2020 (2) TMI 1619 - AT - Income Tax

Late remittance of employees contribution to PF and ES - Assessee stated to made payment prior to the due date of filing of the return u/s. 139(1) - Scope of amendment by Finance Act 2021 to section 36 1 va and 43B - HELD THAT - As in Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company 2021 (10) TMI 1196 - ITAT BANGALORE by following the dictum laid down in the case of Essae Teraoka Pvt. Ltd Vs. DCIT 2014 (3) TMI 386 - KARNATAKA HIGH COURT held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) - Also further held by the ITAT that amendment by Finance Act 2021 to section 36 1 va and 43B of the Act is not clarificatory. Therefore the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision of the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra) the employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction - Decided in favour of assessee.

Summary

Issues:
Delay in filing appeal, Disallowance of employees' contribution to PF and ESI, Applicability of amendment by Finance Act 2021 to section 36(1)(va) and 43B retrospectively.

Delay in filing appeal:
The assessee filed an appeal against CIT(A)'s order with a delay of two days, seeking condonation. The Tribunal found no fault on the assessee's part and accepted the reasons provided for the delay. Consequently, the delay was condoned, and the appeal was considered on merits.

Disallowance of employees' contribution to PF and ESI:
The dispute arose from the disallowance of the employees' contribution to PF and ESI in the assessment for the year 2018-2019. The CIT(A) disallowed the deduction, citing that only the employer's contribution is eligible under section 43B if paid before the due date of filing the return. However, the Tribunal, following a High Court ruling, held that the employees' contribution is also deductible if paid before the due date. The amendment by Finance Act 2021 was deemed not clarificatory and not retrospective.

Applicability of amendment by Finance Act 2021:
The Tribunal emphasized that the amendment to section 36(1)(va) and 43B by Finance Act 2021 is not retrospective and does not apply to the relevant assessment year. Relying on various judicial decisions, it concluded that the employees' contribution paid before the due date of filing the return is allowable as a deduction. The Tribunal decided in favor of the assessee, deleting the disallowance made by the Assessing Officer.

In conclusion, the appeal was allowed by the Tribunal, emphasizing the importance of timely payment of employees' contributions to PF and ESI for eligibility of deductions, and clarifying the non-retrospective nature of the amendment by Finance Act 2021.