2022 (2) TMI 114 - AT - Income Tax

Disallowance of delayed payment of employee contribution to EPF, ESI and other welfare funds u/s. 43B r.w.s. 36(1)(va) - HELD THAT - As relying on M/S JANA URBAN SERVICES FOR TRANSFORMATION PVT. LTD. 2021 (10) TMI 842 - ITAT BANGALORE we find no merit in the argument of the ld.DR since the explanation as provided in Finance Act 2021 prescribes that the amendment in both sec.36(va) as well as 43B by inserting corresponding explanation that although impugned PF comes in the form of provision and the same is applicable from 1/4/2021 onwards only. In the present case we are concerned with the asst. year 2017-18 and the amended provision could not be applied retrospectively as it is only applicable w.e.f 1/4/2021. Being so no disallowance could be made by the AO in respect of PF/ESI paid within the due date of filing return of income. Though, it was beyond the date mentioned in the respective Act. This view of ours is supported by various judgment relied on by the ld.AR. Accordingly the appeal of the assessee is allowed.

Summary

Issues:
Disallowance of delayed payment of employee contribution to EPF, ESI, and other welfare funds under section 43B r.w.s. 36(1)(va) of the Income-tax Act, 1961.

Analysis:

Issue 1: Disallowance of Delayed Payment of Employee Contribution
The appeal concerned the disallowance of delayed payment of employee contributions to EPF, ESI, and other welfare funds under section 43B r.w.s. 36(1)(va) of the Income-tax Act. The assessee contended that the belated payments were made before the due date of filing the return of income and were allowable under section 43B. The Tribunal referred to a previous case where it was held that if the payment was made before the due date of filing the return of income under section 139(1) of the Act, it cannot be disallowed under section 36(1)(va) of the Act. The Tribunal also cited the judgment in the case of Essac Teraoka (P.) Ltd. v. Dy. CIT, emphasizing that the deduction for contributions payable by the employer shall be allowed if paid on or before the due date under section 139(1) of the IT Act. The Tribunal further referred to the judgment of the Hon'ble Karnataka High Court in CIT v. Sabari Enterprises, which supported the assessee's contention. The Tribunal concluded that no disallowance could be made by the Assessing Officer in respect of PF/ESI paid within the due date of filing the return of income, even if it was beyond the date mentioned in the respective Act. The appeal of the assessee was allowed based on these findings.

Conclusion:
The Tribunal allowed the appeal of the assessee, holding that the delayed payment of employee contributions to EPF, ESI, and other welfare funds was allowable under section 43B if made before the due date of filing the return of income. The Tribunal relied on previous judgments and legal provisions to support its decision, emphasizing the importance of timely payments in accordance with the Income-tax Act.