2021 (7) TMI 1265 - AT - Income Tax

Delay in remittance of employees contribution towards provident fund and ESI - assessee s and Revenue s plea that the same has been paid before the due date of filing sec. 139(1) return and after the due date prescribed in the corresponding statutes - HELD THAT - Legislature has not only incorporated necessary amendment in Sections 36(1)(va) as well as 43B vide Finance Act, 2021 to this effect but also the CBDT has issued Memorandum of Explanation that the same applies w.e.f. 1.4.2021 only - as not an issue that the foregoing legislative amendments have proposed employers contribution/ disallowance u/s 43B as against employee s contribution u/s 36 (va) of the Act; respectively. However, keeping in mind the fact that the same has been clarified to be applicable only with prospective effect from 1.4.2021, we hold that the impugned disallowance is not sustainable in view of all these latest developments - The impugned ESI/PF disallowance is deleted therefore. - Decided in favour of assessee.

Summary

Issues:
1. Addition of delay in remittance of employees' contribution towards provident fund.
2. Addition of delay in remittance of employees' contribution towards ESI.
3. Disallowance of ESI/PF amount.

Analysis:
1. The appellant challenged the addition of ?2,83,203 for delay in remittance of employees' provident fund contribution. The CIT(A) confirmed this addition. The tribunal noted that the legislative amendments in Sections 36(1)(va) and 43B, effective from 1.4.2021, addressed this issue. The CBDT clarified the application of these amendments. As the amendments focused on employers' contribution under section 43B, not employees' contribution under section 36(va), the tribunal held the impugned addition unsustainable based on the latest developments. Consequently, the addition for provident fund delay was deleted.

2. The appellant contested the addition of ?44,129 for delay in remitting employees' ESI contribution. The CIT(A) upheld this addition. The tribunal considered the legislative changes and the CBDT's clarification. Given the prospective effect of the amendments from 1.4.2021 and the distinction between employers' and employees' contributions, the tribunal concluded that the disallowance was not justified. Therefore, the addition for ESI delay was also deleted.

3. Addressing the sole substantive issue of ESI/PF disallowance totaling ?3,27,332, the tribunal highlighted the legislative amendments' impact and the CBDT's explanation. Emphasizing the prospective application of the changes from 1.4.2021 and the distinction between employers' and employees' contributions, the tribunal ruled in favor of the appellant. Consequently, the impugned ESI/PF disallowance was deleted, and the appellant's appeal was allowed. The order was pronounced in open court on 01/07/2021.