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2022 (4) TMI 665 - AT - Income TaxDisallowance 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, the contribution made belatedly cannot be allowed - 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. AO to allow the deduction subject to verification as to whether the assessee has made the employee s contribution before the due date of filing of return of income. If the employees contribution was deposited before the due date of filing of return of income, then the AO to allow the deduction in respect of employees contribution towards PF and ESI. Therefore, we set aside the orders of the authorities below and restore back the matter to the file of AO to act accordingly. Appeal of the assessee is allowed for statistical purposes.
Issues:
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. Analysis: The appeal pertains to the disallowance made by the Ld. CIT(A) regarding the PF & ESI contribution in respect of employee's contribution under section 36(1)(va) r.w.s. 2(24)(x) of the Income-tax Act, 1961. The authorities contended that since the assessee did not remit the employees' contribution on the due date as prescribed by the PF & ESI Act, the belated contribution cannot be allowed. However, the ITAT Kolkata found that the CIT(A) erred in considering the Amendment by Finance Act 2021 as retrospective, while it is prospective. The Tribunal referred to the decision in the case of Lumino Industries Ltd. vs. ACIT, where it was held that the amendment is prospective and will be in force from AY 2021-22 onwards. The Tribunal emphasized that the legislative intent is crucial in determining the retrospective or prospective nature of an amendment. The ITAT Kolkata further discussed the amendment brought in by the Finance Act 2021, which clarified the applicability of Section 43B in cases of belated payment of employees' contribution. Referring to legal precedents and the legislative intent, the Tribunal concluded that the amendment is prospective and should be applied from AY 2021-22 onwards. The Tribunal highlighted that the decision of the Jurisdictional High Court in favor of the assessee holds good until AY 2021-22, and the decision of the Delhi High Court in favor of revenue did not consider other decisions favoring the assessee. In light of the above analysis, the ITAT Kolkata set aside the order of the Ld. CIT(A) and directed the AO to allow the deduction for employees' contribution towards ESI and PF if made before the due date of filing the return u/s 139(1) of the Act. The appeal of the assessee was allowed, and the matter was restored back to the AO for verification and necessary action. Therefore, the ITAT Kolkata allowed the appeal of the assessee for statistical purposes, emphasizing the importance of timely employee contribution for PF and ESI to claim deductions under the Income-tax Act, 1961.
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