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2021 (10) TMI 881 - AT - Income TaxDelayed deposits of employees contribution of ESI PF - assessee did not deposit the amounts of employees contribution as per the provisions of section 36(1)(va) - deposits made prior to filing of the return of income u/s 139(1) - HELD THAT - As decided in HARENDRA NATH BISWAS VERSUS DCIT, CIRCLE-29 KOLKATA 2021 (7) TMI 942 - ITAT KOLKATA we do not accept the Ld. CIT(A)'s stand denying the claim of assessee since assessee delayed the employees contribution of EPF ESI fund and as per the binding decision in Vijayshree Ltd. 2011 (4) TMI 63 - ITAT KOLKATA u/s. 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds and we allow the appeal of the assessee.
Issues Involved:
1. Sustenance of the addition made by the Assessing Officer on account of late deposit of employees' share of PF & ESI. Issue-wise Detailed Analysis: 1. Sustenance of the Addition Made by the Assessing Officer on Account of Late Deposit of Employees' Share of PF & ESI: The primary issue in these appeals concerns the addition made by the Assessing Officer (AO) due to the late deposit of employees' share of Provident Fund (PF) and Employees' State Insurance (ESI). The AO made these additions because the assessees did not deposit the amounts within the due dates as per the provisions of section 36(1)(va) of the Income Tax Act, 1961, although the deposits were made before the due date of filing the return of income under section 139(1) of the Act. When the matter was taken to the Commissioner of Income Tax (Appeals) [CIT(A)], the action of the AO was confirmed. The CIT(A) observed: "The submission of the appellant is considered. However, the same cannot be accepted in view of the amendments made to section 36 and 43B by the Finance Act, 2021. The Finance Act, 2021 has amended section 36, which reads as under- 'In section 36 of the Income-tax Act, in sub-section (1), in clause (va), the Explanation shall be numbered as Explanation 1 thereof and after Explanation 1 as so numbered, the following Explanation shall be inserted, namely: - ` Explanation 2.-For the removal of doubts, it is hereby clarified that the provisions of section 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the "due date" under this clause;'. The Finance Act, 2021 has also amended section 43B, as under- 'In section 43B of the Income-tax Act, after Explanation 4, the following Explanation shall be inserted, namely: 'Explanation 5.-For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applies.'" However, the assessees argued that the issue is covered by various decisions of the ITAT, including the jurisdictional ITAT, Jodhpur Bench. The assessees cited several cases where similar issues were adjudicated in favor of the assessee, such as the cases of Mohangarh Engineers and Construction Company, Pali Urban Cooperative Bank Ltd., and U & T Tractor Spares Pvt. Ltd. In her rival submissions, the Departmental Representative (DR) supported the orders of the authorities below, reiterating the observations made by the CIT(A). Upon consideration, it was noted that the assessees deposited the contribution of PF & ESI belatedly but before the due date of filing the return of income under section 139(1) of the Act. Identical issues with similar facts have been adjudicated by various Benches of the ITAT. For instance, in the case of Harendra Nath Biswas vs. DCIT, ITA No. 186/Kol/2021, the ITAT 'B' Bench, Kolkata, held that the Explanation 5 inserted by the Finance Act, 2021, with effect from 01.04.2021, does not apply retrospectively. The Kolkata Bench followed the decision of the Hon'ble Calcutta High Court in Vijayshree Ltd., which held that the deletion of the amount paid by the Employees’ Contribution beyond the due date was deductible by invoking the amended provisions of Section 43(B) of the Act. Similarly, the ITAT Hyderabad 'SMC' Bench in ITA No. 644/Hyd./2020 for AY 2019-20 in the case of Salzgitter Hydraulics Private Ltd., Hyderabad vs. ITO, held that the impugned disallowance is not sustainable in view of the legislative amendments applying prospectively from 1.4.2021. This Bench of the Tribunal also held in the case of Mohangarh Engineers and Construction Company, Jodhpur & Others vs. CPC, Bangalore, that the addition by way of adjustment while processing the return of income under section 143(1) for delayed deposit of employees' contribution towards ESI and PF, paid before the due date of filing the return of income under section 139(1), is not sustainable under section 43B read with section 36(1)(va) of the Act. In light of the above discussions and the binding decisions of the Hon'ble Rajasthan High Court, the Tribunal concluded that the impugned additions made by the AO and sustained by the CIT(A) on account of deposits of employees' contribution of ESI & PF prior to filing the return of income under section 139(1) of the Act, before the amendment made by the Finance Act, 2021, are deleted. In conclusion, all the appeals of the assessees were allowed. (Order pronounced in the open Court on 28.09.2021)
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