2022 (4) TMI 847 - AT - Income Tax

Employees contribution towards ESI/PF - contribution with a delay of few days from the due dates mentioned in the respective Acts however the same was deposited well before the due date of filing of return of income under section 139(1) - HELD THAT - In the instant case admittedly and undisputedly the employees contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) - D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill 2021 however we find that there are express wordings in the said memorandum which says these amendments will take effect from 1st April 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . In the instant case the impugned assessment year is assessment year 2019-20 and therefore the said amended provisions cannot be applied in the instant case - Thus addition towards the deposit of the employee s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted. - Decided in favour of assessee.

Issues Involved:
1. Disallowance of delayed payment of employee’s contribution towards ESI/PF.
2. Applicability of Section 36(1)(va) and Section 43B amendments by Finance Act, 2021.
3. Scope of adjustments under Section 143(1)(a)(iv).

Detailed Analysis:

1. Disallowance of Delayed Payment of Employee’s Contribution towards ESI/PF:
The primary issue revolves around the disallowance of ?70,982/- for delayed payment of employee’s contribution towards ESI/PF. The assessee filed its return of income declaring ?88,84,277/-, which was later adjusted to ?89,55,259/- by the Assistant Director, Income Tax, CPC, due to the delayed payment. The CIT(A) confirmed this disallowance under Section 143(1) of the Income Tax Act, 1961, citing non-compliance with the due dates prescribed under Section 36(1)(va).

2. Applicability of Section 36(1)(va) and Section 43B Amendments by Finance Act, 2021:
The assessee argued that the contributions were deposited before the due date for filing the return of income under Section 139(1), thus no disallowance should be made. The assessee cited various decisions, including those from the Jaipur Bench of the Tribunal and the Rajasthan High Court, supporting the view that contributions deposited before the return filing due date should not be disallowed. The Revenue argued that the amendments introduced by the Finance Act, 2021, clarified that contributions must be deposited by the due dates specified in the respective Acts, and these amendments are declaratory/clarificatory, thus applicable retrospectively.

3. Scope of Adjustments under Section 143(1)(a)(iv):
The Revenue contended that the variance between the tax audit report and the ITR was flagged by the CPC, justifying the disallowance under Section 143(1)(a)(iv). The assessee, however, argued that the adjustment was beyond the scope of Section 143(1) as the contributions were deposited before the due date for filing the return of income.

Judgment:
The Tribunal analyzed the rival contentions and the material on record. It referred to the consistent decisions of the Rajasthan High Court, which held that contributions deposited before the return filing due date under Section 139(1) cannot be disallowed under Section 43B or Section 36(1)(va). The Tribunal noted that the amendments by the Finance Act, 2021, explicitly stated they would apply from April 1, 2021, and thus were not applicable to the assessment year 2019-20.

The Tribunal concluded that the disallowance made by the CPC under Section 143(1) was not justified as the contributions were deposited before the due date for filing the return of income. Consequently, the addition of ?70,982/- was directed to be deleted.

Conclusion:
The appeal of the assessee was allowed, and the disallowance of ?70,982/- was deleted. The Tribunal emphasized adherence to the jurisdictional High Court’s decisions, which supported the assessee’s claim. The judgment clarified that amendments by the Finance Act, 2021, are prospective and not applicable to the assessment year in question.

← Previous Next →