2021 (11) TMI 1035 - AT - Income Tax

Late payments towards EPF and ESI under section 36(1)(va) - amount deposited after the due date but before the due date of filing of return of income - AO made the additions of the impugned amounts for the reasons that the assessee did not deposit the amounts of employees contribution as per the provisions of section 36(1)(va) - HELD THAT - As decided in MOHANGARH ENGINEERS AND CONSTRUCTION COMPANY 2021 (9) TMI 1319 - ITAT JODHPUR we do not accept the Ld. CIT(A) s stand denying the claim of assessee since assessee delayed the employees contribtion of EPF ESI fund and as per the binding decision of the Hon ble High Court in Vijayshree Ltd. 2011 (9) TMI 30 - CALCUTTA HIGH COURT u/s 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds - also see SALZGITTER HYDRAULICS PRIVATE LIMITED VERSUS ITO, WARD 3 (1) HYDERABAD 2021 (6) TMI 1059 - ITAT HYDERABAD and MOHANGARH ENGINEERS 2021 (8) TMI 563 - ITAT JODHPUR . Thus the impugned addition 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.

Issues Involved:
1. Disallowance of ?3,91,256/- under Section 36(1)(va) of the Income Tax Act due to late deposit of employees' contribution to Provident Fund (PF) and Employees' State Insurance (ESI).
2. Consideration of jurisdictional High Court decisions regarding the timing of such deposits.
3. The retrospective application of amendments to Sections 36(1)(va) and 43B of the Income Tax Act.
4. The statutory auditor's disallowance of the impugned amount under Clause 20(b) of Form 3CD.

Detailed Analysis:

1. Disallowance of ?3,91,256/- under Section 36(1)(va) of the Income Tax Act:
The primary grievance of the assessee is the disallowance of ?3,91,256/- made by the Assessing Officer (A.O.) due to late payments towards PF and ESI under Section 36(1)(va) of the Income Tax Act. The payments were made before the filing of the income return under Section 139(1). The CIT(A) sustained this disallowance.

2. Consideration of Jurisdictional High Court Decisions:
The assessee argued that the issue is covered by the jurisdictional High Court's decision, which states that disallowance cannot be made if the amount is credited to the relevant account before the due date of filing the return of income. The ITAT Jodhpur Bench had adjudicated similar issues in the cases of Mohangarh Engineers and Construction Company and Bikaner Ceramics Private Limited, ruling in favor of the assessee. The Tribunal noted that various benches, including ITAT Kolkata and ITAT Hyderabad, have ruled similarly, emphasizing that contributions made before the due date of filing returns should not be disallowed.

3. Retrospective Application of Amendments to Sections 36(1)(va) and 43B:
The CIT(A) held that the amendments to Sections 36(1)(va) and 43B introduced by the Finance Act, 2021, should be applied retrospectively. However, the Tribunal noted that the Explanation 5 inserted by the Finance Act, 2021, is effective from 01.04.2021 and should not be applied retrospectively. The Tribunal cited the Hon’ble Calcutta High Court's decision in the case of Vijayshree Ltd., which followed the Supreme Court's ruling in CIT vs. Alom Extrusion Ltd., stating that such amendments are curative and should be applied prospectively.

4. Statutory Auditor's Disallowance Under Clause 20(b) of Form 3CD:
The CIT(A) also held that the statutory auditor had disallowed the impugned amount under Clause 20(b) of Form 3CD, which pertains to the reporting of details of contributions received from employees. The Tribunal found this adjustment unwarranted and against the provisions of the Act, emphasizing that the contributions were made before the due date of filing the return of income.

Conclusion:
The Tribunal concluded that the facts of the present case are identical to those adjudicated in similar cases by various ITAT benches. The Tribunal directed the deletion of the impugned additions made by the Assessing Officer and sustained by the CIT(A) on account of deposits of employees' contributions to ESI and PF before the filing of the return of income under Section 139(1). The appeal of the assessee was allowed.

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