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2022 (4) TMI 90 - AT - Income TaxDisallowance on account of late payments towards EPF and ESI u/s 36(1)(va) - Deposits were made prior to filing of return of income u/s. 139(1) - HELD THAT - It is not in dispute that the assessee deposited the contribution of PF ESI belatedly in terms of section 36(1)(va) of the Act. However, the said deposits were made prior to filing of return of income u/s. 139(1) of the Act. It is noticed that an identical issue having similar facts has already been adjudicated in RAJA RAM 2021 (11) TMI 370 - ITAT CHANDIGARH wherein addition on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s. 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition/disallowance of ?4425/- for delayed payment of employee's contribution to Welfare Funds. 2. Distinction between provisions of section 36(1)(v) r.w.s. 43B and section 36(1)(va) r.w.s. 2(24)(x) of the Income Tax Act, 1961. 3. Ignoring the amendment by Finance Act, 2021, and Circular No. 22/2015 issued by the CBDT. 4. Tax effect below the prescribed limit of ?50,00,000/- as per Circular No. 17/2019 issued by CBDT. Issue-wise Detailed Analysis: 1. Deletion of Addition/Disallowance of ?4425/- for Delayed Payment of Employee's Contribution to Welfare Funds: The primary grievance of the Department was the deletion of the disallowance of ?4425/- made by the Assessing Officer (A.O.) due to late payments towards EPF and ESI under section 36(1)(va) of the Income Tax Act, 1961. The Ld. Counsel for the Assessee argued that this issue was already covered by the ITAT, Chandigarh Bench's common order dated 20/10/2021 in similar cases, where it was held that such contributions, if made before the filing of the return under section 139(1), should not be disallowed. The Tribunal, after considering the submissions and material on record, agreed with the findings of the Ld. CIT(A) and upheld the deletion of the disallowance. 2. Distinction Between Provisions of Section 36(1)(v) r.w.s. 43B and Section 36(1)(va) r.w.s. 2(24)(x) of the Income Tax Act, 1961: The Department contended that the Ld. CIT(A) erred in law by not distinguishing between the provisions of section 36(1)(v) r.w.s. 43B and section 36(1)(va) r.w.s. 2(24)(x). The Tribunal noted that various Benches of the ITAT had consistently held that employee contributions deposited before the due date of filing the return should not be disallowed, even if paid after the due date prescribed under the respective statutes. The Tribunal referenced several cases, including the decision of the Hon'ble Calcutta High Court in Vijayshree Ltd., which supported this view. 3. Ignoring the Amendment by Finance Act, 2021, and Circular No. 22/2015 Issued by the CBDT: The Department also argued that the Ld. CIT(A) ignored the amendment by Finance Act, 2021, which inserted Explanation 1 & 2 below section 36(1)(va), clarifying the treatment of delayed payments. The Tribunal observed that this amendment was prospective, effective from 01.04.2021, and not applicable to the assessment years in question. The Tribunal cited various decisions where it was held that the amendment does not apply retrospectively. 4. Tax Effect Below the Prescribed Limit of ?50,00,000/- as per Circular No. 17/2019 Issued by CBDT: The Tribunal noted that the tax effect in this appeal was below the prescribed limit of ?50,00,000/- as per Circular No. 17/2019 issued by CBDT. The A.O. mentioned that the case fell under the exceptions provided in para 10(b) of the Circular, but no specific details were provided to substantiate this claim. Consequently, the Tribunal found the appeal not maintainable due to the low tax effect. Conclusion: The Tribunal dismissed the Department's appeal, upholding the Ld. CIT(A)'s order deleting the disallowance of ?4425/-. The Tribunal emphasized that the employee contributions deposited before the due date of filing the return should not be disallowed, and the amendment by Finance Act, 2021, does not apply retrospectively. Additionally, the appeal was not maintainable due to the low tax effect.
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