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2022 (1) TMI 28 - AT - Income TaxDelayed payments of employees contribution to ESI and PF by invoking by the provisions of section 36(1)(va) - Scope of amendment to section 43B of the Act by insertion of Explanation-5 and to section 36(1)(va) of the Act by insertion of Explanation-2, by the Finance Act 2021 - HELD THAT - This issue has been dealt with and adjudicated by the ITAT in a number of cases, consistently ruling in favour of the assessee, holding that the amendment to section 43B of the Act by insertion of Explanation-5 and to section 36(1)(va) of the Act by insertion of Explanation-2, by the Finance Act 2021 is prospective and the issue otherwise stands decided by the jurisdictional high court in favour of the assessee. See M/S JUPITER AQUA LINES PVT. LTD. VERSUS THE D.C.I.T., CIRCLE-6 (1) , MOHALI. 2021 (11) TMI 761 - ITAT CHANDIGARH . In view of the aforestated decisions of the ITAT, therefore the contention of the Ld. DR before us that the amendment to section 36(1)(va) of the Act is retrospective is dismissed. Also since no facts distinguishing the present cases from those decided by the ITAT have been pointed out by the Ld. DR before us and admittedly the amounts of employees' contribution to ESI and PF stood paid before the due date of filing of return of income, the issue of disallowance on account of delayed payments of employees' contribution to ESI and PF is squarely covered by the aforesaid decisions, following which the disallowance made of ESI/PF employees' contribution u/s. 36(1)(va). - Decided in favour of assessee.
Issues:
Addition made to the income of the assessee by disallowing delayed payments of employees' contribution to ESI and PF. Analysis: The appeal was filed against the order of the CIT(A) relating to A.Y. 2019-20, concerning the addition made to the income of the assessee in the intimation under section 143(1) of the Income Tax Act, disallowing delayed payments of employees' contribution to ESI and PF. The Ld. CIT(A) upheld the addition based on the amendment by the Finance Act, 2021, to sections 43B and 36(1)(va) of the Act, stating that the due date for payment of employees' contribution to ESI and PF was not governed by section 43B but by the respective Acts' due dates. The Ld. CIT(A) considered the amendment as retrospective, rejecting the argument that the issue was decided in favor of the assessee by the jurisdictional High Court in previous cases. However, the ITAT consistently ruled in favor of the assessee, holding the amendment as prospective, as seen in various cases, including Ajay Piplani vs. Assistant Director of Income Tax and M/s. Jupiter Aqua Lines Pvt. Ltd. vs. DCIT. The ITAT held that the amendment to section 36(1)(va) and 43B of the Act by the Finance Act, 2021, was prospective, applicable from the assessment year 2021-22 onwards. The ITAT noted that the jurisdictional High Court had previously allowed employees' contribution to ESI and PF if paid by the due date of filing the return of income under section 139(1) of the Act. Citing specific cases like CIT vs. Nuchem Limited and CIT vs. Hemla Embroidery Mills Pvt. Ltd., the ITAT emphasized that the amendment could not be the basis for disallowing the claim in the impugned year, 2019-20. Consequently, the ITAT set aside the disallowance made by the Ld. CIT(A) and directed the AO to allow the assessee's claim. The ITAT dismissed the contention that the amendment was retrospective, as it was not supported by distinguishing facts from the decided cases. Since the employees' contribution to ESI and PF was paid before the due date of filing the return of income, the disallowance of the contribution amounting to ?1,09,545 under section 36(1)(va) was deleted. The ITAT's decision was based on consistent rulings in favor of the assessee in similar cases, indicating that the issue of disallowance due to delayed payments of employees' contribution was already settled in favor of the assessee. Therefore, the appeal of the assessee was allowed, and the order was pronounced on 24.11.2021.
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