Income Tax Appellate Tribunal - Chandigarh
Dcit, Central Circle-Iii,, Ludhiana. vs M/S Swati Industries, Ludhiana on 27 April, 2022
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "B", च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'B', CHANDIGARH
BEFORE: SHRI SUDHANSHU SRIVASAVA, JUDICIAL MEMBER
AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER
ITA No. 421/Chd/2021
(Assessment Year: 2018-19)
Deputy Commissioner of बनाम M/s. Swati Industries,
Income-tax, Central Circle-III, D-74, Phase-V,
Ludhiana. Focal Point, Ludhiana.
थायी लेखा सं./PAN/TAN NO: AADFS 5870 M
नधा रती क ओर से/Assessee by : Shri Pankaj Bhalla, CA
राज व क ओर से/ Revenue by : Dr. Ranjeet Kaur, CIT DR
सन
ु वाई क तार ख/Date of Hearing: 25.04.2022
उदघोषणा क तार ख/Date of Pronouncement: 27.04.2022
आदे श/ORDER
Per Vikram Singh Yadav, Accountant Member:
This is an appeal filed by the revenue against the order of Learned Commissioner of Income Tax ( A p pe a l s ) - 5 , L u d h i a n a [ i n s h o rt t h e ' L d . C I T( A ) ' ] passed u/s 250(6) of the Income Tax Act, 1961 (in short 'the Act') dated 29.11.2021 wherein the revised grounds of appeal reads as under :-
2 ITA No. 421/Chd/2021M/s. Swati Industries, Ludhiana.
1. That the ld. CIT(A) erred in law, in deleting addition/disallowance of Rs. 15,90,138/- made by the Assessing Officer in respect of delayed payment of employee's contribution, beyond the prescribed time, to the welfare Funds like EPF/ESI etc. 1(a) That the ld. CIT (A) erred on facts and law ignoring the distinction between provision of section 36(1)(v) r.w.s. 43B and provisions of section 36(1)(va) r.w.s.
2(24)(x) of the Income Tax Act, 1961, which clearly provide for different treatment. While the delayed payment of employers contribution is allowable if found before the filing of return wherever employee's contribution is disallowed for once and all if payment is delayed beyond the prescribed time.
1(b) That the ld. CIT (A) erred in ignoring and failing to take into account the amendment carried out by Finance Act, 2021 by way of inserting Explanation 1 & Explanation 2 below section 36(1)(va) of the Act which has been interpreted by the Hon'ble Appellate Tribunal, Delhi Bench in M/s. Vedvan Consultants Pvt. Ltd., New Delhi ITA No. 1312/Del/2020 dated 26.08.2021 which was held that the foresaid explanation was clarificatory.
2. That the ld. CI T (A) erred in ignoring the Circular No. 22/2015 issued by the CBDT.
Note That the tax effect in this case is below the limit prescribed by Circular No. 17/2019 dated 08.08.2019 of the CBDT read with Circular No. 03/2018 dated 11.07.2018. However the case falls in the exception provided under para 10(b) of the said Circular No. 03/2018 dated 11.07.2018. The ld. CIT (A) by allowing relief has impliedly held the circular 22/2015 to be illegal. The position of the department vis-à-vis delayed payment of employee's contribution covered u/s 36(1)(va) of the Income Tax Act, 1961 is made amply clear in Para 5 of Circular No. 22/2015 dated 17.12.2015. 3 ITA No. 421/Chd/2021 M/s. Swati Industries, Ludhiana.
Therefore, it is respectfully prayed that the appeal be decided on merit.
