Employees’ contribution towards ESI/PF deposited before due date of filing return allowed, amendment made by Finance Act, 2021 to have a prospective effect only- ITAT Jodhpur
Case Details: |
Shubh Laxmi Syntex Limited vs. DCIT, CPC, Bangalore |
Appeal No.: |
ITA No. 76/Jodh/2021 |
Order pronounced by: |
ITAT Jodhpur |
Date of Order: |
29.09.2021 |
In Favour of: |
Assessee |
Source: www.itat.gov.in
Brief Facts:
The above order is passed by the Hon’ble ITAT Jodhpur in respect of nine appeals by different assessees having a similar issue. In all these appeals, the only issue involved relates to the sustenance of the addition made by the A.O. on account of late deposit of employees’ share of PF & ESI which were deposited after the due date but before the due date of filing return of income. When the matter was taken to the Ld. CIT (A), he confirmed the action of the A.O. The Ld. CIT (A) rejected the submission of the appellants in view of the amendments made to sections 36 and 43B by the Finance Act, 2021.
It should be noted that the following retrospective explanation has been inserted to section 36 of the Income Tax Act vide Finance Act, 2021:
“In section 36 of the Income-Tax Act, in sub-section (1), in clause (va), the Explanation shall be numbered as Explanation 1 thereof and after Explanation 1 as so numbered, the following Explanation shall be inserted, namely: -
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;”
The Finance Act, 2021 has also amended section 43, as under:
“In section 43B of the Income Tax Act, after Explanation 4, the following Explanation shall be inserted, namely:
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.”
Aggrieved, the assesses are in appeal before the Tribunal against the above order of the Ld. CIT(A) in all 9 cases.
Observations of the Tribunal:
The Ld. Counsel for the assessee relied upon various judicial precedents as below:
- Mohangarh Engineers and Construction Company ITA No. 05/Jodh/2021
- Pali Urban Cooperative Bank Limited ITA No. 28 & 29/Jodh/2021
- U&T Tractor Spares Pvt. Ltd. ITA No. 43/Jodh/2021 dated 12/08/2021
- Harendra Nath Biswas vs. DCIT ITA No. 186/Kol/2021 dated 16/07/2021
- Salzgitter Hydraulics Pvt. Ltd. ITA No. 644/Hyd/2020 dated 15/06/2021
The Hon’ble Tribunal took note of the explanations and various judicial precedents as relied upon by the Ld. Counsel for the assessees. It observed that on an identical issue, this bench of the Tribunal vide order dated 12.08.2021 in the case of Mohangarh Engineers and Construction Company, Jodhpur & Others vs. CPC Bangalore in ITA No. 5/Jodh/2021 and others held vide para 13to 18 as under:
- “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’ contribution towards ESI & PF well before the due date of filing of return of income u/s 139(1) and the last of such deposits were made on 16.04.2019 whereas the due date of filing the return for the impugned assessment year 2019-20 was 31.10.2019 and the return of income was also filed on the said date. Admittedly and undisputedly, the employees’ contribution to ESI & PF which have been collected by the assessee from its employees has thus been deposited well before the due date of filing of return of income u/s 139(1) of the Act.
- The issue is no more res Integra in light of a series of decisions rendered by the Hon’ble Rajasthan High Court starting from CIT vs. State Bank of Bikaner & Jaipur (supra) and subsequent decisions.
- In this regard, we may refer to the initial decision of Hon’ble Rajasthan High Court in the case of CIT vs. State Bank of Bikaner & Jaipur wherein the Hon’ble High Court after extensively examining the matter and considering the various decisions of the Hon’ble Supreme Court and various High Courts has decided the matter in favour of the assessee.
- The said decision has subsequently been followed in CIT vs. Jaipur Vidyut Nigam Ltd. (supra), CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. (supra), and CIT vs. Rajasthan State Beverages Corporation Limited (supra). In all these decisions, it has been consistently held that where the PF and ESI dies are paid after the due date under the respective statutes but before the filing of the return of income u/s 139(1), the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act.
- We further note that though the Ld. CIT(A) has not disputed the various decisions of the Hon’ble Rajasthan High Court but has decided to follow the decisions rendered by the Hon’ble Delhi, Madras, Gujarat and Kerala High Courts. Given the divergent views taken by the High Courts and in the instant case, the fact that the jurisdiction over the assessing officer lies with the Hon’ble Rajasthan High Court, in our considered view, the Ld. CIT(A) ought to have considered and followed the decision of the jurisdictional Rajasthan High Court, as evident from a series of decisions referred supra, as the same is binding on all the appellate authorities as well as the Assessing Officer under its jurisdiction in the State of Rajasthan.
- In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the addition by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the delayed deposit of the employees’ contribution towards ESI and PF though paid well before the due date of filing return u/s 139(1) of the Act is hereby directed to be deleted as the same cannot be disallowed u/s 43B read with section 36(1)(va) of the Act in view of the binding decisions of the Hon’ble Rajasthan High Court.”
Ruling of Tribunal:
Since the facts of the present case are identical to the facts involved in the aforesaid referred to cases, therefore respectfully following the earlier orders as referred to hereinabove of the different Benches of the ITAT, the impugned additions made by the A.O. and sustained by the Ld. CIT(A) on account of deposits of employees’ contribution of ESI & PF prior to the filing of the return of income u/s 139(1) of the Act, in all the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 01.04.2021 vide Explanation 5, are deleted.
Read Detailed Order: Shubh Laxmi Syntex Limited vs. DCIT, CPC, Bangalore
Disclaimer: The above article is based upon the judgement of the Hon’ble ITAT Jodhpur and is meant for informative purposes only. Readers are requested to act diligently and under consultation with a professional before applying the information contained in this article.