income T ax Act, as introduced by Finance Act, 2003, was cur ative in nature and is required to be applied retrospectively with eff ect f rom 1st April, 1988.
Such being the position, the deletion of the amount paid by the Employees' Contribution beyond due date was deductible by invoking the af oresaid amended provisions of Section 43(B) of the Act.
We, theref ore, f ind that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal.
Urgent xerox certif ied copy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities."
In the light of the af oresaid discussion we do not accept the Ld. C IT (A)'s stand denying the claim of assessee since assessee delayed the employees contrib tion of EPF & ES I f und and as per the binding decision of the Hon'ble High Cour t in Vijayshree L td. (supra) u/s 36(1)(va) of the Ac t since assessee had deposited the employees contribution bef ore f iling of Return of Income. T heref ore, the assessee succeeds and we allow the appeal of the assessee."
ITA No. 404-Chd-2022 (AY 2018-19) -
Natural Selections, Baddi 6
9. Similar vie w has been taken by the ITAT Hyderabad 'SMC" Bench in IT A No. 644/Hyd./2020 for the AY 2019-20 in the case of Salzgitter Hydraulics Private L td, Hyderabad vs IT O vide order dt 15.6.2021. T he relevan t f indings given in para 2 of the said order read as under:-
"2. C oming to the sole substan tive issue of ESI/PF disallo wance of Rs.1,09,343/- and Rs.3,52,622/-, the assessee's and revenue's stand is that the same has been paid bef ore the due date of f iling sec. 139(1) return and af ter the due date prescribed in the corresponding statu tes; respectively. I notice in this f actual backdrop that the legislature has not only incorporated necessary amendments in Sections 36(va) as well as 43B vide Finance Act, 2021 to this eff ect but also the CBDT has issued Memorandum of Explanation that the same applies w.e.f . 1.4.2021 only. It is f urther not an issue that the f orergoing legislative amendments have proposed employers contribu tions; disallo wances u/s 43B as against employee u/s 36 (va) of the Act; respectively. However, keeping in mind the f act that the same has been clarif ied to be applicable only with prospective eff ect f rom 1.4.2021, I hold that the impugned disallo wance is not sustainable in view of all these latest developments even if the Revenue's case is supported by the f ollowing case law.
(i) C IT vs. Merchem L td, [2015] 378 IT R 443(Ker)
(ii) C IT vs. Gujarat State Road T ransport Corporation (2014) 366 IT R 170 (Guj.)
(iii) C IT vs. South In dia Corporation L td. (2000) 242 IT R 114 (Ker)
(iv) C IT vs. GT N T extiles L td. (2004) 269 IT R 282 (Ker)
(v) C IT vs. Jairam& Sons [2004] 269 IT R 285 (Ker) T he impugned ES I/PF disallowance is directed to be deleted theref ore."
10. On an iden tical issue, this Bench of the T ribunal vide order dated 12.8.2021 in the case of Mohangarh Engineers and Construction Company, Jodhpur & Others vs CPC, Banglore in IT A No. 5/Jodh/2021 and others held vide para 13 to 18 as under:-
ITA No. 404-Chd-2022 (AY 2018-19) -
Natural Selections, Baddi 7 "13. We have heard the rival contentions and perused the material available on record. On perusal of the details submitted by the assessee as part of its return of income, it is noted that the assessee has deposited the employees's contribution towards ESI and PF well bef ore the due date of f iling of return of income u/s 139(1) and the last of such deposits wer e made on 16.04.2019 whereas due date of f iling the return f or the impugned assessment year 2019-20 was 31.10.2019 and the return of income was also f iled on the said date. Admittedly and undisputedly, the employees's contribution to ES I and PF which have been collected by the assessee f rom its employees have thus been deposited well bef ore the due date of f iling of return of income u/s 139(1) of the Act.
14. T he issue is no more res integra in light of series of decisions rendered by the Hon'ble Rajasthan High Cour t star ting f rom C IT vs. State Bank of Bikaner & Jaipur (supra) and subsequent decisions.
15. In this regard, we may ref er to the initial decision of Hon'ble Rajasthan High Cour t in case of C IT vs. State Bank of Bikaner & Jaipur wherein the Hon'ble High Court af ter extensively examining the matter and considering the various decisions of the Hon'ble Supreme Cour t and various other High Cour ts has decided the matter in f avour of the assessee. In the said decision, the Hon'ble High Cour t was pleased to held as under:
"20. On perusal of Sec.36(1)(va) and Sec.43(B)(b) and analyzing the judgments rendered, in our vie w as well, it is clear that the leg islatur e brought in the statute Section 43(B)(b) to cur b the activities of such tax payers who did not discharge their statu tory liability of payment of dues, as af oresaid; and rightly so as on the one hand claim was being made under Section 36 f or allowing the deduc tion of GPF, CPF, ES I etc. as per the system f ollowed by the assessees in claiming the deduction i.e. accrual basis and the same was being allo wed, as the liability did exist but the said amount though claimed as a deduction was not being deposited even af ter lapse of several years. T herefore, to put a check on the said claims/deductions having been made, the said provision was brought in to curb the said activities and which was approved by the ITA No. 404-Chd-2022 (AY 2018-19) -
Natural Selections, Baddi 8 Hon'ble Apex Court in the case of Allied Motors (P) L td. (supra).
