2022 (4) TMI 533 - AT - Income Tax

Disallowance made in respect of PF ESI in respect employee s contribution u/s. 36(1)(va) r.w.s. 2(24)(x) - assessee has not remitted the employees contribution on the due date as prescribed by the PF ESI Act - HELD THAT - We find that the CIT(A) erred in referring to the Amendment brought in by Finance Act 2021 w.e.f. 01.04.2021 which inserted an Explanation to section 36(1)(va) and section 43B of the Act and erred in holding it as clarificatory and so, retrospective in nature. Whereas we note that it is only prospective in nature and cannot disturb the binding judicial precedents in favour of assessee. However, we find that any way this issue is no longer res integra as held by this Tribunal in the case of Lumino Industries Ltd. 2021 (11) TMI 926 - ITAT KOLKATA wherein assessee s favour view was taken by the Tribunal after holding that the amendment brought in by Finance Act, 2021 w.e.f 1.04.2021 is prospective in operation and so will be in force from AY 2021-22 onwards and not retrospective. Assessee is to be allowed deduction in respect of employees contribution to PF ESI provided these are paid before the due date of filing the return of income. On the basis of records before us we are unable to ascertain the date of payments of these dues. Therefore, we are restoring the matter back to the file of the AO to examine and allow the same if these are paid before due date of filing the return of income - Decided in favour of assessee.

Summary

Issues involved: Appeal against disallowance of PF & ESI contribution under section 36(1)(va) r.w.s. 2(24)(x) of the Income-tax Act, 1961 for AY 2019-20.

The judgment dealt with an appeal against the disallowance of PF & ESI contribution under section 36(1)(va) r.w.s. 2(24)(x) of the Income-tax Act, 1961 for AY 2019-20. The assessee contested the action of the Ld. CIT(A) in upholding the disallowance due to delayed remittance of employees' contribution. The key contention was the retrospective or prospective nature of the amendment brought in by the Finance Act 2021, effective from 01.04.2021. The Tribunal noted that the CIT(A) erred in considering the amendment as retrospective, contrary to the legislative intent. The Tribunal relied on the decision in Lumino Industries Ltd. case, emphasizing that the amendment was prospective and applicable from AY 2021-22 onwards. The Tribunal referenced the Explanation 2 to Section 36(1)(va) inserted by the amendment, clarifying the non-applicability of Section 43B for determining the due date. The judgment highlighted the importance of legislative intent in determining the retrospective or prospective nature of amendments, following the principles laid down by the Hon'ble Supreme Court. The Tribunal concluded that until AY 2021-22, the view in favor of the assessee based on jurisdictional High Court decisions would prevail. Consequently, the impugned order was set aside, directing the AO to allow the deduction for employees' contribution shares towards ESI and PF if paid before the due date of filing the return under section 139(1) of the Act.

The judgment further noted that the assessee should be allowed a deduction for employees' contribution to PF & ESI if paid before the due date of filing the return of income. However, due to insufficient information on the payment dates in the records, the matter was remitted back to the AO for verification and appropriate action. As a result, the orders of the authorities below were set aside, and the matter was restored to the AO for further examination. Ultimately, the appeal of the assessee was allowed for statistical purposes, emphasizing the importance of timely payment of employees' contributions to avail of deductions under the relevant provisions of the Income-tax Act, 1961.