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2022 (2) TMI 174 - AT - Income TaxLate remittance of employees contribution to PF and ESI - payments made prior to the due date of filing of the return of income u/s 139(1) - HELD THAT - Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company 2021 (10) TMI 1196 - ITAT BANGALORE by following the dictum laid down in the case of Essae Teraoka Pvt. Ltd Vs. DCIT 2014 (3) TMI 386 - KARNATAKA HIGH COURT held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) - Also further held by the ITAT that amendment by Finance Act, 2021, to section 36 1 va and 43B of the Act is not clarificatory. Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision of the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction - Decided in favour of assessee.
Issues Involved:
1. Legality of CIT(A)'s order. 2. Disallowance of employees' contribution towards provident fund. 3. Retrospective applicability of amendments to sections 36(1)(va) and 43B of the Income Tax Act. 4. Applicability of disallowance under section 43B in the context of section 143(1)(a). Detailed Analysis: 1. Legality of CIT(A)'s Order: The appellant contended that the order of the CIT(A) was "bad and erroneous in law and against the facts and circumstances of the case." The Tribunal admitted the additional ground as it was a pure question of law, referencing the Supreme Court judgment in National Thermal Power Co. Ltd. v. CIT. 2. Disallowance of Employees' Contribution Towards Provident Fund: The assessee argued that the employees' contribution to PF and ESI was paid before the due date of filing the return under section 139(1) of the Act. The CIT(A) confirmed the disallowance, distinguishing between employer’s and employees’ contributions, and held that only employer’s contributions are deductible under section 43B if paid before the due date of filing the return. The Tribunal referenced the Karnataka High Court judgment in Essae Teraoka Pvt. Ltd. Vs. DCIT, which held that employees' contributions are also deductible if paid before the due date of filing the return. 3. Retrospective Applicability of Amendments to Sections 36(1)(va) and 43B: The CIT(A) relied on the Supreme Court judgment in CIT Vs. Gold Coin Health Food Pvt. Ltd., to argue that the amendments by the Finance Act, 2021, are clarificatory and retrospective. However, the Tribunal disagreed, citing the Supreme Court judgment in M.M. Aqua Technologies Limited v. CIT, which held that retrospective provisions in a taxing Act cannot be presumed to be retrospective if they alter the law as it stood. The Tribunal concluded that the amendments are prospective, effective from 01.04.2021, and do not apply to the assessment year 2018-2019. 4. Applicability of Disallowance Under Section 43B in Context of Section 143(1)(a): The Tribunal noted that the CIT(A) had relied on the judgment in CIT Vs. Gold Coin Health Food Pvt. Ltd., which was distinguishable. The Tribunal held that the amendments to section 43B and section 36(1)(va) are not applicable for the assessment year under consideration. The Tribunal followed the Karnataka High Court's binding decision in Essae Teraoka Pvt. Ltd Vs. DCIT, allowing the deduction for employees' contributions paid before the due date of filing the return under section 139(1). Conclusion: The Tribunal allowed the appeal, directing the Assessing Officer to grant the deduction for employees' contributions to ESI and PF, as the payments were made before the due date of filing the return. The amendments to sections 36(1)(va) and 43B by the Finance Act, 2021, were held to be prospective and not applicable to the assessment year 2018-2019. The Tribunal's decision was pronounced on January 31, 2022.
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