2022 (3) TMI 1272 - AT - Income Tax

Delay in payment of employees contribution of PF u/s 36(1)(va) - Assessee submitted that payment made within due date of filing the return of income u/s 139(1) of the Act for the year under consideration - DR contention is that as per sec.43B(b) of the Income-tax Act and explanatory notes to Finance Act 1983, that Employees Contribution was never intended to be covered by sec.43B - HELD THAT - As relying on M/S JANA URBAN SERVICES FOR TRANSFORMATION PVT. LTD. 2021 (10) TMI 842 - ITAT BANGALORE find no merit in the argument of the ld. DR 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.

Issues Involved:
1. Error in passing the order by CIT(A).
2. Addition without considering submissions of the Appellant.
3. Addition of ?1,01,15,391 in lieu of ESI and PF payments under Sec. 36(1)(va).
4. Consideration of timely ESI and PF payments.
5. Full payment of ESI and PF without dues.
6. Addition of TDS amount on account of mismatch.
7. TDS amount filed as per 26AS.
8. Jurisdictional High Court judgment in CIT vs. Sabari Enterprises.
9. Arbitrary, excessive, and unreasonable disallowance.
10. Levy of interest against the Appellant.

Detailed Analysis:
1. Error in Passing the Order by CIT(A)
The appellant contended that the CIT(A) erred in passing the order without proper consideration of the facts and submissions presented. This issue was a general grievance against the procedural handling of the case by the CIT(A).

2. Addition Without Considering Submissions of the Appellant
The appellant argued that the CIT(A) made additions without duly considering the submissions provided by the appellant. This issue highlighted a lack of due process and fair consideration in the assessment proceedings.

3. Addition of ?1,01,15,391 in Lieu of ESI and PF Payments Under Sec. 36(1)(va)
The primary issue was the disallowance of employee contributions to provident fund (PF) and ESI amounting to ?1,01,15,391 under Section 43B read with Section 36(1)(va) of the Income-tax Act. The revenue authorities disallowed these payments due to delayed payment under the respective acts. The CIT(A) confirmed the AO's order, which led to the appeal.

4. Consideration of Timely ESI and PF Payments
The appellant claimed that the payments for ESI and PF were made within the stipulated time and there was no delay. The appellant argued that these payments were made before the due date of filing the return of income under Section 139(1) and should be allowable under Section 43B of the Income-tax Act.

5. Full Payment of ESI and PF Without Dues
The appellant emphasized that the ESI and PF payments were made in full and there were no outstanding dues. This was to counter the revenue's claim of delayed payments and to establish compliance with the statutory requirements.

6. Addition of TDS Amount on Account of Mismatch
The appellant contended that the CIT(A) erred in adding the TDS amount due to a mismatch. The appellant argued that the TDS amount was correctly filed as per Form 26AS, and there should not have been any addition on this ground.

7. TDS Amount Filed as per 26AS
The appellant reiterated that the TDS amount was filed accurately as per Form 26AS, and there should be no question of a mismatch. This was to reinforce the argument against the addition made by the CIT(A).

8. Jurisdictional High Court Judgment in CIT vs. Sabari Enterprises
The appellant argued that the issue regarding ESI and PF payments was covered by the jurisdictional High Court judgment in CIT vs. Sabari Enterprises. The appellant relied on this precedent to support their claim for the allowance of the ESI and PF payments made before the due date of filing the return of income.

9. Arbitrary, Excessive, and Unreasonable Disallowance
The appellant claimed that the disallowance was arbitrary, excessive, and unreasonable. This issue was raised to highlight the perceived unfairness and lack of justification in the disallowance made by the revenue authorities.

10. Levy of Interest Against the Appellant
The appellant contended that the CIT(A) erred in confirming the levy of interest against them. This issue was raised to challenge the additional financial burden imposed due to the disallowance.

Tribunal's Findings:
The Tribunal noted that the issue of disallowance of employee contributions to PF and ESI was covered by the order in the case of M/s. Jana Urban Services For Transformation Pvt. Ltd. v. DCIT, CPC, where it was held that such contributions made before the due date of filing the return of income under Section 139(1) could not be disallowed under Section 36(1)(va).

The Tribunal referred to several judgments, including those of the Karnataka High Court in CIT v. Sabari Enterprises and Essac Teraoka (P.) Ltd. v. Dy. CIT, which supported the appellant's claim. These judgments established that contributions made before the due date of filing the return of income should be allowed as deductions.

The Tribunal also addressed the argument regarding the applicability of the amendments introduced by the Finance Act 2021, clarifying that these amendments were prospective and not applicable to the assessment year in question.

Conclusion:
The Tribunal allowed the appeal by the assessee, holding that no disallowance could be made for PF/ESI contributions paid within the due date of filing the return of income, even if they were beyond the date mentioned in the respective acts. The Tribunal's decision was based on various precedents and the interpretation of the relevant statutory provisions.

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