2019 (3) TMI 1627 - AT - Income Tax

Addition on account of late payment of EPF - amount paid before due date of filing the return of income - HELD THAT - In the present case it is an admitted fact that there was delay in depositing the employees contribution of provident fund and ESIC. However it is accepted by the AO that the deposit was made before filing of the return of income on 27.09.2013. On a similar issue in the case of CIT vs. Hemla Embroydery Mills (p.) Ltd. 2013 (2) TMI 41 - PUNJAB AND HARYANA HIGH COURT held as the second proviso to section 43B of the Income-tax Act 1961 omitted by the Finance Act 2003 with effect from April 1 2004 was clarificatory in nature and was to operate retrospectively. Thus the assessee for the assessment year 2003-04 was entitled to deduction in respect of the employer s and employees contributions to the employees State Insurance and provident fund as the contributions had been deposited prior to the filing of the return under section 139(1). So respectfully following the ratio laid down by the Hon ble Jurisdictional High Court in the aforesaid referred to case the impugned addition made by the AO and sustained by the Ld. CIT(A) is deleted. - Decided in favour of assessee.

Summary

Issues:
Appeal against addition of late EPF payment

Analysis:
The appeal was filed by the assessee against the order of Ld. CIT(A)-4, Ludhiana confirming the addition of ?10,84,619 made by the AO due to late payment of EPF, even though the payment was made before the due date of filing the income tax return. The AO invoked Section 36(1)(va) read with Section 43B of the Income Tax Act, 1961 to make the addition. The Ld. CIT(A) sustained the addition based on the observation that the EPF payments were made beyond the grace period allowed under the EPF Act. The assessee relied on judgments of the Hon'ble Punjab & Haryana High Court and the Hon'ble Gujarat High Court to contest the disallowance.

During the appeal proceedings, the assessee argued that the EPF/ESI contributions were deposited before filing the income tax return, hence the disallowance was unjustified. The Ld. Counsel cited the judgment of the Hon'ble Jurisdictional High Court in the case of CIT vs. Hemla Embroydery Mills (P.) Ltd. to support this argument. On considering the submissions and the material on record, it was acknowledged that there was a delay in depositing the contributions, but it was also recognized that the deposit was made before filing the return of income. Referring to the judgment in the case of CIT vs. Hemla Embroydery Mills (P.) Ltd., the Tribunal concluded that the second proviso to Section 43B of the Income-tax Act, 1961, was clarificatory in nature and operated retrospectively. Therefore, the addition made by the AO and sustained by the Ld. CIT(A) was deleted, and the appeal of the assessee was allowed.