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2021 (12) TMI 1336 - AT - Income TaxDelayed payments of employees contribution to ESI and PF by invoking the provisions of section 36(1)(va) - Scope of amendment - HELD THAT - This issue has been dealt with and adjudicated by the ITAT in a number of cases, consistently ruling in favour of the assessee, holding that the amendment to section 43B of the Act by insertion of Explanation-5 and to section 36(l)(va) of the Act by insertion of Explanation-2, by the Finance Act 2021 is prospective and the issue otherwise stands decided by the jurisdictional high court in favour of the assessee. As decided in AJAY PIPLANI, VERSUS THE ASSISTANT DIRECTOR OF INCOME TAX, BENGALURU 2021 (10) TMI 1280 - ITAT that the claim of employees contribution to ESI and PF as per section 36 (1) (va) of the Act cannot be denied in the impugned year, i. e. 2019 - 20 on the basis of amendment made to the section by Finance Act 2021. The order of the Ld. CIT(A) upholding the said disallowance to the is therefore set aside and the AO is directed to allow the claim of the assessee. Also see M/S JUPITER AQUA LINES PVT. LTD. VERSUS THE D.C.I.T., CIRCLE-6 (1) , MOHALI. 2021 (11) TMI 761 - ITAT CHANDIGARH - Decided in favour of assessee.
Issues:
1. Addition of delayed payments of employees' contribution to ESI and PF under section 36(1)(va) of the Income Tax Act, 1961. Analysis: The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the addition made to the income of the assessee for delayed payments of employees' contribution to ESI and PF. The Commissioner upheld the addition based on the amendment introduced by the Finance Act, 2021, to sections 43B and 36(1)(va) of the Act. The amendment clarified that the due date for payment of employees' contribution to ESI and PF, for claiming deduction under section 36(1)(va), is governed by their respective Acts, not by the due date specified in section 43B. The Commissioner considered this amendment as retrospective, brushing aside the assessee's argument that previous court decisions favored their case. The issue has been addressed by the ITAT in various cases, consistently ruling in favor of the assessee. The ITAT held that the Finance Act, 2021 amendment to sections 43B and 36(1)(va) is prospective. In a specific case, it was noted that the jurisdictional High Court had previously ruled in favor of allowing employees' contribution to ESI and PF if paid by the due date of filing the return of income. Therefore, the ITAT concluded that the amendment cannot be applied retrospectively, and the addition made by the Revenue was unjustified. In line with previous decisions, the ITAT dismissed the Revenue's argument that the amendment was retrospective. Since the employees' contribution to ESI and PF was paid before the due date of filing the return of income, the disallowance of the contribution amount was deemed unwarranted. The ITAT ruled in favor of the assessee, allowing the appeal and deleting the disallowance of the employees' contribution amount. Therefore, based on the consistent decisions of the ITAT and the jurisdictional High Court's stance on the matter, the appeal of the assessee was allowed, and the disallowance of the employees' contribution amount was set aside.
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