2022 (3) TMI 1127 - AT - Income Tax

Belated remittance of employees share of ESIC and PF u/s. 43B r.w.s. 36(1)(va) - HELD THAT - As decided in M/S JANA URBAN SERVICES FOR TRANSFORMATION PVT. LTD. 2021 (10) TMI 842 - ITAT BANGALORE since the explanation as provided in Finance Act 2021 prescribes that the amendment in both sec.36(va) as well as 43B by inserting corresponding explanation that although impugned PF comes in the form of provision and the same is applicable from 1/4/2021 onwards only. In the present case we are concerned with the asst. year 2017-18 and the amended provision could not be applied retrospectively as it is only applicable w.e.f 1/4/2021. Being so no disallowance could be made by the AO in respect of PF/ESI paid within the due date of filing return of income. Though, it was beyond the date mentioned in the respective Act. This view of ours is supported by various judgment relied on by the ld.AR. Accordingly the appeal of the assessee is allowed.

Summary

Issues:
Disallowance of employees' share of ESIC and PF under section 43B r.w.s. 36(1)(va) of the Income-tax Act for the assessment year 2018-19.

Analysis:

Issue 1: Disallowance of employees' share of ESIC and PF under section 43B r.w.s. 36(1)(va)
The appeal was against the disallowance of ?1,25,50,590 towards belated remittance of employees' share of ESIC and PF by the revenue authorities. The assessee, engaged in works contract business, filed the return of income before the due date but the payments were considered belated by the authorities. The AR argued that the payments were made before the due date of filing the return of income u/s. 139(1) and should be allowable u/s. 43B of the Act. The Tribunal referred to a similar case where it was held that if the contribution is made before the due date for filing the return of income under section 139(1) of the IT Act, the employer is entitled to deduction. The Tribunal also cited judgments supporting the view that the deduction for payment of tax is permissible if the statutory liability of payment of provident fund or other contribution funds is paid before the due date applicable when submitting returns of income. The AR further highlighted the deletion of the second proviso to section 43B by the Finance Act 2003, supporting the case of the assessee. The Tribunal agreed with the arguments presented by the AR and allowed the appeal based on the precedent set by previous judgments.

Conclusion:
The Tribunal allowed the appeal, stating that no disallowance could be made by the AO in respect of PF/ESI paid within the due date of filing the return of income, even if it was beyond the date mentioned in the respective Act. The Tribunal relied on various judgments and the explanation provided in the Finance Act 2021 to support its decision.