2021 (9) TMI 1336 - AT - Income Tax

Late deposit of employees share of PF ESI - additions of the impugned amounts for the reasons that the assessees did not deposit the amounts of employees contribution as per the provisions of section 36(1)(va) - Scope of amendment - HELD THAT - In the present cases, it is not in dispute that the assessees deposited the contribution of PF ESI belated in terms of section 36(1)(va) of the Act, however, the said deposits were made prior to filing of return of income u/s 139(1). See MOHANGARH ENGINEERS AND CONSTRUCTION COMPANY VERSU 2021 (8) TMI 563 - ITAT JODHPUR , SALZGITTER HYDRAULICS PRIVATE LIMITED 2021 (6) TMI 1059 - ITAT HYDERABAD and HARENDRA NATH BISWAS 2021 (7) TMI 942 - ITAT KOLKATA Thus additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Sustenance of the addition made by the Assessing Officer on account of late deposit of employees' share of PF & ESI.

Detailed Analysis:

Background:
Both appeals by the assessee challenge the orders of the CIT(Appeal), National Faceless Appeal Centre (NFAC), Delhi, dated 27.07.2021 and 23.07.2021. The core issue in both appeals is the addition made by the Assessing Officer due to the late deposit of employees' share of PF & ESI, which were deposited after the due date but before the due date for filing the return of income.

Assessing Officer's Additions:
The Assessing Officer made additions based on the provisions of section 36(1)(va) of the Income Tax Act, 1961, which mandates timely deposit of employees' contributions to PF & ESI. The CIT(A) upheld these additions, citing amendments made by the Finance Act, 2021, to sections 36 and 43B of the Act.

CIT(A)'s Observations:
The CIT(A) noted that the Finance Act, 2021, clarified that the provisions of section 43B do not apply to the determination of the "due date" for employees' contributions under section 36(1)(va). The amendments introduced Explanation 2 to section 36(1)(va) and Explanation 5 to section 43B, which explicitly state that section 43B's provisions are inapplicable for determining the due date under section 36(1)(va).

Assessee's Arguments:
The assessee's counsel argued that the issue is covered by various ITAT decisions, including those from the Jodhpur Bench. The counsel cited several cases where similar additions were deleted, emphasizing that the contributions were deposited before the due date for filing the return of income under section 139(1) of the Act.

ITAT's Consideration:
The ITAT considered submissions from both parties and reviewed the material on record. It acknowledged that the assessees deposited the PF & ESI contributions late per section 36(1)(va) but before the due date for filing the return of income under section 139(1).

Precedent Cases:
The ITAT referenced several decisions, including:
- Harendra Nath Biswas vs. DCIT, ITA No. 186/Kol/2021: The ITAT Kolkata Bench ruled that the amendments introduced by the Finance Act, 2021, are not retrospective and apply prospectively from 01.04.2021. Therefore, the law laid down by the jurisdictional High Court, which allows deductions if contributions are made before the return filing date, remains applicable.
- Salzgitter Hydraulics Pvt. Ltd vs. ITO, ITA No. 644/Hyd/2020: The ITAT Hyderabad Bench held that the disallowance of ESI/PF contributions paid before the due date for filing the return is unsustainable, given the prospective application of the amendments.
- Mohangarh Engineers and Construction Company, ITA No. 5/Jodh/2021: The ITAT Jodhpur Bench reiterated that contributions made before the return filing date should not be disallowed, aligning with the jurisdictional High Court's rulings.

Conclusion:
The ITAT concluded that the facts of the present cases are identical to those in the cited precedents. Therefore, following the earlier ITAT orders and the binding decisions of the jurisdictional High Court, the additions made by the Assessing Officer and sustained by the CIT(A) are deleted. The appeals of the assessees are allowed.

Order Pronounced:
The order was pronounced in the open Court on 28.09.2021.