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2022 (3) TMI 1410 - AT - Income TaxAddition of employees contribution to PF and ESI paid on or before due date of filing of return - Scope of amendment - HELD THAT - We do not think that the legislative intent and objective is to treat belated payment of Employee s Provident Fund (EPF) and Employee s State Insurance Scheme (ESI) as deemed income of the employer under Section 2(24)(x) of the Act. It is settled law that when two judgments are available giving different views then the judgment which is in favour of the assessee shall apply as held in case of Vegetable Products Ltd. 1973 (1) TMI 1 - SUPREME COURT by the Hon ble Supreme Court. Hence in light of the latest decision in case of Pro Interactive Service (India) Pvt. Ltd. 2018 (9) TMI 2009 - DELHI HIGH COURT the issue is covered in favour of the assessee. Therefore the CIT(A) as well as the Assessing Officer was not at all justified in disallowing this claim. Thus the order of the CIT(A) is not just and proper. The appeal of the assessee is thus allowed.
Issues:
Appeal against order confirming addition of employees' contribution to PF and ESI, applicability of amendments in Income Tax Act 1961, failure to decide all grounds of appeal, retrospective nature of Finance Act 2021 amendments. Analysis: The appeal was filed against the order confirming the addition of employees' contribution to PF and ESI. The assessee argued that the addition was arbitrary and unjust, claiming the benefit of Section 43B of the Act as the contributions were made before filing the return of income. The assessee cited various court decisions in their favor, emphasizing that the issue was debatable and outside the purview of Section 143(1) of the Act. The assessee also challenged the action of the CPC based on the Audit Report. The Ld. A.R. relied on decisions supporting the assessee's position, while the Ld. D.R. argued that the Finance Act 2021 amendments were retrospective and clarified the due date for contributions. The Ld. D.R. contended that the contributions were made after the statutory due date under the PF and ESI Acts, emphasizing the importance of adhering to due dates for beneficial legislation. The CIT(A) upheld the disallowance, citing the retrospective nature of the Finance Act 2021 amendments. The CIT(A) concluded that the contributions made after the statutory due date but before filing the return were rightly disallowed. The insertion of explanations in Section 43B and 36(1)(va) clarified the due date as the statutory due date under the specific Statute. The CIT(A) highlighted that the amendments were not retrospective and applied from 01.04.2021, affecting A.Y. 2021-22 and subsequent years. The CIT(A) referenced court decisions in favor of the Revenue, but the assessee relied on decisions supporting their case, particularly the legislative intent to allow expenditure only when payments are actually made. The Tribunal considered the arguments of both parties and analyzed the legislative intent behind the amendments. The Tribunal noted conflicting court decisions but emphasized the principle that when two judgments differ, the one favoring the assessee should apply. Relying on the latest decision in favor of the assessee, the Tribunal allowed the appeal, stating that the CIT(A) and Assessing Officer were unjustified in disallowing the claim. Consequently, the appeal of the assessee was allowed, overturning the decision of the CIT(A). In conclusion, the Tribunal's detailed analysis focused on the retrospective nature of the Finance Act 2021 amendments, the legislative intent behind the amendments, and the application of court decisions favoring the assessee. The Tribunal's decision highlighted the importance of considering the specific statutory due dates for contributions and upheld the principle of resolving conflicting judgments in favor of the assessee.
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