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2022 (2) TMI 912 - AT - Income TaxBelated contribution towards ESI/PF - assessee s failure to pay the employee s contribution of PF/ESI within the prescribed due dates as per Section 36(1)(va) - Scope of amendment to section 36(1)(va) and section 43B - HELD THAT - In the instant case, admittedly and undisputedly, the employees contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act. Further, the ld D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . In the instant case, the impugned assessment year is assessment year 2019-20 and therefore, the said amended provisions cannot be applied in the instant case. Addition towards the deposit of the employees s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted. - Decided in favour of assessee.
Issues Involved:
1. Confirmation of additions in respect of employees' contribution towards ESI/PF. 2. Applicability of Section 36(1)(va) and Section 43B of the Income Tax Act. 3. Retrospective effect of the amendments introduced by the Finance Act, 2021. Issue-wise Detailed Analysis: 1. Confirmation of Additions in Respect of Employees' Contribution towards ESI/PF: The assessee filed its return of income declaring a total income of ?40,86,090, which was processed under Section 143(1). The Centralized Processing Centre (CPC) made a disallowance of ?2,36,373 towards employees' contribution to ESI and PF, as these were not deposited within the prescribed due dates under Section 36(1)(va). The CIT(A) confirmed this disallowance. The assessee contended that the contributions were deposited before the due date of filing the return of income and relied on various judicial precedents, including decisions from the Hon’ble Rajasthan High Court. 2. Applicability of Section 36(1)(va) and Section 43B: The assessee argued that no disallowance under Section 36(1)(va) should be made if the contributions were deposited before the due date of filing the return of income, citing decisions such as CIT vs. Rajasthan State Beverages Corporation Ltd. and CIT vs. State Bank of Bikaner and Jaipur. The Revenue, however, maintained that the contributions must be deposited within the due dates specified in the respective Acts, referencing the amendment brought by the Finance Act, 2021, which clarifies that any delay in deposit, even by a single day, disallows the deduction. 3. Retrospective Effect of the Amendments Introduced by the Finance Act, 2021: The assessee contended that the amendment to Section 36(1)(va) by the Finance Act, 2021, which took effect from 1st April 2021, should not apply to the assessment year 2019-20. The Tribunal noted that the explanatory memorandum to the Finance Act, 2021, explicitly states that the amendments apply from the assessment year 2021-22 onwards. Therefore, the amended provisions could not be applied retrospectively to the assessment year 2019-20. The Tribunal also referenced similar views taken by other benches, such as in the case of Shri Gopalkrishna Aswini Kumar vs. ACIT. Tribunal's Decision: The Tribunal, relying on the consistent decisions of the Hon’ble Rajasthan High Court and other judicial precedents, held that employees' contributions to ESI and PF deposited before the due date of filing the return of income under Section 139(1) could not be disallowed under Section 43B read with Section 36(1)(va). The Tribunal directed the deletion of the addition made by the CPC amounting to ?2,36,373. The appeal of the assessee was allowed. Order Pronouncement: The order was pronounced in the open Court on 11/11/2021.
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