2022 (1) TMI 1149 - AT - Income Tax

Late deposit of Employees Contribution to ESI and EPF - AR submitted that the assessee has deposited employees contribution towards ESI and PF though with the delay of few days from the due date mentioned in the respective Statutes however the same was deposited well before the due date of filing of return of income u/s 139(1) - HELD THAT - In the instant case it is not in dispute that employees contribution to ESI and PF had been deposited well before the due date of filing of return of income u/s 139(1) of the Act. We find that the issue is squarely covered by the decisions of the Hon ble Punjab Haryana High Court as well as other High Courts such as Hon ble Himachal Pradesh High Court and Hon ble Rajasthan High Court. We further note that though the Id. CIT(A) has not disputed the various decisions of Hon ble High Courts including the decision of the jurisdictional Punjab Haryana High Court but has referred to the amendment brought in by the Finance Act 2021. It is a consistent position across various Benches of the Tribunal including Chandigarh Benches that the amendment which has been brought in by the Finance Act 2021 shall apply w.e.f. assessment year 2021-22 and subsequent assessment years and the impugned assessment year being assessment year 2019-20 the said amendment cannot be applied in the instant case. Therefore considering the entirety of facts addition made by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the deposit of employees contribution towards ESI and PF paid before the due date of filing of the return of income u/s 139(1) of the Act is hereby directed to be deleted. - Decided in favour of assessee. Addition on account of provision for gratuity - as submitted that the assessee while filing its return of income has suo-moto disallowed the provision for gratuity and where such adjustment has been made by the CPC while processing the return of income the same amount to double taxation which cannot stand in the eyes of law therefore the said addition needs to be deleted - HELD THAT - It is manifest from the return of income along with the computation of income so filed by the assessee that the provision for gratuity which has been debited in the profit/loss account has been disallowed by the assessee itself and no claim for the provision for gratuity has been made by the assessee while filing its return of income. Therefore the action of the CPC in disallowing the same will amount to a situation where there is disallowance of provision which has not been claimed at the first place by the assessee and the same will clearly result in double taxation and which cannot be sustained in eyes of law. In the result the addition so made towards the provision for gratuity is hereby directed to be deleted and the ground of appeal is thus allowed.

Summary

Issues:
1. Disallowance of late deposit of Employees Contribution to ESI and EPF.
2. Disallowance of provision for gratuity.

Issue 1: Disallowance of late deposit of Employees Contribution to ESI and EPF:
The appeal was against the order of the Commissioner of Income Tax (Appeals) confirming the disallowance of ?3,68,124 towards late deposit of employees' contribution to ESI & PF. The assessee argued that the contributions were deposited before the due date of filing the return of income under section 139(1) of the Income Tax Act, relying on various court decisions. The Tribunal noted that the issue was covered by decisions of High Courts and Tribunal Benches, stating that the amendment by the Finance Act, 2021 applied prospectively from assessment year 2021-22. As the assessment year in question was 2019-20, the amendment could not be applied. Consequently, the disallowance was directed to be deleted, allowing the first ground of the assessee's appeal.

Issue 2: Disallowance of provision for gratuity:
The second ground of appeal challenged the disallowance of ?11,14,217 on account of provision for gratuity. The assessee had self-disallowed this provision while filing the return of income. The Tribunal observed that the provision for gratuity had not been claimed by the assessee in the return of income, making the disallowance by the CPC result in double taxation. Therefore, the Tribunal directed the deletion of the disallowance towards the provision for gratuity. Consequently, the second ground of appeal was allowed, and the appeal of the assessee was allowed in its entirety.

Conclusion:
The Tribunal ruled in favor of the assessee on both issues, directing the deletion of the disallowances related to the late deposit of Employees Contribution to ESI and EPF, as well as the provision for gratuity. The judgment highlighted the prospective application of the amendment brought by the Finance Act, 2021 and emphasized the importance of considering whether provisions were claimed or self-disallowed by the assessee while filing the return of income.