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2021 (11) TMI 329 - AT - Income TaxDisallowance being employees contribution to PF and ESI - scope of amendment to section 36(1)(va) and 43B - HELD THAT - Since, the assessment year concerned in this case being 2018-2019, we hold that the amendment to section 36(1)(va) and 43B of the I.T.Act by Finance Act, 2021 does not have application - direct the A.O. to delete the disallowance being employees contribution to PF and ESI, since the same has been paid prior to the due date of filing of the return u/s 139(1). Disallowance of GST - An identical figure has been disallowed by the assessee voluntarily in the return of income filed u/s 40A(3) of the I.T.Act. If an identical amount has been disallowed inadvertently u/s 40A(3) then further disallowance u/s 43B of the I.T.Act by the A.O. would amount to double taxation. Therefore, restore this issue to the files of the A.O - AO is directed to examine whether the assessee has voluntarily made disallowance of GST since the same was not paid before the due date of filing of return u/s 139(1) of the I.T.Act. If the assessee has voluntarily made disallowance of the said amount (though inadvertently u/s 40A(3) the same needs to be deleted because the disallowance by A.O. u/s 43B of the I.T.Act tantamount to double taxation, which is impermissible in law. With these observations, I direct the A.O. to examine the issue afresh and pass an order after affording a reasonable opportunity of hearing to the assessee
Issues Involved:
1. Whether the CIT(A) erred in upholding the addition of ?6,21,831 made by the A.O. under section 36(1)(va) of the I.T. Act. 2. Whether the CIT(A) erred in sustaining the A.O.’s addition of ?9,915 under section 43B of the I.T. Act. Detailed Analysis: Issue 1: Addition under Section 36(1)(va) of the I.T. Act The primary contention revolves around the disallowance of ?6,21,831, which represents the employees' contribution to PF/ESI not paid within the due dates specified under the respective Acts. The CIT(A) upheld this addition, referencing the insertion of Explanation 5 to section 43B by the Finance Act 2021, which clarifies that the provisions of section 43B do not apply to sums received from employees to which section 2(24)(x) applies. The CIT(A) concluded that this amendment has retrospective effect, rendering the appellant's argument based on pre-amendment law and earlier judicial decisions (which allowed deductions if payments were made before the due date of filing the return under section 139(1)) inapplicable. However, upon appeal, the Tribunal considered the appellant's reliance on the ITAT’s decision in the case of M/s. Shakuntala Agarbathi Company Vs. DCIT, which held that the amendment by Finance Act 2021 to sections 36(1)(va) and 43B is prospective and not retrospective. The Tribunal noted that the Hon’ble jurisdictional High Court in Essae Teraoka (P.) Ltd. v. DCIT had already established that deductions are permissible if contributions are made before the due date for filing the return under section 139(1). The Tribunal further cited the Hon’ble Supreme Court's judgment in M.M. Aqua Technologies Limited v. CIT, which emphasized that retrospective provisions in a taxing Act cannot be presumed to be retrospective if they alter the law as it previously stood. The Tribunal concluded that the amendment by Finance Act, 2021, to sections 36(1)(va) and 43B does not apply retrospectively to the assessment year 2018-2019. Consequently, the disallowance of ?6,21,831 was directed to be deleted as the payment was made before the due date of filing the return. Issue 2: Addition under Section 43B of the I.T. Act The second issue pertains to the disallowance of ?9,915 under section 43B, representing a GST payment not made before the due date of filing the return under section 139(1). The appellant argued that this amount was already disallowed voluntarily under section 40A(3) in the return of income, and thus, further disallowance under section 43B would result in double taxation. The Tribunal acknowledged this contention and directed the A.O. to verify whether the amount of ?9,915 had indeed been disallowed voluntarily under section 40A(3). If confirmed, the Tribunal instructed that the disallowance under section 43B should be deleted to avoid double taxation, which is impermissible by law. The A.O. was directed to re-examine the issue and provide a reasonable opportunity for the appellant to present their case. Conclusion: The appeal was partly allowed. The Tribunal directed the deletion of the disallowance of ?6,21,831 under section 36(1)(va), and remanded the issue of ?9,915 under section 43B back to the A.O. for fresh examination to ensure no double taxation occurs.
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