Nikhil Mohine Vs DCIT (ITAT Jabalpur)
Sec. 43B(b) does not include the employee 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 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.
Lastly, no decision by Hon’ble jurisdictional High Court in the matter has been either cited before me, 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. No adjustment, in view of the conflicting judicial opinion could, accordingly, be made to the returned income u/s. 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. The assessee, accordingly, succeeds in his challenge to the impugned adjustments, which are held as bad in law and directed for deletion. This is of course subject to any different view taken by the Hon’ble jurisdictional High Court for any year prior to AY 2021-22. Assessee appeal allowed.
FULL TEXT OF THE ORDER OF ITAT JABALPUR
This is a set of two Appeals by the Assessee, i.e., for two consecutive years, being assessment years 2018-19 & 2019-20, agitating the dismissal of his appeals before the National Faceless Appeal Centre, New Delhi (‘NFAC’ or ‘first appellate authority’ for short) dated 22/8/2019 and 10/4/2020 for the two successive years respectively.
The respective cases
2.1 The only issue arising in these appeals is the disallowance in respect of the employees’ contribution to the employees’ provident fund and the employees’ state insurance fund, on account of the same having been deposited (by the assessee-employer) beyond the due dates for the deposit thereof under the relevant statute. The assessee’s case is that the same has been nevertheless deposited before the due date of filing the return of income u/s. 139(1) for the relevant year/s and, in fact, along with interest for the delayed deposit, i.e., under the relevant statute. The Hon’ble Karnatka High Court has in Essae Teraoka P. Ltd. vs. Dy. CIT [2014] 366 ITR 408 (Kar) clarified that the word ‘contribution’, as defined u/s. 2(c) of the Employee’s Provident Fund Act, 1952, includes both the employees’ and the employers’ contribution. The amount, even as noted by the Hon’ble Court, is in fact deposited in the first instance by the employer and, further, vide the same challan. How could the same be therefore, it was posited, treated differently? The Revenue invokes Explanation-5 to sec. 43B to make the adjustment to the returned income/s for the relevant years, which though came on the statute book only w.e.f. 1.4.2021. How could the same thus have an application for the years under reference, being AYs. 2018-19 and 2019-20.
2.2 The Revenue’s case, relying on the impugned order/s, is that the disallowance/s has been effected u/s. 36(1)(va) – which defines the ‘due date’, by which date the sum specified thereunder is to be paid to qualify for deduction thereunder, as the date prescribed for payment under the relevant statute, – and not u/s. 43B, which is being employed by the assessee to advance his case of the payment having been made by the due date of filing the return of income u/s. 139(1). 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, concerns the employer’s contribution, i.e., that contributed by him to the relevant fund, which is in addition to the employee’s contribution. It is only this contribution that is the subject matter of and governed by sec. 43B. The Explanations to ss. 36(1)(va) and 43B, though inserted by Finance Act, 2021, w.e.f. 01/4/2021, are, clearly, declaratory in character, even as expressed therein and, thus, retrospective.
3. I have heard the parties, and perused the material on record.
The scope of the controversy
4.1 My first observation in the matter is that the adjustment to the returned income stands made u/s. 143(1) (for AY 2019-20) and u/s. 154 (for AY 201819). The scope of an adjustment under these two sections is very limited, excluding any contentious or debatable issue, i.e., on which there could conceivably be two points of view (ITO v. Volkart Brothers v. ITO [1971] 82 ITR 50 (SC)). Clearly, therefore, the merits of the case of the opposing sides aside, the Revenue’s case can survive only where the Explanations to section 36(1)(va) and 43B, inserted simultaneously by Finance Act, 2021, remove the allowance (or otherwise) of the impugned sums outside the realm of controversy, which has in fact attended it for long, with there being decisions by the Hon’ble High Courts on either side. In other words, what would clinch and be determinative of the matter is the scope of Explanation-2 to sec. 36(1)(va) and Explanation-5 to s. 43B, inserted on the statute book by Finance Act, 2021, w.e.f. 1.4.2021. It would though be relevant to state here that an amendment being inserted with effect from a particular date would not by itself be conclusive of it being not retrospective, so that it would not apply to periods anterior to that date (CWT v. B.R. Theatres & Indl. Concerns P. Ltd. [2005] 272 ITR 177 (Mad)). The test to be applied for deciding as to whether a later amendment should be given a retrospective effect, despite the legislative declaration specifying a prospective date as the date from which the amendment is to come into force, it was explained therein, is as to whether without the aid of the subsequent amendment the unamended provision is capable of being so construed as to take within its ambit the subsequent amendment. There is case law galore on the amendments, despite being apparently prospective, having been held as retrospective in nature, with some under the Act being as follows: CIT v. Calcutta Export Co. Ltd. [2012] 404 ITR 654 (SC); CIT v. Vatika Township (P.) Ltd. [2014] 367 ITR 466 (SC); CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC); Allied Motors (P.) Ltd. v. CIT [1997] 224 ITR 677 (SC); and Bagri Impex (P.) Ltd. v. Asst. CIT [2013] 214 Taxman 305 (Cal), with the latter two by the Apex Court being in the context of s. 43B itself.
The Explanations
4.2 The Explanations under reference read as under:
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;
(to section 36(1)(va), renumbering the existing Explanation thereto as Explanation 1)
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. (to section 43B, after Explanation 4 thereto)
The same are unambiguously worded. They clarify, with a view to remove any doubt in the matter, that s. 36(1)(va) and s. 43B operate in different fields. While that to the former clarifies the ‘due date’ u/s. 36(1)(va) to be that under the relevant statute, i.e., under which the deposit of the contributions is to be made, that to the latter is qua the sum received by the assessee from any of his employees to which the provision of s.2(24)(x) apply, excluding thus the employers’ contribution to these funds. This, again, is not in doubt or dispute, but, as afore-noted, as to whether the same, as their clear language states, do indeed clarify the law as it always stood? That is, are the said Explanations essentially and intrinsically explanatory or clarificatory in nature, so as to be given a retrospective effect. It would, therefore, be necessary to discern and appreciate the true meaning and scope thereof, toward which it would be appropriate to read the relevant provisions of the Act as well as traverse their legislative history.
The law
4.3 The relevant provisions read as under:
Definitions.
2. In this Act, unless the context otherwise requires,—
