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2021 (10) TMI 621 - AT - Income TaxDelayed payment of employees contribution to PF ESI - As submitted assessee has deposited the employees contribution to PF ESI before the due date of filing of the income tax return - HELD THAT - Since in the instant case the assessee admittedly has deposited the employees contribution to PF ESI before the due date of filing of the income tax return, therefore hold that the Ld. CIT(A) is not justified in sustaining the adjustment made by the A.O-CPC on account of belated payment of employees contribution to PF and ESI. See M/S. BHARAT HOTELS LTD. 2018 (9) TMI 798 - DELHI HIGH COURT - Decided in favour of assessee.
Issues Involved:
1. Disallowance of ?8,37,846/- for delayed payment of employees' contribution to PF & ESI. 2. Applicability of amendments in Sections 36 and 43B of the I.T. Act, 1961, introduced by the Finance Act, 2021. Issue-Wise Detailed Analysis: 1. Disallowance of ?8,37,846/- for Delayed Payment of Employees' Contribution to PF & ESI: The assessee, a private limited company engaged in call center services, filed its return of income for A.Y. 2018-19 declaring NIL income. The return was revised after receiving a notice under section 143(1)(a) for proposed adjustments, including disallowance of late payments for employees' ESI/EPF contributions. The CPC processed the revised return and made an adjustment of ?8,37,846/- under section 36(1)(va) for delayed payments. The assessee filed for rectification, which was dismissed, leading to an appeal before the Ld. CIT(A). The assessee argued that the contributions were deposited before the due date of filing the income tax return and relied on the decision of the Hon’ble Delhi High Court in CIT vs. AIMIL Ltd. and other similar decisions. However, the Ld. CIT(A) upheld the disallowance, citing the decision in CIT vs. M/s. Bharat Hotels Ltd., which stated that the assessee is not entitled to deductions for delayed payments under section 36(1)(va). 2. Applicability of Amendments in Sections 36 and 43B of the I.T. Act, 1961: The assessee contended that the amendments in Sections 36 and 43B introduced by the Finance Act, 2021, which clarify that the provisions apply from A.Y. 2021-2022 onwards, should not affect the current assessment year. The Ld. D.R. argued that the amendments clarify that the provisions of Section 43B do not apply to employees' contributions and that the disallowance was justified as the payments were not made before the specified statutory dates. Tribunal's Analysis and Decision: The Tribunal considered the arguments and the relevant decisions. It noted that the consistent view of the Coordinate Benches of the Tribunal is that employees' contributions to PF & ESI, if paid before the due date of filing the income tax return, are allowable deductions. The Tribunal cited several decisions where similar disallowances were deleted, including the decisions in DCIT vs. Dee Development Engineers Ltd. and PCIT vs. Pro Interactive Service (India) Pvt. Ltd., which supported the assessee's position. The Tribunal emphasized that the legislative intent was to allow deductions for actual payments made before the due date of filing the return, and not to treat belated payments as deemed income. The Tribunal also referenced the amendments introduced by the Finance Act, 2021, noting that they apply from A.Y. 2021-2022 and do not affect the current assessment year. Conclusion: The Tribunal held that since the assessee deposited the employees' contributions before the due date of filing the income tax return, the disallowance was not justified. The order of the Ld. CIT(A) was set aside, and the A.O. was directed to delete the disallowance of ?8,37,846/-. The appeal of the assessee was allowed. Order Pronounced: The appeal of the assessee was allowed, and the order was pronounced in the open Court on 13.10.2021.
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