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2022 (4) TMI 497 - AT - Income TaxLate payment of Employee contribution of PF and ESI - Revenue has disputed that the employees contribution received by the assessee would be treated as income of the assessee because the same has not been deposited in the Government account within the due date as prescribed under the respective Acts - whether by the Finance Act, 2021, the provisions of Section 36(1)(va) by inserting the Explanation 2 r.w.s. 43B of the Act have been amended, whereby it is clarified that the provisions of Section 43B of the Act shall not apply and shall be deemed ought to have been applied for the purpose of determining the due date under this clause? - HELD THAT - This amendment has brought in the statute book to provide certainty about the applicability of provisions of Section 43B in spite of belated payment of employees contribution. We also noted from the memorandum explaining the provisions to Finance Act, 2021, wherein relevant Clauses to said memorandum clearly intended that the amendment shall take effect from 01.04.2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years. In the present case also, before insertion of Explanation 2 to Section 36(1)(va) of the Act, there is ambiguity regarding due date of payment of employees contribution on account of provident fund and ESI, whether the due date is as per the respective Acts or up to the due date of filing of return of income of the assessee. As noted in the case of CIT vs. Vatika Township Pvt. Ltd 2014 (9) TMI 576 - SUPREME COURT amendment made to a taxing statute can be said to be intended to remove hardship only of the assessee and not of the Department. Imposing of a retrospective levy on the assessee would cause undue hardship and for that reason Parliament specifically chose to make the proviso affective from a particular date. In the present case also, the amendment brought out by Finance Act, 2021 by way of Explanation-2 to s. 36(1)(va) of the Act along with Explanation-5 to s. 43B of the Act w.e.f. 01.04.2021 i.e. for and from assessment year 2021-22, cannot be applied retrospectively. Thus, from the above, it is clear that the amendment brought in the statute i.e., by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the Act amended by inserting Explanation 2 is prospective and not retrospective. Hence, the amended provisions of Section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue of assessee s appeal is allowed.
Issues:
1. Disallowance of employee's contribution to PF & ESI. 2. Applicability of amended provisions of section 36(1)(va) r.w.s. 43B of the Act. Analysis: Issue 1: Disallowance of employee's contribution to PF & ESI - The assessee, a private limited company, filed its return of income for A.Y. 2018-19, with the CPC processing it u/s 143(1) determining total income differently. - The CPC disallowed a sum for late payment of Employee PF and ESI contributions. - The CIT(A) held that late payments of employees' contributions are to be added to the assessee's income. - CIT(A) relied on judicial decisions and the Finance Bill 2021 clarifying the provisions of section 36(1)(va). Issue 2: Applicability of amended provisions of section 36(1)(va) r.w.s. 43B of the Act - The assessee appealed the CIT(A)'s order, arguing that the late payments were made before the due date of filing the return u/s 139(1) of the Act. - The assessee cited a jurisdictional ITAT order supporting their claim. - The Tribunal considered the amendment brought by the Finance Act 2021, clarifying the applicability of Section 43B despite belated payments. - The Tribunal noted that the amendment is prospective and not retrospective, applying from A.Y. 2021-22 onwards. - The Tribunal ruled in favor of the assessee, allowing the appeal. In conclusion, the Tribunal allowed the appeal, holding that the amended provisions of Section 36(1)(va) r.w.s. 43B of the Act are not applicable for A.Y. 2018-19 but will apply from A.Y. 2021-22 onwards. The decision was based on the clarification provided by the Finance Act 2021, ensuring the prospective nature of the amendment.
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