2022 (3) TMI 874 - AT - Income Tax

Delay deposit of employees contribution to PF/ESI - Amount for having not paid the same on or before the prescribed due dates as per section u/s. 36(1)(va) of the Act - Payment before furnishing the return of income under section 139(1) - HELD THAT - In the present case it is not in dispute that the assessee deposited the contribution of PF ESI belatedly in terms of section 36(1)(va). However the said deposits were made prior to filing of return of income u/s. 139(1) - It is noticed that an identical issue having similar facts has already been adjudicated in RAJA RAM 2021 (11) TMI 370 - ITAT CHANDIGARH wherein addition 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. Adjustment to the return of income by adding a sum due to the failure to deposit employees' contribution to PF/ESI within the prescribed due dates.
2. Interpretation of section 36(1)(va) and section 43B of the Income Tax Act, 1961, as amended by the Finance Act, 2021.
3. Retrospective applicability of the amendment to section 36(1)(va) and section 43B.

Issue-Wise Detailed Analysis:

1. Adjustment to the Return of Income:
The solitary issue in the appeal concerns the adjustment made to the return of income filed by the assessee. The adjustment involved adding ?87,22,105/- due to the assessee's failure to deposit employees' contributions to PF/ESI on or before the prescribed due dates as per section 36(1)(va) of the Income Tax Act, 1961. The assessee had paid the contributions before the due date for filing the return of income under section 139(1), but not within the due dates prescribed under the respective Acts.

2. Interpretation of Section 36(1)(va) and Section 43B:
The Revenue Authorities based the adjustment on amendments to section 36(1)(va) and section 43B effected by the Finance Act, 2021. These amendments clarified that the due date for payment of employers' contributions prescribed under section 43B before the due date of filing the return of income under section 139(1) would not apply to the allowability of employees' contributions as per section 36(1)(va). The amendment specified that for the allowability of employees' contributions to PF/ESI under section 36(1)(va), the contributions must be paid by the due dates specified in the respective Acts.

3. Retrospective Applicability of the Amendment:
The impugned assessment year was before the amendment was brought into the statute (i.e., assessment year 2019-20). The Revenue contended that the amendment was clarificatory and hence retrospective in operation. However, the assessee argued that the issue was covered by previous ITAT decisions, which held that employees' contributions paid before the due date of filing the return of income under section 139(1) were allowable as deductions.

Judgment Analysis:

The ITAT considered submissions from both parties and reviewed the material on record. The Tribunal noted that identical issues with similar facts had been adjudicated in previous cases, including Raja Ram Vs. ITO, Yamunanagar. In those cases, it was held that employees' contributions to PF/ESI, though paid after the due dates prescribed under the respective Acts but before the due date for filing the return of income under section 139(1), were allowable as deductions.

The Tribunal referenced decisions from various High Courts, including the Hon'ble Calcutta High Court in the case of Vijayshree Ltd., which followed the Supreme Court's decision in CIT vs. Alom Extrusion Ltd. The Calcutta High Court held that the amendment to section 43B by the Finance Act, 2003, was curative and applied retrospectively. Therefore, the deletion of the amount paid by employees' contributions beyond the due date was justified.

The Tribunal also cited decisions from other ITAT Benches, including ITAT Hyderabad and ITAT Jodhpur, which supported the view that employees' contributions paid before the due date of filing the return of income under section 139(1) were allowable as deductions, even if paid after the due dates prescribed under the respective Acts.

Based on these precedents, the Tribunal concluded that the disallowances sustained by the Ld. CIT(A) were not justified. The Tribunal deleted the impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees' contributions to PF/ESI made before the due date of filing the return of income under section 139(1).

Conclusion:
The appeal of the assessee was allowed, and the disallowances sustained by the Ld. CIT(A) were deleted. The Tribunal's decision was based on the consistent view that employees' contributions paid before the due date of filing the return of income under section 139(1) were allowable as deductions, irrespective of the due dates prescribed under the respective Acts.

← Previous Next →