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2021 (12) TMI 1337 - AT - Income TaxDelayed payments of employees contribution to ESI and PF by invoking the provisions of section 36(1)(va) - addition on the basis of the amendment effected by the Finance Act, 2021, to section 43B of the Act by insertion of Explanation-5 and to section 36(1)(va) of the Act by insertion of Explanation-2 - 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 made to the income of the assessee by disallowing delayed payments of employees' contribution to ESI and PF. Analysis: The appeal was filed against the order of the Commissioner of Income Tax (Appeals) relating to the assessment year 2018-19, concerning the addition made to the income of the assessee by disallowing delayed payments of employees' contribution to ESI and PF. The issue revolved around the interpretation of the provisions of section 36(1)(va) of the Income Tax Act, 1961. The Ld. Commissioner of I. Tax (A) upheld the addition based on the amendment introduced by the Finance Act, 2021, to section 43B and section 36(1)(va) of the Act. The amendment clarified that the due date for payment of employees' contribution to ESI and PF was not governed by section 43B but by the respective Acts, making the payment due by the specified dates in those Acts for claiming deductions. The retrospective application of the amendment was emphasized, disregarding previous decisions in favor of the assessee by the Jurisdictional High Court. The issue had been consistently addressed by the ITAT in various cases, ruling in favor of the assessee by holding the amendment to be prospective. In a specific case, it was noted that the jurisdictional High Court had previously held that employees' contribution to ESI and PF could be claimed as a deduction if paid by the due date of filing the return of income under section 139(1) of the Act. The ITAT reiterated that the Finance Act, 2021 amendment should be applied prospectively, as indicated in the Notes on Clauses during its introduction, specifically for assessment year 2021-22 and subsequent years. The ITAT emphasized that the jurisdictional High Court had consistently allowed such deductions in previous cases, further supporting the assessee's position. The ITAT referred to another case where a similar issue was decided in favor of the assessee, reinforcing the stance that the amendment to section 36(1)(va) of the Act was not retrospective. The ITAT dismissed the argument that the amendment was retrospective, highlighting that the disallowance of employees' contribution to ESI and PF was not applicable in cases where the amounts were paid before the due date of filing the return of income. Consequently, the disallowance made by the Revenue was overturned, and the appeal of the assessee was allowed, directing the AO to permit the claim of the assessee regarding the employees' contribution to ESI and PF. In conclusion, the ITAT's decision was based on the prospective application of the Finance Act, 2021 amendment to section 36(1)(va) of the Act, in line with previous rulings of the jurisdictional High Court, ensuring that deductions for employees' contribution to ESI and PF were allowable if paid before the due date of filing the return of income under section 139(1) of the Act.
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