2022 (4) TMI 1297 - AT - Income Tax

Delayed payment of employee's contribution to provident fund under section 36(1)(va) - scope of amendment brought in the statute by Finance Act, 2021, the provisions of section 36(1)(va) r.w.s. 43B - HELD THAT - The assessee has deposited employee s contribution to PF/ESIC after due date specified in PF/ESIC Acts but before the due date of filing the return of income as prescribed in section 139(1) of the act The ITAT Bangalore in the case of Shivanajappa Vijay Kumar 2021 (12) TMI 598 - ITAT BANGALORE after following the decision of Hon ble High Court of Karnataka 2014 (3) TMI 386 - KARNATAKA HIGH COURT held that the amendment made to section 36(1)(va) of the Act will have prospective application. We have also perused the decision of ITAT Chennai in the case of Adhyar Anand Bhavan Sweets India P. Ltd. 2021 (12) TMI 558 - ITAT CHENNAI wherein after following the decision of Hon ble High Court of Madras in the case of M/s Industrial Security and Intelligence India P. Ltd. 2015 (7) TMI 1063 - MADRAS HIGH COURT held that the amendment brought in the statute 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. In the case of the assessee, it had remitted the employee s contribution towards PF/ESIC beyond the due date for payment as specified in PF/ESIC Act, but within the due date for filing the return of income, therefore, following the aforesaid decisions, we considered that Ld. CIT(A) is not justified in disallowing the claim of deduction of the assessee. Accordingly, we decide this issue in favour of the assessee

Summary

Issues:
1. Disallowance of delayed payment of employee's contribution to provident fund under section 36(1)(va) of the Income Tax Act, 1961.
2. Addition made by DCIT, CPC outside the scope of provisions of section 143(1) of the Act.
3. Failure to submit further evidence in the course of appellate proceedings.

Analysis:

Issue 1: Disallowance of delayed payment of employee's contribution to provident fund under section 36(1)(va) of the Income Tax Act, 1961:
The assessing officer disallowed a sum of INR 50,47,759 in respect of the delay in payment of employees' contribution towards provident fund while processing the return of income under section 143(1) of the Act. The assessee contended that the entire contribution was paid before the due date of filing the return of income. The CIT(A) upheld the disallowance, leading to the appeal before the ITAT. The ITAT, after considering precedents and case laws, noted that the employee's contribution was deposited after the due date specified in PF/ESIC Acts but before the due date of filing the return of income as per section 139(1) of the Act. Referring to relevant judgments, the ITAT concluded that the amendment to section 36(1)(va) of the Act would have prospective application. Therefore, the ITAT held in favor of the assessee, ruling that the disallowance made by the Assessing Officer was unjustified, and the claim of deduction by the assessee was allowed.

Issue 2: Addition made by DCIT, CPC outside the scope of provisions of section 143(1) of the Act:
The ITAT did not delve into this issue as the primary issue of disallowance of delayed payment of employee's contribution was decided in favor of the assessee. Consequently, the grounds related to this addition were not required to be adjudicated.

Issue 3: Failure to submit further evidence in the course of appellate proceedings:
Similarly, the ITAT did not address this issue as the main issue was resolved in favor of the assessee, rendering the need for adjudication on this ground unnecessary.

In conclusion, the ITAT allowed the appeal filed by the assessee, overturning the disallowance made by the Assessing Officer regarding the delayed payment of employee's contribution to the provident fund. The ITAT's decision was based on the interpretation of relevant legal provisions and precedents, emphasizing the prospective application of the amendment to section 36(1)(va) of the Income Tax Act, 1961.