2022 (3) TMI 972 - AT - Income Tax

Addition u/s.36(1)(va) read with section 43B - delayed payment of employees contribution to EPF ESIC etc - HELD THAT - Finance Act, 2021 has inserted Explanation 2 below section 36(1)(va) providing that the provisions of section 43B shall not apply for the purpose of determining the due date under this clause w.e.f. 01.04.2021. The effect of this amendment is that if the amount of employees contribution towards EPF, ESIC, etc is delayed by an employer beyond the due date under the respective Acts, the disallowance will be called for notwithstanding the fact that it was deposited before the due date u/s 139 of the Act. The Memorandum explaining the provisions of the Finance Bill, 2021, provides that this amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to assessment year 2021-2022 and subsequent assessment years. Since the assessment year under consideration, namely, 2017- 18 is anterior to the amendment carried out with effect from A.Y. 2021-22, I hold that the position of law as set out by various Hon ble High Courts including the one in CIT vs. Nipso Polyfabriks Ltd. 2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT squarely applies to the facts and circumstances of the instant case thereby not warranting any disallowance as the amount in question was admittedly deposited before due date u/s 139(1) - Appeal of assessee allowed.

Summary

Issues:
Delay in filing appeal due to Covid pandemic, Disallowance of employees' contribution under section 36(1)(va) read with section 43B of the Income-tax Act, 1961.

Analysis:
1. Delay in filing appeal due to Covid pandemic:
The appellant filed an appeal against the order passed by the CIT(Appeals) - National Faceless Appeal Centre with a delay of one day. The appellant attributed the delay to the Covid pandemic and sought condonation. Referring to judgments by the Hon'ble Supreme Court regarding the extension of limitation due to Covid-19, the Tribunal decided to condone the delay and admitted the appeal for disposal on merits.

2. Disallowance of employees' contribution under section 36(1)(va) read with section 43B:
The main issue in the appeal was the disallowance of ?14,90,362 made by the Assessing Officer under section 36(1)(va) read with section 43B of the Income-tax Act, 1961. The appellant had delayed depositing the Employees Provident Fund (EPF) and Employee State Insurance Contribution (ESIC), leading to the disallowance. However, the Tribunal noted that the appellant had deducted the employees' share of EPF and ESIC but paid it after the due date but before the time for filing the return under section 139(1) of the Act. Citing precedents, including the judgment by the Himachal Pradesh High Court, the Tribunal held that deductions under section 36(1)(va) are permissible for contributions deposited after the due date but before the filing deadline under section 139.

3. The Tribunal also highlighted the amendment brought by the Finance Act, 2021, inserting Explanation 2 under section 36(1)(va), which exempts the application of section 43B for determining the due date. This amendment, effective from April 1, 2021, mandates disallowance if the employees' contribution is delayed beyond the due date under respective Acts, even if deposited before the due date under section 139. However, since the assessment year in question was 2017-18, predating the amendment, the Tribunal applied the existing legal position and allowed the deduction, directing the deletion of the addition made by the Assessing Officer.

In conclusion, the Tribunal allowed the appeal, emphasizing that the appellant's delayed deposit of employees' contribution was permissible under the law applicable to the assessment year 2017-18, and the disallowance was unwarranted.