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2022 (3) TMI 124 - AT - Income TaxDisallowance of employees' contribution made to the respective funds of the Government under PF ESI Act - assessee has not remitted the employees' contribution on the due date as prescribed by the PF ESI Act, the contribution made belatedly cannot be allowed - HELD THAT - As relying on LUMINO INDUSTRIES LTD 2021 (11) TMI 926 - ITAT KOLKATA we direct the AO to allow the claim of deduction in respect of employees contribution shares towards ESI, PF, by the assessee before the due date of filing of return u/s. 139(1) we are inclined to allow the appeal of the assessee and direct the A.O. to delete the addition and hold that the Amendment brought in Finance Act 2021 w.e.f. 01.04.2021 by inserting an Explanation to section 36(1)(va) and section 43B of the Act is prospective in nature in nature and would apply from AY 2021-22 onwards and, therefore, the amendment is not applicable to this assessment year (Assessment Year 2018-19) under consideration. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of employees' contribution to PF and ESI due to delayed payment. 2. Retrospective or prospective applicability of the amendment brought by Finance Act, 2021 to Section 36(1)(va) and Section 43B of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Disallowance of Employees' Contribution to PF and ESI: The primary issue in this appeal is the disallowance of employees' contribution to Provident Fund (PF) and Employee State Insurance (ESI) due to delayed payment. The authorities below disallowed the contribution because it was not remitted within the due date prescribed under the PF and ESI Acts. However, the assessee contended that since the remittance was made before the filing of the return of income under Section 139 of the Income Tax Act, 1961, no disallowance should be made. The CIT(A) confirmed the disallowance, referencing the amendment brought by the Finance Act, 2021, which inserted an Explanation to Section 36(1)(va) and Section 43B, and held it as clarificatory and retrospective in nature. 2. Retrospective or Prospective Applicability of the Amendment: The core of the dispute lies in whether the amendment brought by the Finance Act, 2021, is retrospective or prospective. The assessee argued that the amendment is prospective and should apply from AY 2021-22 onwards, citing the Tribunal's decision in Lumino Industries Ltd. vs. ACIT, which held that the amendment is prospective. The CIT(A) held the amendment to be retrospective, thus confirming the disallowance. Tribunal's Analysis and Decision: Disallowance of Employees' Contribution to PF and ESI: The Tribunal noted that the assessee had remitted the employees' contribution to PF and ESI before the due date of filing the return of income under Section 139(1) of the Act. The AO and CIT(A) disallowed the deduction based on the CBDT Circular No. 22/2015 and judicial precedents, which held that employees' contribution can only be allowed if deposited within the due date prescribed under the respective Acts. Retrospective or Prospective Applicability of the Amendment: The Tribunal examined the legislative intent behind the amendment brought by the Finance Act, 2021. It referred to the "Notes on Clauses" of the Finance Bill, 2021, which explicitly stated that the amendments would take effect from 1st April 2021 and apply to AY 2021-22 and subsequent years. The Tribunal also considered the Supreme Court's decision in M/s. Snowtex Investment Ltd. and M/s. Vatika Township Pvt. Ltd., which emphasized that the legislative intent should be clear and unambiguous regarding the retrospective or prospective nature of amendments. Conclusion: The Tribunal concluded that the amendment brought by the Finance Act, 2021, is prospective and applies from AY 2021-22 onwards. Therefore, for the assessment year under consideration (AY 2018-19), the binding judicial precedents, including the decisions of the Hon'ble Jurisdictional Calcutta High Court, which allowed the deduction if the payment was made before the due date of filing the return, would apply. The Tribunal set aside the order of the CIT(A) and directed the AO to allow the deduction of the employees' contribution to PF and ESI, as the remittance was made before the due date of filing the return under Section 139(1) of the Act. Final Judgment: The appeal of the assessee was allowed, and the Tribunal directed the AO to delete the addition, holding that the amendment brought by the Finance Act, 2021, is prospective and not applicable to AY 2018-19.
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