2. The relevant findings of the ld. CIT (A) which are under challenge are contained in para 5.2 of his order reads as under :-
" 5.2. Ground of Appeal No. 2 relates to disallowance of Rs. 15,90,138/- on account of employee's share of ESI (Rs. 2,69,899/-) & EPF (Rs. 13,20,239/-). The AR argued that there were paid before the due date of filing the return u/s 139(1) of the Income Tax Act, 1961. It is further submitted that if the payment of ESI/EPF is made after the due dates of the respective act, same is allowable if made prior to filing of return u/s 139(1). It is argued that as per various judicial pronouncements by the Jurisdictional High Court, the said amount is not to be treated as income, if the same is paid before the due date of filing of Income Tax Return u/s 139(1). The AR submitted that the appellant has made all these contributions before the filing of Income Tax Return and relied upon various case laws including the judgment of High Court of Punjab and Haryana in the case of Commissioner of Income Tax vs. M/s. Hemla Embroidery Mills (P) Ltd., reported as 366 I TR 167. The arguments of the AR are found acceptable since the payments were made before the due date of filing the return u/s 139(1) and the present case falls in the jurisdiction of Hon'ble Punjab & Haryana High Court, the judicial discipline 4 ITA No. 421/Chd/2021 M/s. Swati Industries, Ludhiana.
demands that the view taken by the jurisdictional High Court has to prevail in the absence of any contrary decision of the Apex Court. The jurisdictional High Court has equated the Employers' and Employees' contribution and has treated them at par for applicability of the amended provision of section 43B, allowing deduction if the amount in question stand paid on or before the due date under section 139(1) in respect of the previous year in which the liability to pay such sum was incurred and evidence of such payment is furnished in the return of income. It would be expedient to extract herein below the relevant paragraph of the decision of the Hon'ble High Court of Punjab & Haryana in the case of CI T, Faridabad vs. Hemla Embroidery Mills (P) Ltd. :-
"5. Learned counsel for the appellant could not dispute that the issue raised here in finally stand settled by the Apex Court judgment in Commissioner of Income Tax v. Alom Extrusions Ltd., [2009] 319 I TR 306 © and this court in Income Tax Appeal No. 663 of 2005 (The Commissioner of Income Tax, Patiala vs. M/s. Raj Agro Industries Ltd., Sangrur), decided on 30.11.2010 wherein it has been held that Second Proviso to section 43B of the Act omitted by the Finance Act, 2003 with effect from 1.4.2004 was clarificatory in nature and was to operate retrospectively. Once that is so, in the present case, the respondent assessee was entitled to deduction in respect of employers and employee's contribution to ESI/ and Provident Fund as the same had been deposited prior to the filing of the return under section 139(1) of the Act.
6. In view of the above, the substantial questions of law are answered against the revenue and in favour of the assessee. Consequently the appeals are dismissed."5 ITA No. 421/Chd/2021
M/s. Swati Industries, Ludhiana.
Thus, the disputed issue is covered in favour of the appellant by the Hon'ble Jurisdictional High Court of Punjab & Haryana. Therefore, the disallowance/addition of Rs. 15,90,138/- made by the CPC is not found sustainable and hence deleted.
Accordingly, this ground of appeal is allowed."
3. We have heard both the parties and perused the material available on record. We find that the matter is squarely covered by a series of various decisions of Coordinate Benches of the Tribunal and in this regard we refer to the latest decision of Coordinate Chandigarh Benches in case of DCIT vs. Smt. Madhubala & Others in ITA Nos. 18/CHD/2022 and Others dated 21.04.2022 wherein the relevant findings are contained in para 6 of its order which reads as under :-
6.0 We have heard the rival submissions and have also perused the material on record. The fact that in all the captioned appeals, the employees' contribution of ESI and PF had been deposited before the due date of filing of return u/s 139(1) of the Act is not in dispute. It is seen that the said issue, as far as the present Forum is concerned, stands fully covered in favour of the assessees not only by the consistent orders of the various Benches of the ITAT across the country but also by the consistent orders of the Chandigarh Bench of the ITAT. It is seen that all along, the 6 ITA No. 421/Chd/2021 M/s. Swati Industries, Ludhiana.
