Everestims Technologies Private Limited, Bangalore v. DCIT, CPC, Bangalore

ITA 408/BANG/2021 | 2019-20
Pronouncement Date: 08-11-2021 | Result: Allowed

Appeal Details

RSA Number 40821114 RSA 2021
Assessee PAN AAECE6095N
Bench Bangalore
Appeal Number ITA 408/BANG/2021
Duration Of Justice 2 month(s) 10 day(s)
Appellant Everestims Technologies Private Limited, Bangalore
Respondent DCIT, CPC, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 08-11-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Assessment Year 2019-20
Appeal Filed On 29-08-2021
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN VICE PRESIDENTAND SHRI B. R. BASKARAN ACCOUNTANT MEMBER ITA Nos.407 408/Bang/2021 Assessment Years: 2018-19 2019-20 M/s. Everestims Technologies Private Limited Site No.14 PID No.57-166-14 Axis One 4 3 rd Floor 15 th Cross 100 Feet Ring Road 4 th Phase JP Nagar Bengaluru – 560 078. PAN : AAECE 6095 N Vs. DCIT Central Processing Centre Bengaluru. Assessee by :Shri. Shambu Sharma CA Revenue by:Shri. Priyadarshi Mishra Additional CIT(DR)(ITAT) Bengaluru Date of hearing:02.11.2021 Date of Pronouncement:09.11.2021 O R D E R Per N. V. Vasudevan Vice President Theseare appeals filed by the assessee against 2 orders both dated 27.07.2021 of CIT(A) National Faceless Appeal Centre (NFAC) Delhi relating to Assessment Years 2018-19 2019-20. 2. The Assessee is a Private Limited Company. The Assesse filed return of income for AY 2018-19 declaring total income of Rs.60 31 848. In an intimation dated 17.10.2019 issued u/s.143(1) of the Act the Centralized Processing Centre (CPC) added a sum of Rs. 4 34 514/- representing contribution to PF/ESI to the ITA Nos.407 408/Bang/2021 Page 2 of 6 extent not paid on or before the due date as mentioned in Sec 36(1)(va) of the Income Tax Act 1961. 3. It was the case of the assessee that employee share of PF and ESI has been paid before the due date for filing of return u/s.139(1) of the Act and hence has been considered allowable on the basis of decision of Supreme Court in CIT vs. Alom Extrusions Ltd (2009) 319 ITR 306 (SC) and other cases such as CIT Vs Magus Customers Dialog (P) Ltd (Kar) CIT Vs Sabri Enterprises (2008) 298 ITR 141 (Kar) Consultants India P Ltd Vs CIT Bangalore III (2013) 597/34 Taxman.com 20 (Kar). 4. With regard to employee’s share of contribution to PF and ESI the CIT(A) referred to the amendment made to section 36(1)(va) and 43B of the Act by the Finance Act 2021. The Finance Act 2021 has amended section 36 sub-section (1) in clause (va) by inserting Explanation-2 which reads thus: “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 also amended section 43B by inserting Explantion-5 thereto which reads thus: 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. According to the CIT(A) by virtue of newly inserted Explanation 2 to clause (va) of sub-section (1) of the said section 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 the said clause. The CIT(A) also held that ITA Nos.407 408/Bang/2021 Page 3 of 6 Section 43B of the Income-tax Act relates to allowing certain deductions only on actual payments. Clause (b) of the said section provides that any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. Proviso to the said section provides that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. By virtue of insertion of Explanation 5 to this section the provisions of the said section shall not apply and shall be deemed never to have been applied to asum received by the assessee from any of his employees to which the provisions of subclause (x) of clause (24) of section 2 applies. 