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2021 (12) TMI 1076 - AT - Income TaxLate remittance of employees contribution to PF and ESI u/s 139(1) - contribution paid by the assessee before the due date of filing of return of income u/s 139(1) - HELD THAT - 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). 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 - 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:
1. Disallowance of employees' contribution to PF and ESI under section 36(1)(va) of the Income Tax Act. 2. Applicability of amendments introduced by Finance Act, 2021 to section 36(1)(va) and 43B of the Act. 3. Deduction of employees' contribution to PF and ESI paid before the due date of filing the return of income under section 139(1) of the Act. Issue 1: Disallowance of employees' contribution to PF and ESI under section 36(1)(va) of the Income Tax Act: The appellant contested the disallowance of employees' contribution to PF and ESI by the Assessing Officer under section 36(1)(va) based on late remittance. The CIT(A) upheld the disallowance, distinguishing between employer and employee contributions. However, the Tribunal, citing the judgment of the jurisdictional High Court, held that employees' contribution to PF and ESI, if paid before the due date of filing the return of income, is deductible under section 43B of the Act. The Tribunal ruled in favor of the assessee, stating that the disallowance made by the Assessing Officer was unwarranted. Issue 2: Applicability of amendments introduced by Finance Act, 2021 to section 36(1)(va) and 43B of the Act: The Tribunal analyzed the amendments brought by the Finance Act, 2021 to section 36(1)(va) and 43B of the Act. It was argued that these amendments, though purported to be clarificatory and retrospective, altered the law adversely to the assessee. Citing judicial precedents, including the Supreme Court's stance on retrospective provisions, the Tribunal concluded that the amendments were not retrospective in nature. The Tribunal highlighted that the amendments were effective from 01.04.2021 and would apply prospectively from the assessment year 2021-2022 onwards. Issue 3: Deduction of employees' contribution to PF and ESI paid before the due date of filing the return of income under section 139(1) of the Act: The Tribunal reiterated that employees' contribution to PF and ESI, if paid before the due date of filing the return of income, is an allowable deduction as per the judgment of the jurisdictional High Court. By following the binding decision, the Tribunal held that the employees' contribution paid by the assessee before the due date of filing the return of income under section 139(1) of the Act should be allowed as a deduction. Consequently, the disallowance made by the Assessing Officer was overturned, and the issue was decided in favor of the assessee. In conclusion, the Tribunal allowed the appeal filed by the assessee, directing the Assessing Officer to grant deduction for employees' contribution to ESI as it was paid before the due date of filing the return of income. The judgment emphasized the importance of timely payments and adherence to statutory provisions for claiming deductions under the Income Tax Act.
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