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2021 (2) TMI 1270 - AT - Income TaxDelayed employees contribution towards ESI and PF - assessee s failure to pay the employees contribution of ESI PF within the prescribed due date under the relevant Statute as per section 36(1)(va) - deposit paid before the due date of filing of the return of income u/s. 139(1) - Scope of amendment - HELD THAT - In the instant case it is not in dispute that employees contribution to ESI and PF collected by the assessee from its employees had been deposited well before the due date of filing of return of income u/s. 139(1) of the Act. We find that the issue is squarely covered by the decisions of the Hon ble Rajasthan High Court Hon ble Himachal Pradesh High Court as well as Hon ble Punjab Haryana High Court. We further note that though the ld. CIT(A) has not disputed the various decisions of Hon ble High Courts including the decision of the jurisdictional Punjab Haryana High Court but has referred to the amendment brought in by the Finance Act 2021. It is a consistent position across various Benches of the Tribunal including Chandigarh Benches that the amendment which has been brought in by the Finance Act 2021 shall apply w.e.f. assessment year 2021-22 as also evident from the amendment as so introduced in the statue and subsequent assessment years and the impugned assessment year being assessment year 2018-19 the said amendment cannot be applied in the instant case Thus the addition made by way of adjustment while processing the return of income u/s. 143(1) so made by the CPC towards the deposit of employees contribution towards ESI and PF paid before the due date of filing of the return of income u/s. 139(1) of the Act is hereby directed to be deleted. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of employees' contribution towards ESI and PF under Section 36(1)(va) of the Income Tax Act, 1961. 2. Applicability of the amendment brought by the Finance Act, 2021 to Section 36(1)(va) and Section 43B of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Disallowance of Employees' Contribution towards ESI and PF: The assessee filed its return of income declaring a total income of ?2,41,42,000, which was processed under Section 143(1) of the Income Tax Act, 1961. The Centralized Processing Center (CPC) made a disallowance of ?2,05,48,971 towards employees' contribution to ESI and PF, citing non-payment within the prescribed due dates under the relevant statute as per Section 36(1)(va) of the Act. The Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)], National Faceless Appeal Centre (NFAC), Delhi, confirmed the disallowance, leading the assessee to appeal before the ITAT Chandigarh. The assessee argued that although there was a delay of a few days in depositing the contributions, they were made well before the due date for filing the return of income under Section 139(1). The assessee relied on several judgments, including those from the Hon'ble Rajasthan High Court, Punjab & Haryana High Court, and Himachal Pradesh High Court, which held that contributions made before the due date of filing the return of income should not be disallowed. 2. Applicability of the Amendment by Finance Act, 2021: The Ld. DR contended that the amendment to Section 36(1)(va) introduced by the Finance Act, 2021, clarifies that employees' contributions must be paid within the due dates specified in the respective statutes. This amendment, they argued, is declaratory/clarificatory and should apply retrospectively. However, the Tribunal noted that the explanatory memorandum to the Finance Act, 2021, explicitly states that the amendments are effective from 1st April 2021 and apply to the assessment year 2021-22 and subsequent years. Therefore, the amendment could not be applied retrospectively to the assessment year 2019-20. The Tribunal referred to consistent decisions from various High Courts and ITAT Benches, including the Hon'ble Rajasthan High Court, which held that if the contributions are paid before the due date of filing the return under Section 139(1), they cannot be disallowed under Section 43B read with Section 36(1)(va). The Tribunal also cited decisions from the Chandigarh Benches and other Benches of the Tribunal, which consistently held that the amendment by the Finance Act, 2021, is prospective and not retrospective. Conclusion: The ITAT Chandigarh concluded that the employees' contributions to ESI and PF, deposited before the due date of filing the return of income under Section 139(1), could not be disallowed under Section 43B read with Section 36(1)(va) of the Act. The Tribunal directed the deletion of the disallowance amounting to ?2,05,48,971 made by the CPC. Final Order: The appeal of the assessee was allowed, and the order was pronounced on 17.02.2022.
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