5. The CIT(A) was of the view that Section 36(1)(va) and section 43B(b) operate on totally different footings and have different parameters for due dates i.e. employee's contribution is linked to payment before the due dates specified in the respective Acts or Funds and employer's contribution is linked to the payment before the prescribed due date for filing of return u/s.139(1) Income Tax Act 1961. The result of any failure to pay within the prescribed dates also leads to different results. In the case of employee's contribution any failure to pay within the prescribed due date ITA Nos.407 408/Bang/2021 Page 4 of 6 under the respective PF Act or Scheme will result in negating employer's claim for deduction permanently forever u/s.36(1)(va). On the other hand delay in payment of employer's contribution is visited with deferment of deduction on payment basis u/s.43B and is therefore not lost totally. This legal distinction between employees' contribution and employer's contribution under the Act was duly recognised by the Courts also. The CIT(A) in this regard referred to the following judicial pronouncement wherein the aforesaid distinction has been accepted viz. Hi-tech India Pvt. Ltd. Vs. UoI 227 ITR 446 (AP) CIT Vs. Madras Radiators and Pressings Ltd. (2003) 129 Taxmann 709 (Madras)Unifac Management Services (India) (P.) Ltd. v. Dy. CIT [2018] 100 taxmann.com 244 42019] 260 Taxman 60/[2018] 409 ITR 225 (Mad.) CIT v. Gujarat State Road Transport Corpn. [2014] 41 taxmann.com 100/ 366 ITR 170/223 Taxman 398 (Guj.) CIT v. Merchem Ltd. [2015] 61 taxmann.com 119/235 Taxman 291/378 ITR 443 (Ker.). (iv) B.S. Patel v. Dy. CIT [2010] 326 ITR 45742008] 171 Taxman 304 (MP) Popular Vehicles & Services Pvt Ltd v. CIT [2018] 96 taxmann.com 13/257 Taxman 120/406 ITR (Ker). 6. The CIT(A) thereafter held that the amendment to section 36(1)(va) by insertion of explanation 2 and the amendment to section 43B by insertion to explanation 5 by the Finance Bill 2021 was only declaratory / clarificatory in nature and there therefore was applicable with retrospective effect by necessary intendment of deeming nature expressly stated therein. The CIT(A) upheld the addition made by the AO. 7. In Assessment Year 2019-2020 the facts are identical. The disputed addition is employee’s share of contribution to PF and ESI and the addition made in this regard was a sum of Rs.2 91 972/-. Otherwise the discussion on the issue in the intimation under section 143(1) as well as the appellate order is identical. We find that identical issue has been considered in the following decisions: ITA Nos.407 408/Bang/2021 Page 5 of 6 M/s Mahadev Cold Storage vs Jurisdictional AO - ITA.No.41 & 42/Agra/2021 M/s Essae Teraoka (P.) Ltd vs DCIT - [2014] 43 taxmann.com 33 (Karnataka) Anand Kumar Jain vs ITO - ITA NO 4192/MUM/2012 ValueMomentum Software Services Private Limited vs. DCIT I.T.A. No. 2197/HYD/2017 [Assessment Year: 2013-14] dated19.05.2021 Mohan Ram Chaudhary vs. ITO ITA No. 51&54-55/Jodh/2021 [Assessment Year: 2018-19} dated 28.09.2021 8. The Hon’ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd. (supra) has taken the view that employee’s contribution under section 36(1)(va) of the Act would also be covered under section 43B of the Act and therefore if the share of the employee’s share of contribution is made on or before due date for furnishing the return of income under section 139(1) of the Act then the assessee would be entitled to claim deduction. Therefore the issue is covered by the decision of the Hon’ble Karnataka High Court. The next aspect to be considered is whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act 2021 has to be construed as retrospective and applicable for the period prior to 01.04.2021 also. On this aspect we find that the explanatory memorandum to the Finance Act 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e. from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act in both the Assessment Years deserves to be deleted. ITA Nos.407 408/Bang/2021 Page 6 of 6 9. In the result both the appeals of the assessee are allowed. Pronounced in the open court on the date mentioned on the caption page. Sd/- Sd/- Bangalore. Dated: 09.11.2021. /NS/* Copy to: 1.Appellants2.Respondent 3.CIT4.CIT(A) 5.DR6.Guard file By order Assistant Registrar ITAT Bangalore. (B. R. BASKARAN) (N. V. VASUDEVAN) Accountant Member Vice President