2021 (11) TMI 1022 - AT - Income Tax

Delay in the payment of EPF relatable to the employees contribution as far as the time limit set out by the specific Act - HELD THAT - It is an admitted fact that there was a delay in the payment of EPF relatable to the employees contribution as far as the time limit set out by the specific Act is concerned. It is also an admitted fact that the return was filed by the assessee within the due date as per the time limit as set out u/s 139(1) of the Income Tax Act. Hence the amount of the employees contribution of the EPF stood paid before the filing of the return. It is seen that the disallowance made was sustained by Addl. Commissioner on account of the fact that the Amendments carried out by Finance Act 2021 in Sections 36(1)(va) and Sec. 43B were considered to be clarificatory hence retrospective in nature. The said view has consistently been held to be incorrect by various orders of the ITAT as on a bare consideration of the Notes on Clauses appended to the Finance Bill it was clarified that the Amendment will take effect from the First April 2021. Thus the legal position thereon is well settled. See INSTA EXHIBITIONS PVT. LTD C/O. CHACHAN LATH 2021 (8) TMI 1235 - ITAT DELHI . We hold that the disallowance sustained in the present appeal by the CIT(A) qua the employees contribution despite late payment qua the specific Act cannot be made. Admittedly in the facts of the present case the payment has been made well within the time line as set out under the Income Tax Act u/s 139(1). Thus admittedly the return of income was filed well within time after making the specific payments. The position of law that the Amendments carried out by the Finance Act 2021 are prospective in nature and not declaratory stand well settled. The disallowance accordingly cannot be sustained. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 5,24,104/- on account of late payment of Employees' Provident Fund (EPF).
2. Non-compliance with the jurisdictional Himachal Pradesh High Court decision in CIT vs Nipso Polyfabrika Ltd.

Issue-wise Detailed Analysis:

1. Addition of Rs. 5,24,104/- on account of late payment of EPF:

The assessee challenged the correctness of the order dated 08.07.2021 by the CIT(A) for the assessment year 2018-19, which upheld the addition made by the Assessing Officer (AO) of Rs. 5,24,104/- due to late payment of EPF. The assessee argued that the amount was paid before the due date of filing the return under section 139(1) of the Income Tax Act, 1961, and thus should be an allowable expenditure as per the Supreme Court judgment in Pr. CIT vs Rajasthan State Beverages Corporation Ltd.

The Tribunal acknowledged the delay in EPF payment as per the specific Act but noted that the return was filed within the due date under section 139(1). The disallowance was based on the Finance Act 2021 amendments to Sections 36(1)(va) and 43B, considered retrospective by the CIT(A). However, the Tribunal referenced multiple ITAT decisions, including those from the Delhi and Hyderabad Benches, which clarified that these amendments are prospective, effective from April 1, 2021.

The Tribunal cited several cases, such as Insta Exhibitions Pvt. Ltd. vs Addl. CIT and M/s Crescent Roadways Pvt. Ltd. vs Dy. CIT, which consistently held that the amendments are not retrospective. The Tribunal concluded that the disallowance was unsustainable since the amount was paid before the due date for filing the return, thus aligning with the legal position that the amendments are prospective.

2. Non-compliance with the jurisdictional Himachal Pradesh High Court decision in CIT vs Nipso Polyfabrika Ltd.:

The assessee contended that the CIT(A) did not follow the binding decision of the Himachal Pradesh High Court in CIT vs Nipso Polyfabrika Ltd., which should have been considered. The Tribunal confirmed that the jurisdictional High Court's decision in Nipso Polyfabrika Ltd. supported the assessee's position on employees' contribution, referencing the Supreme Court's decision in CIT vs Alom Extrusions Ltd. and the Delhi High Court's decision in CIT vs Aimil Ltd.

The Tribunal noted that the Himachal Pradesh High Court's decision was not considered by the CIT(A) and emphasized that this decision, which pertains to employees' contribution, is favorable to the assessee. The Tribunal reiterated that the amendments by the Finance Act 2021 are prospective and not applicable to the assessment year in question.

Conclusion:

The Tribunal allowed the appeal of the assessee, directing the deletion of the disallowance of Rs. 5,24,104/- related to the late payment of EPF. The Tribunal's decision was based on the consistent view that the Finance Act 2021 amendments are prospective and the binding jurisdictional High Court decision in favor of the assessee. The order was pronounced on 18th November 2021.