Co-ordinate Benches have held that the amendments to Sections 36(1)(va) and u/s 43B of the Income Tax Act effected by the Finance Act, 2021 are applicable prospectively and not retrospectively. While coming to the said conclusion, the Benches have relied upon the Notes on Clauses at the time of introduction of the Finance Act, 2021 and have held that the amendment is applicable in relation to the assessment year 2021-22 and subsequent years and not retrospectively. Thus, in view of this legal position, as considered by the Co-ordinate Benches and duly taking note of the judgements of the jurisdictional High Court in the case of CIT Vs Nuchem Limited (ITA 323 of 2009) and CIT Vs Hemla Embroidery Mills Pvt. Ltd. (2014) 366 ITR 167, we are of the view that the additions cannot be made or sustained on the strength of the amendment effected by Finance Act, 2021 to Sections 36(1)(va)/43B of the Act as the legal position thereon is very clear. The departmental stand that it is clarificatory in nature has consistently been rejected. Thus, in the face of the clear legal position, we find that the claim of the assessee is to be allowed. Although, the Ld. DR has argued at length and has forwarded many reasons in support of her contention, we are unable to subscribe to the same as they are contrary to the law laid down by the Jurisdictional High Court i.e. the Hon'ble Punjab & Haryana High Court and we are bound to apply the law as laid down by the Jurisdictional High Court. We also note that only four Hon'ble High Courts i.e. Gujarat High Court, Madras High Court, MP High Court and Kerela High Court have given dissenting view as of now on the said issue. However, we are bound by the law laid down by the Hon'ble Punjab and Haryana High Court in the case of CIT Vs. Hemla Embroidery Mills (P) Ltd (supra) wherein it was categorically held that the respondent - assessee was entitled to deduction in respect of employer and employee's contribution to ESI and Provident Fund as the same had been deposited prior to the filing of the 7 ITA No. 421/Chd/2021 M/s. Swati Industries, Ludhiana.
return u/s 139(1) of the Act. The judgment of the Hon'ble Gujarat High Court has been distinguished by Chandigarh Bench of the ITAT in the case of Gilco Exports Ltd. Vs. ACIT, Circle 2(1) reported in (2019) 178 ITD 865 (Chd. Trib.) and it has been held that any sum received from employees towards EPF & ESI contribution deposited late but before the due date of filing of return would be entitled to deduction. It is also to be noted that in terms of Article 227 of the Constitution of India, when decision of Jurisdictional High Court is available on the issue, non-Jurisdictional High Court cannot be followed. It is trite that when there is judgment of Jurisdictional High Court for any authority within its territorial jurisdiction subjected to its superintendence, decision recorded by High Court is a binding precedent to be followed. It is also to be noted that even the Memorandum explaining the amendments has laid down that the amendments shall be effective from assessment year 2020-21 and, therefore, considering the entirety of facts and circumstances (which are identical in this bunch of appeals) and respectfully following the judgement of the Jurisdictional High Court as well as the Coordinate Benches of the Tribunal, we are of the considered view that the claim of the assessees with respect to the deposit of employees' contribution towards ESI and PF paid before the due date of filing of return of income u/s 139(1) of the Act deserve to succeed.
Therefore, respectfully following the decision of Hon'ble Jurisdictional High Court as well as consistent view taken by various Benches of the Tribunal, the appeal of the revenue is dismissed.
8 ITA No. 421/Chd/2021M/s. Swati Industries, Ludhiana.
4. In the result, appeal of the revenue is dismissed.
Order pronounced on 27.04.2022.
Sd/- Sd/-
( SUDHANSHU SRIVASTAVA ) (VIKRAM SINGH YADAV)
याय क सद य/Judicial Member लेखा सद य/Accountant Member
Dated: 27 .04.2022
*Das*
आदे श क % त&ल'प अ*े'षत/ Copy of the order forwarded to :
1. अपीलाथ+/ The Appellant
2. %,यथ+/ The Respondent
3. आयकर आयु-त/ CIT
4. आयकर आय-
ु त (अपील)/ The CIT(A)
5. 'वभागीय % त न0ध, आयकर अपील य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानुसार/ By order, सहायक पंजीकार/ Assistant Registrar Draft dictated 25.04.2022 Sr.PS Draft placed before author 26.04.2022 Sr.PS Approved Draft comes to the Sr.PS/PS 27.04.2022 Sr.PS Order signed and pronounced on File sent to the Bench Clerk 29.04.2022 Sr.PS Date on which file goes to the AR Date on which file goes to the Head Clerk.
Date of dispatch of Order.
9 ITA No. 421/Chd/2021M/s. Swati Industries, Ludhiana.