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2022 (2) TMI 692 - AT - Income TaxDisallowance being late remittance of employees contribution to PF and ESI under the respective Acts - As contended that assessee has paid the employees contribution prior to the due date of filing of return under section 139(1) - HELD THAT - Scope of amendment by Finance Act, 2021, to section 36 1 va and 43B - HELD THAT - As in 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 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 the CIT(A)'s order. 2. Deductibility of employees' contribution to PF if paid before the due date of filing the return. 3. Non-response to the proposal notice under section 143(1)(a) of the Act. 4. Retrospective applicability of amendments to section 36(1)(va) and section 43B by Finance Act, 2021. 5. Applicability of section 43B disallowance under section 143(1)(a) of the Act. Detailed Analysis: 1. Legality of the CIT(A)'s Order: The assessee challenged the CIT(A)'s order dated 12.11.2021, arguing that it was prejudicial to their interests and erroneous in law and facts. The Tribunal examined whether the CIT(A)'s decision was legally sound and factually accurate. 2. Deductibility of Employees' Contribution to PF: The primary issue was whether the employees' contribution to PF, amounting to ?93,86,400, paid before the due date of filing the return under section 139(1) of the Act, was deductible. The Tribunal referenced the Karnataka High Court's decision in Essae Teraoka Pvt. Ltd Vs. DCIT, which allowed such deductions if payments were made before the due date of filing the return. The Tribunal concluded that the assessee was entitled to the deduction, aligning with the precedent set by the jurisdictional High Court. 3. Non-response to Proposal Notice: The CIT(A) upheld the addition on the grounds that the assessee did not respond to the proposal notice issued under section 143(1)(a) of the Act. The Tribunal reviewed this procedural aspect but focused more on the substantive legal principles regarding the deductibility of contributions. 4. Retrospective Applicability of Amendments: The CIT(A) held that the amendments to section 36(1)(va) and section 43B by the Finance Act, 2021, were retrospective. The Tribunal disagreed, citing the ITAT's decision in M/s. Shakuntala Agarbathi Company Vs. DCIT, which held that these amendments were not clarificatory and thus not retrospective. The Tribunal also referenced the Supreme Court's judgment in M.M. Aqua Technologies Limited v. CIT, which stated that retrospective provisions in taxing acts cannot be presumed if they alter the existing law. The Tribunal emphasized that the amendments were effective from 01.04.2021 and applicable from the assessment year 2021-2022 onwards, thus not affecting the assessment year 2018-2019. 5. Applicability of Section 43B Disallowance: The Tribunal examined whether disallowance under section 43B fell within the purview of section 143(1)(a). The Tribunal, referencing various judicial pronouncements, concluded that the disallowance of employees' contributions paid before the due date of filing the return was not applicable under section 143(1)(a). The Tribunal directed the AO to grant the deduction since the payment was made before the due date. Conclusion: The Tribunal allowed the appeal, directing the AO to grant the deduction for the employees' contribution to PF, as the payment was made before the due date of filing the return. The Tribunal held that the amendments to sections 36(1)(va) and 43B by the Finance Act, 2021, were not retrospective and thus not applicable to the assessment year 2018-2019. The Tribunal's decision was based on binding precedents and a detailed examination of the legal principles involved.
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