2021 (12) TMI 1282 - AT - Income Tax

Disallowance of employees' contribution made to the respective funds of the Government under PF ESI Act - assessee has not remitted the employees' contribution on the due date as prescribed by the PF ESI Act, thus the contribution made belatedly cannot be allowed - Scope of amendment - HELD THAT - Respectfully following the decision of M/s. Lumino Industries 2021 (11) TMI 926 - ITAT KOLKATA we are inclined to allow the appeals of the assessee and direct the A.O to delete the addition and hold that the Amendment brought in Finance Act 2021 w.e.f. 01.04.2021 by inserting an Explanation to section 36(1)(va) and section 43B of the Act is prospective in nature in nature and would apply from AY 2021-22 onwards and therefore, the amendment is not applicable to these assessment years (AYs 2014-15, 2017-18 2019-20) under consideration.- Decided in favour of assessee.

Issues Involved:
1. Disallowance of employees' contribution to PF and ESI due to delayed remittance.
2. Applicability of the amendment brought by Finance Act 2021 to Section 36(1)(va) and Section 43B of the Income Tax Act.
3. Determining whether the amendment is retrospective or prospective.

Detailed Analysis:

1. Disallowance of Employees' Contribution to PF and ESI:
The primary issue in these appeals is the disallowance of employees' contribution to PF and ESI due to delayed remittance. The authorities below disallowed the contributions because they were not remitted on the due date as prescribed by the PF and ESI Acts. However, the assessee contended that since the remittances were made before the filing of the return of income under Section 139 of the Income Tax Act, no disallowance should be warranted.

2. Applicability of the Amendment by Finance Act 2021:
The CIT(A) referred to the amendment brought by the Finance Act 2021, which inserted an Explanation to Section 36(1)(va) and Section 43B, and held it as clarificatory and retrospective. The assessee argued that the amendment is prospective and cannot override binding judicial precedents favoring the assessee. The Tribunal in the case of Lumino Industries Ltd. vs. ACIT held that the amendment is prospective, applicable from AY 2021-22 onwards, and not retrospective.

3. Determining Whether the Amendment is Retrospective or Prospective:
The Tribunal examined the legislative intent and the "Notes on Clauses" of the Finance Act 2021, which explicitly state that the amendment takes effect from 1st April 2021 and applies to AY 2021-22 and subsequent years. The Tribunal relied on the Supreme Court's decision in M/s. Aqua Technologies Ltd. vs. CIT, which clarified that retrospective provisions in tax acts cannot be presumed unless explicitly stated. The Tribunal also cited the Constitution Bench decision in CIT vs. Vatika Township Pvt. Ltd., which emphasized that amendments are presumed to be prospective unless the legislative intent for retrospectivity is clear.

Conclusion:
The Tribunal concluded that the amendment brought by Finance Act 2021 is prospective and applies from AY 2021-22 onwards. Therefore, for the assessment years under consideration (AYs 2014-15, 2017-18, and 2019-20), the binding judicial precedents of the Jurisdictional Calcutta High Court, which allow deductions for employees' contributions remitted before the due date of filing the return of income, hold good. Consequently, the Tribunal set aside the impugned orders of the CIT(A) and directed the AO to allow the deduction of employees' contributions to PF and ESI made before the due date of filing the return under Section 139(1) of the Act.

Order:
The appeals of the assessee are allowed, and the AO is directed to delete the additions. The amendment brought by Finance Act 2021 is held to be prospective and not applicable to the assessment years under consideration. The order was pronounced in the open court on 15 December 2021.

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