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2021 (11) TMI 1038 - AT - Income TaxAdditions in respect of employees contribution towards ESI/PF - assessee s failure to pay the employee s contribution of PF/ESI within the prescribed due dates as per Section 36(1)(va) - HELD THAT - In the instant case admittedly and undisputedly the employees contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) - D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill 2021 however we find that there are express wordings in the said memorandum which says these amendments will take effect from 1st April 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . In the instant case the impugned assessment year is assessment year 2018-19 and therefore the said amended provisions cannot be applied in the instant case. Similar view has been taken in case of Shri Gopalkrishna Aswini Kumar 2021 (10) TMI 952 - ITAT BANGALORE . Addition by way of adjustment while processing the return of income u/s 143(1) made by the CPC towards the deposit of the employees s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted. - Assessee appeal allowed.
Issues Involved:
1. Confirmation of additions in respect of employees' contribution towards ESI/PF for the assessment year 2018-19. 2. Applicability of Section 36(1)(va) and Section 43B of the Income Tax Act. 3. Impact of the amendment introduced by the Finance Act, 2021 on the assessment year 2018-19. Issue-wise Detailed Analysis: 1. Confirmation of Additions in Respect of Employees' Contribution towards ESI/PF: The assessee filed its return of income on 06.10.2018 declaring a total income of Rs. Nil, which was processed under Section 143(1). The Centralized Processing Center (CPC) made a disallowance of Rs. 2,48,633/- towards employees' contribution to ESI and PF, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Assessment Centre (NFAC) on the grounds that the contributions were not paid within the prescribed due dates as per Section 36(1)(va) of the Act. 2. Applicability of Section 36(1)(va) and Section 43B of the Income Tax Act: During the hearing, the assessee argued that the employees' contributions to PF/ESI, though deposited with a delay beyond the due dates mentioned in the respective Acts, were made well before the due date of filing the return of income. The assessee relied on various judicial precedents, including decisions from the Hon'ble Rajasthan High Court in CIT vs. Rajasthan State Beverages Corporation Ltd. and CIT vs. State Bank of Bikaner and Jaipur, which held that such contributions deposited before the due date of filing the return of income should not be disallowed under Section 36(1)(va). The Revenue, on the other hand, argued that the disallowance was correctly made under Section 143(1)(a)(iv) based on the tax audit report, which flagged the variance between the tax audit report and the Income Tax Return (ITR). The Revenue also cited the amendment brought by the Finance Act, 2021, to Section 36(1)(va), which clarified that employees' contributions to specified funds would not be allowed as deductions if there was any delay in deposit beyond the due dates mentioned in the respective legislations. 3. Impact of the Amendment Introduced by the Finance Act, 2021 on the Assessment Year 2018-19: The assessee contended that the amendment to Section 36(1)(va) introduced by the Finance Act, 2021, would take effect from 1st April 2021 and apply to assessment year 2021-22 and subsequent years, not to the impugned assessment year 2018-19. The Tribunal agreed with this contention, noting that the amendment could not be applied retrospectively to the assessment year 2018-19. The Tribunal referred to its own decision in the case of Mohangarh Engineers and Construction Company vs. DCIT, CPC, where it was held that employees' contributions to ESI and PF deposited before the due date of filing the return of income could not be disallowed under Section 43B read with Section 36(1)(va). The Tribunal also noted that the CIT(A) should have followed the binding decisions of the jurisdictional Rajasthan High Court, which consistently held that contributions paid before the due date of filing the return of income could not be disallowed. Conclusion: The Tribunal concluded that the employees' contributions to ESI and PF, which were 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). The addition made by the CPC while processing the return of income under Section 143(1) was directed to be deleted. Consequently, the appeal of the assessee was allowed. Order pronounced in the open Court on 15/11/2021.
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