| The Tax Publishers2022 TaxPub(DT) 0046 (Jab-Trib) : (2022) 093 ITR (Trib) 0658 INCOME TAX ACT, 1961
Section 43B, Expln. 5 Sections 143(1) & 154 Section36(1)(via), Expln. 2, Income Tax Act, 1961, Section 36(1)(va)
Where on adjustment being made by Centralised processing Centre, Bangaluru in respect of amount of employees' contribution towards PF and ESI having been deposited by assessee beyond the due dated for deposit thereof under the relevant Act(s), the scope of adjusdtment as regards the question whether addition so made by CPC as per cannot be taken in appeal against the order passed by CPC under section 154 as against intimation under section 143(1) under these two section is very limit, excluding any contentions or debatable issue i.e. on which there could conceivably two points of view. Therefore, no adjustment. In view of the conflicting judicial opinion could, accordingly, be made to the returned income under section 143(1)/154. Amendments made by the Finance Act, 2021 by way of insertion of Explanation 2 to provisions of section 36(1)(via) and the insertion of Explanation 5 tosection 43B of the Income Tax Act, 1961, which disallow the payment in respect of employees' contributions to PF and ESI if not made within the due dates as prescribed by respective statutes i.e. PF Act and ESI Act, would take effect from 1-4-2021 ansd accordingly apply to assessment year 2021-22 and subsequent years; therefore, as per notes on clauses to, and the menorandum explaining the provisions of Finance Bill, 2021, the provisions of afore-said amendments are applicable prospectively, and not returned income under section 143(1)/154 were held bad in law and directed for deletion, however, of course subject to any different view taken by the Hon'ble jurisdictional High Court for any year prior to assessment year 2021-22.
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Business deduction under section 36(1)(va) - Employess' contribution towards PF and ESI - Payment made beyond due date under relevant Act, but within due under section 139(1) - Adjustment made by CPC, Bengaluru while processing income tax return under section 143(1) and rectification of mistake under section 154 vis-a-vis disallowance under section 43B
AO made disallowance in respect of employees' contribution to the employees' provident fund and employees' State insurance fund, on account of the same having been deposited (by assessee-employer) beyond due dates for deposit thereof under the relevant statute. The assessee's case was that same was nevertheless deposited before due date of filing of return of income under section 139(1) for the relevant year/s and, in fact, along with interest for the delayed deposit, i.e., under the relevant statute. Revenue invoked Explanation 5 to section 43B to make adjustment to the returned income. As per AO, section 36(1)(va) makes a clear reference to the employee's contribution, being the sums received therefrom by the assessee as an employer for deposit, on employee's behalf, with the relevant fund. Section 43B, in contradistinction, concerned the employer's contribution, i.e., that contributed by him to the relevant fund, which is in addition to the employee's contribution. It was only this contribution that was the subject-matter of and governed by section 43B. The Explanation 2 to section 36(1)(via) and Explanation 5 to section 43B, though inserted by Finance Act, 2021, with effect from 1-4-2021, were, clearly, declaratory in character, even as expressed therein and, thus, retrospective. Held: The explanations and provisos, it is well-settled, have interpretative value. Viewed from any angle, section 43B (b) does not include employee's contribution, and even regarding so is to no avail, rendering the explanations under reference, even as suggested by their express language, explanatory. An examination of the Notes on Clauses to, and the Memorandum explaining the Provisions of, Finance Bill, 2021, however, resolves the matter beyond the pale of any doubt. While confirming the Explanations 2 and 5 under reference to be explanatory of the law, even as signified by the clear, unambiguous language employed therein, are yet stated to be prospective inasmuch as they are applicable assessment year 2021-22 onwards. No decision by jurisdictional High Court in the matter was either cited before, or found, which, where so, would, irrespective of the view expressed therein, hold for the relevant years, being prior to the year of applicability of the explanations under reference. The argument of hardship in Alom Extrusions was not applicable to the employee-contribution as the money stood already received by the employer and, two the prescribed date is only that by which it is supposed to deposit both the contributions with the relevant fund. The argument of unintended result, also adopted in that case, is again applicable only the employer part of the contribution; the employee contribution being subject to 36(1)(via), which has not witnessed any amendment relaxing the condition of payment specified therein. No adjustment, in view of the conflicting judicial opinion could, accordingly, be made to the returned income under sections 143(1)/154, which sections admit only issues on which there could be conceivably no two views, rampant, irrespective of merits thereof, in the instant case, which aspect, as explained therein, has been given cognizance to in making the provision applicable not retrospectively.
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