2022 (3) TMI 1399 - AT - Income Tax

Delayed payments of employees contribution to ESI PF account within the due date provided under the PF ESI Act - Deduction of employees contribution paid before the due date of filling of the return - HELD THAT - A claim has been made that payment was made within the due date of filing of the return. But no details were submitted before the lower authorities and for buttressing this contention, for the first time an audit report is being placed before us exhibiting the payment made before the due date of filing of the return. We confronted the assessee with regard to the above fact, then he informed us that basically the return of the assessee was processed at CPC, Bengaluru, wherein without asking for any explanation from the assessee, the disallowance was made. Before the ld. CIT(Appeals), it could not submit the details. Thus in a faceless disposal of appeal, the disallowance was confirmed by the ld. 1st appellate authority. We set aside the impugned orders in this appeal for a limited purpose to the file of ld. Assessing Officer. Ld. to verify, whether payments to ESI and PF accounts out of employees contribution has been made within the due date of filing of return or not. In case, it is found that payments of these contributions have been made within the due date of filing of the return, then no disallowance ought to be made. With the above observation, this appeal is to be treated as allowed for statistical purposes

Summary

Issues Involved:
Whether the assessees are entitled to deduction of employees' contribution paid before the due date of filing of the return.

Analysis:
The appeals before the Appellate Tribunal ITAT Kolkata revolved around the issue of whether assessees are eligible for deduction of employees' contribution paid before the due date of filing the return. The Assessing Officer disallowed the claim of assessees for deduction of such contributions under section 36(1)(va) read with section 2(24)(x) of the Income Tax Act, as the payments were not made within the due date provided under the PF & ESI Act. The contentious issue was whether the amendment introduced by the Finance Act, 2021, which disallows employees' contribution made after the due date, should be applied prospectively or retrospectively.

The ITAT, Kolkata examined the amendment brought in by the Finance Act, 2021, and referred to the judgment in the case of Lumino Industries Limited & Others. The Tribunal observed that the amendment disallows employees' contribution made after the due date as prescribed by the statutes, and clarified that the amendment is prospective in operation from April 1, 2021, for Assessment Year 2021-22 and subsequent years. The Tribunal emphasized that the legislative intent was clear from the Notes on Clauses of the Finance Bill, 2021, indicating that the amendment should be applied prospectively.

The ITAT reiterated that if employees' contribution is received and paid to ESI and PF accounts before the due date of filing the return, the assessee is entitled to claim deduction for such amounts. In cases where payments were made within the due dates of filing the return, except for one instance, the ITAT directed the Assessing Officer to verify if the payments were made within the due date. The Tribunal set aside the impugned orders and deleted the disallowance in all appeals except one, where further verification was required. Consequently, ITA No. 483/KOL/2021 was allowed for statistical purposes, while all other appeals were allowed in favor of the assessees.

In conclusion, the judgment clarified the eligibility criteria for claiming deduction of employees' contribution paid before the due date of filing the return, taking into account the relevant legislative amendments and judicial precedents.