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2021 (12) TMI 1028 - AT - Income TaxLate payments towards EPF and ESI under section 36(1)(va) - payment before furnishing the return of income under section 139(1) - HELD THAT - Since the facts involved in the present case are identical to the facts involved in the case of Mohangarh Engineers and Construction Company and in the case of Bikaner Ceramics Private Limited, Bikaner 2021 (9) TMI 1319 - ITAT JODHPUR the impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted - Decided in favour of assessee.
Issues Involved:
1. Disallowance of ? 64,64,563/- on account of Employees Contribution to PF and ESI under section 36(1)(va) of the Income Tax Act, 1961. 2. Prospective application of the amendment in Finance Bill 2021. 3. Jurisdictional High Court's binding decision. Issue-wise Detailed Analysis: 1. Disallowance of ? 64,64,563/- on account of Employees Contribution to PF and ESI: The primary grievance of the assessee pertains to the disallowance of ? 64,64,563/- made by the Assessing Officer (A.O.) due to late payments towards Employees' Provident Fund (EPF) and Employees' State Insurance (ESI) under section 36(1)(va) of the Income Tax Act, 1961. The A.O. disallowed the amount since the contributions were deposited after the due date prescribed under the respective statutes, but before the filing of the return of income under section 139(1) of the Act. 2. Prospective Application of the Amendment in Finance Bill 2021: The assessee argued that the amendment introduced by the Finance Bill 2021, which affects the treatment of delayed payments of employees' contributions to PF and ESI, is prospective and applicable from 01/04/2021. The contention is that this amendment should not apply to the assessment years under consideration (prior to 01/04/2021). 3. Jurisdictional High Court's Binding Decision: The assessee referred to the decision of the Hon’ble Rajasthan High Court, which is binding on the jurisdictional tax authorities. The Rajasthan High Court has consistently held that employees' contributions to PF and ESI, if deposited before the due date of filing the return of income under section 139(1), cannot be disallowed under section 43B or section 36(1)(va) of the Act. Tribunal's Findings: 1. Identical Issue Adjudicated by ITAT Jodhpur Bench: The Tribunal noted that an identical issue with similar facts had already been adjudicated by the ITAT Jodhpur Bench in the cases of Mohangarh Engineers and Construction Company Vs. DCIT and Bikaner Ceramics Private Limited, Bikaner Vs. ADIT, CPC, Bengaluru. In these cases, it was held that the disallowance of employees' contributions to PF and ESI, deposited before the due date of filing the return of income under section 139(1), is not sustainable. 2. Prospective Nature of Finance Bill 2021 Amendment: The Tribunal acknowledged that the amendment introduced by the Finance Bill 2021, which affects the treatment of delayed payments of employees' contributions to PF and ESI, is prospective and applicable from 01/04/2021. This amendment does not have retrospective effect and thus does not apply to the assessment years under consideration. 3. Binding Precedents of Jurisdictional High Court: The Tribunal emphasized that the jurisdictional Rajasthan High Court's decisions are binding on all appellate authorities and the Assessing Officer within its jurisdiction. The Rajasthan High Court has consistently held that employees' contributions to PF and ESI, if deposited before the due date of filing the return of income under section 139(1), cannot be disallowed. Conclusion: In light of the above findings, the Tribunal concluded that the disallowances made by the Assessing Officer and sustained by the CIT(A) on account of delayed deposits of employees' contributions to PF and ESI, which were deposited before the due date of filing the return of income under section 139(1), are not sustainable. The Tribunal allowed the appeals of the assessee and directed the deletion of the impugned disallowances. Result: The appeals of the assessee were allowed, and the disallowances made by the Assessing Officer and sustained by the CIT(A) were deleted.
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