2022 (5) TMI 94 - AT - Income Tax

Employees contribution to PF and ESI has been paid by the assessee beyond the due date prescribed in the respective Acts - HELD THAT - As in the case of M/s. Shakuntala Agarbathi Company 2021 (10) TMI 1196 - ITAT BANGALORE by following the dictum laid down in the case of Essae Teraoka Pvt. Ltd 2014 (3) TMI 386 - KARNATAKA HIGH COURT had held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) of the I.T.Act. It was further held by the ITAT that amendment by Finance Act, 2021, to section 36 1 va and 43B of the Act is not clarificatory. The amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. - Decided in favour of assessee.

Summary

Issues:
Challenge to disallowance of employees' contribution to provident fund and employees state insurance under section 36(1)(va) of the Income-tax Act, 1961 for assessment years 2018-19 and 2019-20.

Analysis:
1. The appeals were filed challenging disallowance of employees' contribution to provident fund and employees state insurance under section 36(1)(va) of the Income-tax Act, 1961 for assessment years 2018-19 and 2019-20.

2. The assessee contended that payments were made before the due date prescribed under section 139(1) of the Act, relying on judgments by the Karnataka High Court. However, the Ld. CIT(A) upheld the disallowance citing amendments by the Finance Act, 2021 in sections 43B and 36(1)(va) of the Act.

3. The Tribunal referred to a previous case where it was held that the assessee is entitled to deduction if payments were made before the due date of filing the return of income under section 139(1) of the Act. The Tribunal also stated that the Finance Act, 2021 amendments were not clarificatory.

4. The Tribunal emphasized that the amendment by Finance Act, 2021 alters the law adversely to the assessee and is not retrospective. Various Tribunal orders supported the prospective nature of the amendment.

5. Following the binding decision of the Karnataka High Court, the Tribunal held that the employees' contribution paid before the due date of filing the return of income under section 139(1) of the Act is an allowable deduction, leading to deletion of the disallowance made by the Assessing Officer.

6. A legal issue raised by the Ld. A.R. regarding adjustments under section 143(1) of the Act was not decided due to the favorable decision on the merit of the case.

7. The Ld. D.R. mentioned a contrary view by the Gujarat High Court, pending before the Supreme Court. The Tribunal allowed the appeals filed by the assessee, granting relief from the disallowance of employees' contribution to provident fund and employees state insurance.

8. The Tribunal pronounced the order on 7th Apr, 2022, allowing both appeals filed by the assessee.