21. A conjoint reading of the proviso to Section 43-B wh ich was inser ted by the Finance Act, 1987 made effective f rom 01/04/1988, the words numbered as clause (a), (c), (d), (e) and (f ), are omitted f rom the above proviso and, f urther more second proviso was removed by Finance Act, 2003 theref ore, the deduction to wards the employer's contribution, if paid, prior to due date of f iling of return can be claimed by the assessee. In our vie w, the explanation appended to Section 36(1)(va) of the Act further envisage that the amount actually paid by the assessee on or bef ore the due date admissible at the time of submitting return of the income under Section 139 of the Ac t in respect of the previous year can be claim ed by the assessee f or deduction out of their gross total income. It is also clear that Sec.43B star ts with a notwithstanding clause & would thus override Sec.36(1) (va) and if read in isolation Sec. 43B would become obsolete. Accordingly, contention of counsel for the revenue is not tenable f or the reason af oresaid that deductions out of the gross income f or payment of tax at the time of submission of return under Sec tion 139 is permissible only if the statu tory liability of paymen t of PF or other contribution ref erred to in Clause (b) are paid within the due date under the respective enactments by the assessees and not under the due date of f iling of return.
22. We have already observed that till this provision was brough t in as the due amounts on one pretext or the other were not being deposited by the assessees though substantial benef its had been obtained by them in the shape of the amount having been claimed as a deduction but the said amounts were not deposited. It is per tinent to note that the respective Act such as PF etc. also provides that the amounts can be paid later on subject to payment of interest and other consequences and to get benef it under the Income T ax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or bef ore the return of income under sub-section (1) of Section 139 of the IT Act.
23. T hus, we are of the vie w that where the PF and/or EPF, CPF, GPF etc., if paid af ter the due date under respective Act but bef ore f iling of the return of income under Section 139(1), cannot be ITA No. 404-Chd-2022 (AY 2018-19) -
Natural Selections, Baddi 9 disallo wed under Section 43B or under Section 36(1)(va) of the IT Act."
16. T he said decision has subsequently been follo wed in C IT vs. J aipur Vidyut Vitran Nigam L td. (supra), C IT vs. Udaipur Dugdh Utpadak Sahakari Sangh L td. (supra), and C IT vs Rajasthan State Beverages Corportation Limited (supra). In all these decisions, it has been consistently held that where the PF and ESI dues are paid af ter the due date under the respective statues but bef ore f iling of the re turn of income under section 139(1), the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act.
17. We f ur ther note that though the ld. CIT (A) has not disputed the various decisions of Hon'ble Rajasthan High Court but has decided to f ollow the decisions rendered by the Hon'ble Delhi, Madras, Gujarat and Kerala High Cour ts. Given the divergent vie ws taken by the various High Courts and in the instan t case, the f act that the jurisdiction over the Assessing off icer lies with the Hon'ble Rajasthan High Cour t, in our considered view, the ld C IT (A) ought to have considered and follo wed the decision of the jurisdictional Rajasthan High Court, as evident f rom ser ies of decisions ref erred supr a, as the same is binding on all the appellate authorities as well as the Assessing off icer under its jurisdiction in the S tate of Rajasthan.
18. In light of af oresaid discussion and in the entirety of f acts and circumstances of the case, the addition by way of adjustment wh ile processing the return of income u/s 143(1) amounting to Rs 4,38,530/- so made by the C PC to wards the delayed deposit of the employees's con tribution to wards ES I and PF though paid well bef ore the due date of f iling of return of income u/s 139(1) of the Act is hereby directed to be deleted as the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act in view of the binding decisions of the Hon'ble Rajasthan High Court"
11. Since the f acts of the present cases are iden tical to the f acts involved in the af oresaid ref erred to cases, theref ore respectf ully f ollowing the earlier orders as ref erred to herein above of the diff erent Benches of the ITAT , the impugned additions made by the Assessing Off icer and sustained by the Ld. CIT (A) on account of deposits ITA No. 404-Chd-2022 (AY 2018-19) -
Natural Selections, Baddi 10 of employees contribution of ESI & PF prior to f iling of the return of income u/s 139(1) of the Act, in both the years under consider ation prior to the amendment made by the Finance Act, 2021 w.e.f . 1.4.2021 vide Explanation 5, are deleted.
12. In the result, both the appeals of the assessees are allowed."
10. So respectf ully f ollowing the af oresaid ref erred to order of the Coordinate Bench of the T ribunal, the disallo wances sustained by the Ld. C IT(A) are deleted.
7.1 Since the facts involved in the present case are identical to the facts involved in the case of Raja Ram Vs. ITO, Yamunanagar (supra), respectfully following the aforesaid referred to order of the Coordinate Bench of the Tribunal, the disallowance sustained by the Ld. CIT(A) is deleted.
8 In the final result, the appeal of the assesse is allowed.
Order pronounced on 05.09.2022.
sd/-
(SUDHANSHU SRIVASTAVA) Judicial Member Dated : 05.09.2022 "आर.के."
आदे शक त+ल,पअ-े,षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकरआयु.त/ CIT
4. आयकरआयु.त (अपील)/ The CIT(A)
5. ,वभागीय त न1ध, आयकरअपील$यआ1धकरण, च3डीगढ़/ DR, ITAT, CHANDIGARH
6. गाडफाईल/ Guard File आदे शानुसार/ By order, ITA No. 404-Chd-2022 (AY 2018-19) -
Natural Selections, Baddi 11 सहायकपंजीकार/ Assistant Registrar