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2022 (1) TMI 933 - AT - Income TaxDisallowance of Employees contribution to PF ESI not credited before the due date of payment under respective Acts - Scope of amendment made by the Finance Act, 2021 to Section 36(1)(va) r.w.s. 43B - HELD THAT - As decided in case of M/s.Adyar Ananda Bhavan Sweets India Pvt. Ltd 2021 (12) TMI 558 - ITAT CHENNAI payment of employees contribution in regard to PF ESI if made before the due date of filing of return of income u/s.139(1) of the Act, the same is allowable as deduction as per the provisions of Section 2(24)(x) r.w.s. 36(1)(va) r.w.s. 43B. For scope of amemdment as before insertion of Explanation 2 to Section 36(1)(va) of the Act, there is ambiguity regarding due date of payment of employees contribution on account of provident fund and ESI, whether the due date is as per the respective acts or up to the due date of filing of return of income of the assessee - it is clear that the amendment brought in the statute i.e., by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the Act amended by inserting Explanation 2 is prospective and not retrospective. Hence, the amended provisions of Section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year 2018-19 but will apply from assessment year 2021- 22 and subsequent assessment years. Hence, this issue of assessee s appeal is allowed.
Issues involved:
Disallowance of Employees' contribution to PF & ESI not credited before the due date of payment under respective Acts. Detailed Analysis: Issue 1: Disallowance of Employees' contribution to PF & ESI Analysis: The appeals by the assessee arose from orders of the Commissioner of Income Tax (Appeals) regarding the disallowance of Employees' contribution to PF & ESI not credited before the due date of payment under respective Acts for the assessment years 2017-18 & 2018-19. The primary contention was the disallowance made by the ADIT, Centralized Processing Centre, Bengaluru. The Finance Act, 2021 amended Section 36(1)(va) r.w.s. 43B of the Income Tax Act, impacting the treatment of late payments. The CIT(A) confirmed the disallowance, citing the clarificatory amendments made by the Finance Act, 2021. The Co-ordinate Bench decision in a similar case highlighted the principle that legislation is presumed not to have retrospective operation unless stated otherwise, emphasizing that current law governs current activities. The judgment discussed the retrospective vs. prospective nature of amendments, emphasizing the need for unambiguous tax laws. The CIT(A) noted divergent judgments of various High Courts on the issue, indicating ambiguity in the interpretation of Section 43B. The amendment brought by the Finance Act, 2021 was deemed prospective, impacting the applicability of the amended provisions for the assessment year 2018-19 and subsequent years. The appeals of the assessee were allowed based on the Co-ordinate Bench decision, concluding that the amended provisions were not applicable for the assessment year 2018-19 but would apply from the assessment year 2021-22 and subsequent years. This detailed analysis provides a comprehensive understanding of the judgment, focusing on the disallowance of Employees' contribution to PF & ESI not credited before the due date of payment under respective Acts. The judgment delves into the impact of the Finance Act, 2021 amendments, the retrospective vs. prospective nature of legislation, and the interpretation of tax laws by various High Courts, leading to the allowance of the assessee's appeals based on the prospective application of the amended provisions.
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