2022 (3) TMI 961 - AT - Income Tax

Delayed payments of employees' contribution to ESI PF account within the due date provided under the PF ESI Act - HELD THAT - As relying on Lumino Industries Limited 2021 (11) TMI 926 - ITAT KOLKATA if employees' contribution received by an assessee and paid to ESI and PF accounts before the due date of filing of the return, then the assessee will be eligible to claim the deduction of such amounts. With the assistance of ld. representatives, we have specifically gone through the record and find that payments have been made within the due dates of filing of the return. With the above observation, these appeals of the assessee are treated as allowed.

Summary

Issues involved:
Whether the assessee is entitled to deduction of employees' contribution paid before the due date of filing the return.

Analysis:
The appeals filed by the assessee challenged the orders of the Commissioner of Income Tax (Appeals) regarding the deduction of employees' contribution paid before the due date of filing the return for A.Y. 2018-19 and 2019-20. The Assessing Officer disallowed the claim based on section 36(1)(va) read with section 2(24)(x) of the Income Tax Act, as the appellant failed to make the payments within the due date provided under the PF & ESI Act. The appellant argued that the issue was covered by judgments of the Calcutta High Court and other cases. The Senior D.R. contended that the Finance Act, 2021 amended sections 36(1)(va) and 43B, making it prospective, not allowing deductions for belated payments.

The ITAT, Kolkata examined the amendment brought by the Finance Act, 2021, in the case of Lumino Industries Limited & Others. The amendment disallowed employees' contribution if not made within the due date as per PF and ESI Acts, effective from A.Y. 2021-22 onwards. The ITAT noted that before the amendment, the Calcutta High Court held that such payments made before the due date of filing the return were allowable deductions. The ITAT analyzed the retrospective or prospective nature of the amendment, following the legislative intent as per Supreme Court precedents. The ITAT concluded that the amendment was prospective, effective from April 1, 2021, and would apply to A.Y. 2021-22 and subsequent years, upholding the High Court's view in favor of the assessee.

The ITAT specifically stated that if employees' contribution was received and paid to ESI and PF accounts before the due date of filing the return, the assessee could claim deductions for such amounts. Upon careful review of the records confirming timely payments, the ITAT allowed the appeals of the assessee, deleting the disallowances in both cases. Consequently, both appeals of the assessee were allowed, with the orders pronounced on March 9th, 2022.