2022 (5) TMI 1555 - AT - Income Tax

Delayed employees contribution of PF and ESI - assessee deposited contribution with the state exchequer well before the filing of return of income as is evident from the tax audit report - HELD THAT - As in case of CIT V. Ghatge Patil Transporters Ltd. 2014 (10) TMI 402 - BOMBAY HIGH COURT by confirming the order passed by the Tribunal that deduction claimed by the assessee on account of employees contribution to PF ESIC well before the due date of filing return of income is allowable deduction. Since the amended provisions contained under section 43B read with section 36(1)(va) of the Act are not applicable for the year under consideration i.e. A.Y. 2018-19 as the amendment will be effective from A.Y. 2021-22 and the AO/ Ld. CIT(A) have erred in disallowing the same. Resultantly, impugned order passed by Ld. CIT(A) is not sustainable in the eyes of law hence set aside and AO is directed to allow the employees contribution deposited by the assessee well before filing the return of income - Appeal of assessee allowed.

Summary

Issues:
1. Disallowance of employees' contribution to Provident Fund (PF) and Employee State Insurance Corporation (ESIC) by Assessing Officer.
2. Appeal before Ld. CIT(A) and subsequent appeal before the Tribunal.
3. Interpretation of provisions under section 36(1)(va) of the Income Tax Act, 1961.
4. Application of section 43B read with section 36(1)(va) for the assessment year 2018-19.
5. Comparison with relevant legal precedents - CIT V. Ghatge Patil Transporters Ltd. and M/s. Adyar Ananda Bhavan Sweets India P. Ltd. vs. ACIT.

Detailed Analysis:

1. The Assessing Officer disallowed the employees' contribution to PF and ESIC paid by the assessee after the due date, resulting in an addition of Rs. 1,60,02,116 under section 36(1)(va) of the Income Tax Act, 1961.

2. The assessee appealed before the Ld. CIT(A), who partially allowed the appeal. Subsequently, feeling aggrieved by the order, the assessee approached the Tribunal through the present appeal.

3. The Tribunal considered the submissions of both parties, reviewed the orders of the lower revenue authorities, and examined the relevant documents in light of the applicable law and circumstances of the case.

4. It was established that the assessee had deposited the employees' PF and ESI contributions after the prescribed due date but before filing the income tax return, as confirmed by the tax audit report.

5. Citing legal precedents, the Ld. A.R. argued that similar issues had been decided in favor of the assessee by the Hon'ble Bombay High Court in the case of CIT V. Ghatge Patil Transporters Ltd. and by a Co-ordinate Bench of the Tribunal in the case of M/s. Adyar Ananda Bhavan Sweets India P. Ltd. vs. ACIT.

6. Referring to the judgment in the case of Ghatge Patil Transporters Ltd., the Tribunal noted that the deduction claimed by the assessee for employees' contributions to PF & ESIC before the due date of filing the return of income was allowable, as per the provisions of section 43B and section 36(1)(va) of the Act.

7. The Tribunal emphasized that the amended provisions under section 43B, along with section 36(1)(va), were not applicable for the assessment year 2018-19, as the amendment would be effective from the assessment year 2021-22.

8. Consequently, the Tribunal held that the AO and Ld. CIT(A) erred in disallowing the employees' contribution, and the impugned order was deemed unsustainable in the eyes of the law. Thus, the Tribunal set aside the order and directed the AO to allow the employees' contribution deposited by the assessee before filing the return of income, ultimately allowing the appeal filed by the assessee.

9. The order was pronounced in the open court on 30.05.2022, bringing the matter to a close with a favorable outcome for the assessee.