Page 59 - DHC Budget Book 2021-22 Final
P. 59
There has been numerous disputes whether employees’ contribution to the aforesaid welfare funds deposited beyond the due date mentioned under the respective labour laws but before the due date of filing return of Income u/s 139(1)
as specified in Sec. 43B is allowable deduction. Divergent rulings have been rendered by various Courts.
Hence, it is proposed to insert new Explanation 2 to Sec. 36(1)(va) and also Explanation 5 to Sec. 43B to clarify that provisions of Sec. 43B do not apply and shall be deemed never to have been applied for the purpose of determining the due date under Sec. 36(1)(va) in respect of employees’ contribution
Comments:
Hon’ble Apex Court in the case of Pr. CIT –vs.- Rajasthan State Beverages Corporation Ltd (2017) 250 Taxman 16 (SC) has dismissed the SLP filed by the Revenue against the decision of High Court in the case of Pr. CIT –vs.- Rajasthan State Beverages Corporation Ltd (2017) 250 Taxman 32 (Raj) wherein payment of PF and ESI
Sec. 44DB provides mechanism for apportionment of deduction u/s 32, 35D, 35DD or 35DDA in case of business reorganisation
of co-operative on the basis of number of days between the predecessor co-operative bank and the successor co-operative bank.
Further, Sec. 47(vica) & Sec. 47(vicb) provides that transfer of capital asset by the predecessor co-operative bank to the successor co-operative bank and transfer of shares of predecessor co-operative bank by its shareholders in consideration of allotment of shares in successor co-operative bank, respectively, shall not be considered as transfer for the purpose of computation of capital gains.
It is now proposed to expand the scope of business reorganisation as referred to in Sec. 44DB to include conversion of primary co- operative bank to a banking company.
before the due date of filing return of income was allowed u/s 43B r.w.s 36(1)(va). Similar view has been taken by various other Courts.
At the same time, contrary view has been taken by various courts, among others, in the case of Unifac Management Services (India) (P) Ltd. vs. DCIT (2019) 307 CTR 168 (Mad), Popular Vehicles & Services (P) Ltd. vs. CIT (2018) 406 ITR 150 (Ker).
Further, CBDT in Circular No. 22 of 2015 dated 17-12-2015 haS clarified that due date specified in Sec. 43B does not apply to claim of deduction relating to employees’ contribution to welfare funds which are governed by Sec. 36(1)(va).
The proposed amendment in Sec. 36(1)(va) and Sec. 43B has settled the contradictory decision on this issue.
Though the amendment made effective from AY 2021-22, in view of the language used in the Explanation the possibility of the same being considered as clarificatory in nature and hence would be applicable retrospectively cannot be ruled out.
Further, Sec. 47(vica) is also proposed to be amended to provide that transfer of a capital asset by the primary co-operative bank which has been converted into a banking company as a result of conversion shall not be considered as transfer for the purposes of capital gains. Similarly, Sec. 47(vicb) is also proposed to be amended to provide that allotment of shares as a result of such conversion shall not be treated as transfer for the purposes of capital gains.
Comments
Circular No. 5/07.01.000/2018-19 was introduced by Reserve Bank of India (RBI) on 27- 09-2018 whereby voluntary transition of Primary [Urban] Co-operative Bank into a banking company was permitted by way of transfer of assets and liabilities. The aforesaid amendment seeks to make such transfer tax exempt.
4.3
Tax Neutral Conversion of Primary [Urban] Co-operative Bank into Banking Company [Sec. 44DB, 47(vica) & 47(vicb)] [w.r.e.f AY 2021-22]
Content
Economic Survey 2020-21 Basic 57
