2022 (3) TMI 1129 - AT - Income Tax

Late payment of ESI/PF - employees' contribution to ESI and PF had been deposited well before the due date of filing of return of income u/s. 139(1) - scope of amendment - HELD THAT - CIT(A) has referred to the amendment brought in by the Finance Act, 2021 wherein an explanation has been introduced to Sections 36(1)(va) and u/s.43B of the Income Tax Act. It is a consistent position across various Benches of the Tribunal including Chandigarh Benches that the amendment which has been brought in by the Finance Act, 2021 shall apply w.e.f. assessment year 2021-22 and subsequent assessment years and the impugned assessment year being assessment year 2018-19, the said amendment cannot be applied in the instant case. Addition made by way of adjustment while processing the return of income u/s. 143(1) so made by the CPC towards the deposit of employees' contribution towards ESI and PF paid before the due date of filing of the return of income u/s.139(1) - Decided in favour of assessee.

Summary

Issues:
Disallowance of ESI/PF deposit before due date of filing return of income.
Quantum of disallowance dispute.
Amendment applicability and retrospective effect.

Analysis:
1. The appeal was against the disallowance of ESI/PF deposit despite being made before the due date of filing the return of income. The assessee argued that since the payments were made before the due date, no disallowance should be imposed under section 36(1)(va) of the Income Tax Act. The assessee cited relevant court decisions to support their claim.
2. The Ld. AR emphasized that the payments were made before the due date of filing the return of income, which should prevent any disallowance. The Ld. CIT(A) relied on the amendment introduced by the Finance Act, 2021, inserting Explanation-5 to section 36(1)(va). However, it was argued that this amendment should be prospective and not retrospective, as clarified by various Tribunal decisions.
3. The Ld. DR contended that the amendment clarified that employees' contributions must be paid within the specified due dates to qualify for deduction under section 36(1)(va). The Ld. CIT(A) upheld the disallowance, citing the amendment's clarity on the matter.
4. The ITAT considered the divergent views of different High Courts and noted that the jurisdiction over the Assessing officer lies with the Punjab & Haryana High Court. The ITAT emphasized that the amendment by the Finance Act, 2021 should apply prospectively from assessment year 2021-22, not retrospectively. Hence, the disallowance of the ESI/PF deposit made before the due date of filing the return was directed to be deleted.
5. Ultimately, the ITAT allowed the appeal of the assessee, concluding that the disallowance of the ESI/PF deposit before the due date of filing the return was not justified. The ITAT's decision was based on the legal position, relevant court decisions, and the prospective application of the amendment introduced by the Finance Act, 2021.

This detailed analysis covers the issues raised in the judgment, including the arguments presented, legal interpretations, and the final decision rendered by the ITAT.