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2021 (12) TMI 940 - AT - Income TaxLate remittance of employees contribution to PF and ESI under the respective Acts - Scope of amendments - HELD THAT - On identical facts, the Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company 2021 (10) TMI 1196 - ITAT BANGALORE by following the dictum laid down by the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd 2014 (3) TMI 386 - KARNATAKA HIGH COURT had held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) - ITAT that amendment by Finance Act, 2021, to section 36 1 va and 43B of the Act is not clarificatory. As the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision of the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee
Issues Involved:
1. Disallowance of employees' contribution to PF and ESI. 2. Applicability of amendments to sections 36(1)(va) and 43B of the Income Tax Act by Finance Act, 2021. 3. Levying of interest under sections 234A, 234B, and 234C of the Income Tax Act, 1961. Detailed Analysis: 1. Disallowance of Employees' Contribution to PF and ESI: The primary issue in this appeal is the disallowance of employees' contribution to PF and ESI. The assessee filed the return of income for the assessment year 2018-2019 on 31.10.2018, declaring an income of ?26,62,050. However, the Assessing Officer determined the total income at ?1,99,97,020 under section 143(1) due to the disallowance of ?1,73,34,970 for late remittance of employees' contribution to PF and ESI. 2. Applicability of Amendments to Sections 36(1)(va) and 43B by Finance Act, 2021: The CIT(A) upheld the disallowance, citing that only the employer's contribution to PF and ESI is deductible under section 43B if paid before the due date of filing the return under section 139(1). The CIT(A) also relied on the Supreme Court's judgment in CIT Vs. Gold Coin Health Food Pvt. Ltd., asserting that the amendments to sections 36(1)(va) and 43B by Finance Act, 2021, are clarificatory and have retrospective effect. The Tribunal, however, disagreed, referencing the Bangalore Bench's decision in M/s. Shakuntala Agarbathi Company Vs. DCIT, which followed the Karnataka High Court's ruling in Essae Teraoka Pvt. Ltd Vs. DCIT. The High Court had held that the assessee is entitled to the deduction of employees' contribution to PF and ESI if payments are made before the due date of filing the return under section 139(1). The Tribunal further noted that the amendment by Finance Act, 2021, is not clarificatory and does not have retrospective effect. This view was supported by several Tribunal decisions, including Dhabriya Polywood Limited v. ACIT and NCC Limited v. ACIT. 3. Levying of Interest Under Sections 234A, 234B, and 234C: The assessee also contested the levying of interest under sections 234A, 234B, and 234C. However, the Tribunal's decision primarily focused on the disallowance issue, and there was no detailed discussion on the interest levied under these sections. Conclusion: The Tribunal concluded that the amendments to sections 36(1)(va) and 43B by Finance Act, 2021, are not retrospective. Therefore, for the assessment year 2018-2019, the assessee is entitled to the deduction of employees' contribution to PF and ESI if paid before the due date of filing the return under section 139(1). The disallowance made by the Assessing Officer was deleted, and the appeal filed by the assessee was allowed. The Tribunal's decision aligns with the Karnataka High Court's ruling in Essae Teraoka Pvt. Ltd Vs. DCIT and other supporting Tribunal decisions. The order was pronounced on 16th December 2021.
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