2021 (12) TMI 1128 - AT - Income Tax

Delay in depositing the employee s contribution towards PF/ESI - same stands duly deposited before the due date of filing the return of income u/s 139(1) of the Act - scope of amendment - HELD THAT - We find that this tribunal in the case of Nipun Jain 2021 (12) TMI 1042 - ITAT AMRITSAR has deleted the said disallowance on observing that the alleged amount of employee s contribution PF and ESI has been deposited befor the due date of filing return of income prescribed u/s 139(1) - also there is no doubt qua applicability of the amended provisions referred above, prospectively ad second aspect as considered/determined by the ld. CIT(A) qua retrospective application of the amended provisions of Section 36(1)(va) and 43B of the Act wherein Explanations have been inserted by Finance Act, 2021 qua employees share in respect of PF ESI Act, is also unsustainable - Decided in favour of assessee.

Summary

Issues:
Appeal against Ld. CIT(A) order regarding disallowance of employee's contribution towards PF/ESI before due date.

Analysis:
The appeals were filed by the assessee(s) against the Ld. CIT(A) order for the Assessment Years 2018-19 & 2019-20 u/s. 250 of the Income Tax Act, 1961. The main issue was the delay in depositing the employee's contribution towards PF/ESI, which was, however, deposited before the due date of filing the return of income u/s 139(1) of the Act. The assessee(s) argued that the issue was covered in their favor by a decision of the tribunal in a previous case. The Ld. Departmental Representative supported the Ld. CIT(A)'s order confirming the disallowance made by the Assessing Officer u/s 36(1)(va) of the Act.

The tribunal observed that the issue was contentious, with different High Courts having divergent views. However, the Finance Act, 2021 amendments clarified the applicability of Section 36(1)(va) and 43B of the Act. The tribunal referred to various judgments in favor of the assessee(s) and highlighted that the Hon'ble jurisdictional High Court held that the assessee is entitled to claim deduction of employee's share of ESI & PF u/s.43B of the Act if deposited before the filing of the return of income u/s.139(1) of the Act. The tribunal also noted that the amendment by the Finance Act, 2021 was prospective and not retrospective.

In another case, a Coordinate Bench in Bangalore also decided in favor of the assessee, stating that if the employee's share of contribution is paid before the due date for filing the return of income u/s.139(1) of the Act, there cannot be any disallowance. The tribunal held that the impugned additions under section 36(1)(va) of the Act deserved to be deleted based on the provisions of the Finance Act, 2021.

Similarly, a Coordinate Bench in Hyderabad also held a similar view, stating that the impugned disallowances of employee's contribution towards PF/ESI should be deleted. The tribunal set aside the findings of Ld. CIT(A) and allowed the appeals challenging the disallowance of employee's contribution towards PF/ESI.

In conclusion, the tribunal allowed all the appeals at the instance of the assessee(s) and pronounced the order on 30/11/2021, deleting the disallowances of employee's contribution towards PF/ESI.