Focus Consultancy Services vs. Asst. Director Of Income Tax - (Income Tax Appellate Tribunal) (14 Oct 2021)

Retrospective provision in a taxing Act which is "for the removal of doubts" cannot be presumed to be retrospective, if it alters or changes the law as it earlier stood

MANU/IL/0413/2021

Direct Taxation

The assessee has filed present appeal challenging the order passed by Learned Commissioner of Income Tax [CIT(A)], National Faceless Appeal Centre and it relates to the assessment year 2018-19. The assessee is aggrieved by the decision of Learned CIT(A) in confirming the disallowance of Rs.35.06 lakhs made under Section 36(i)(va) of the Income-tax Act,1961 [IT Act] relating to employees contribution to PF while processing return under Section 143(1)of the Act.

During the year under consideration, the assessee remitted employees contribution of ESI amounting to Rs.35,06,231 beyond the due date prescribed under the ESI Act. However, it was paid before the due date for filing return of income under Section 139(1) of the IT Act. Hence, the assessee did not make any disallowance under Section 36(1)(va) of the IT Act. While processing return of income filed by the assessee, the CPC disallowed the above said amount. Aggrieved, the assessee filed the appeal before the Learned CIT(A).

Karnataka High Court in the case of CIT Vs. Spectrum Consultants India Pvt. Ltd., wherein it was held that, the contributions, if paid before the due date prescribed under Section 139(1) of the IT Act, the same is allowable under Section 36(1)(va) of the Act since the provisions of Section 43B of the Act override section 36(1)(va) of the IT Act.

The decision rendered by Karnataka High Court in the case of Spectrum Consultants India Pvt. Ltd. and also in the case of EssaeTeroka Pvt. Ltd. Vs. DCIT supports the case of the assessee. There should not be any dispute that, the decision rendered by the jurisdictional High Court is binding on all authorities below it. Hence, the Learned CIT(A) was not justified in placing reliance on the decision rendered by non-jurisdictional High Court, when there is a decision of jurisdictional High Court on the very same issue.

The Hon'ble Supreme Court in the recent judgment in the case of M.M.Aqua Technologies Limited vs. CIT had held that, retrospective provision in a taxing Act which is "for the removal of doubts" cannot be presumed to be retrospective, if it alters or changes the law as it earlier stood. Consistent with the view taken in the above said cases, we set aside the order passed by Learned CIT(A) and direct the A.O. to delete the impugned disallowance. The appeal filed by the assessee is allowed.

Tags : ASSESSMENT DISALLOWANCE LEGALITY