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2022 (2) TMI 167 - AT - Income TaxLate payments towards EPF and ESI u/s 36(1)(va) - deposits prior to filing of the return of income u/s. 139(1) - HELD THAT - As relying on RAJA RAM VERSUS THE ITO, WARD 3 AND SANCHI MANAGEMENT SERVICES PRIVATE LIMITED 2021 (11) TMI 370 - ITAT CHANDIGARH the impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s. 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of contributions towards ESI and EPF under section 36(1)(va) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: Disallowance of Contributions towards ESI and EPF under Section 36(1)(va) of the Income Tax Act, 1961: The primary issue in these appeals is the disallowance of contributions towards Employee State Insurance (ESI) and Employee Provident Fund (EPF) under section 36(1)(va) of the Income Tax Act, 1961. The Assessing Officer (A.O.) disallowed these contributions on the grounds that they were deposited after the due date prescribed under the respective statutes but before the due date for filing the return of income under section 139(1) of the Act. The assessees contended that the issue is covered by the ITAT, Chandigarh Bench's common order dated 20/10/2021 in the cases of Raja Ram Vs. ITO, Yamunanagar, and Sanchi Management Services Private Limited Vs. ITO, Chandigarh. The Tribunal had held that contributions deposited before the filing of the return of income under section 139(1) should not be disallowed, even if deposited after the due date under the respective statutes. The Tribunal considered various precedents, including the ITAT Jodhpur Bench's order dated 28.09.2021 in ITA Nos. 71 & 72/Jodh/2021, and decisions from other benches such as ITAT Kolkata in Harendra Nath Biswas vs. DCIT Kolkata, and ITAT Hyderabad in Salzgitter Hydraulics Private Ltd. vs. ITO. These decisions consistently held that contributions deposited before the filing of the return of income under section 139(1) should not be disallowed. Further, the Tribunal referred to the decision of the Hon'ble Calcutta High Court in Vijayshree Ltd., which followed the Supreme Court's ruling in CIT vs. Alom Extrusion Ltd. The Calcutta High Court held that the amendment to the second proviso to Section 43(B) of the Income Tax Act, introduced by the Finance Act, 2003, was curative and should be applied retrospectively. The Tribunal also noted the legislative amendments in Sections 36(va) and 43B introduced by the Finance Act, 2021, which clarified that the amendments apply prospectively from 1.4.2021. The CBDT's Memorandum of Explanation supported this prospective application. In light of these precedents and legislative clarifications, the Tribunal concluded that the disallowances made by the A.O. and sustained by the CIT(A) were not justified. The Tribunal held that contributions deposited before the due date for filing the return of income under section 139(1) should not be disallowed under section 36(1)(va) or section 43B of the Act. Consequently, the Tribunal allowed the appeals of the assessees and deleted the disallowances made on account of late payments towards ESI and EPF. In conclusion, the Tribunal's order emphasized that contributions towards ESI and EPF, if deposited before the due date for filing the return of income under section 139(1), should not be disallowed, even if deposited after the due date prescribed under the respective statutes. This principle was consistently upheld across various benches of the ITAT and supported by judicial precedents and legislative amendments. (Order pronounced on 27/01/2022)
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