2022 (5) TMI 131 - AT - Income Tax

Disallowance of payment of employees contribution towards Provident Fund and ESI under section 36(1)(va) read with section 43B - scope of amendment - HELD THAT - Now, this issue stands covered by series of decisions of this Tribunal following various judgments of Hon ble High Courts including Delhi High Court that, if the payment of employees contribution to PF/ESI though has been made beyond the amendment of statutory date but much before filing of return of income, then no disallowance can be made. See FLYING FABRICATION VERSUS DEPUTY COMMISSIONER OF INCOME TAX 2021 (11) TMI 1041 - ITAT DELHI Amendment regarding due date of deposit of employees contribution of PF/ESI are prospective, i.e., beyond AY 2021-22 and the same is allowed if it is paid before the due date of filing of Income-tax return prior to AY 2021-22 and same cannot be disallowed u/s 36(1)(va) - See RAJ KUMAR VERSUS ITD, CPC, BENGALURU KARNATAKA 2022 (2) TMI 1224 - ITAT DELHI - Decided in favour of assessee.

Issues involved:
Challenge to disallowance of payment of employees' contribution towards Provident Fund and ESI under section 36(1)(va) read with section 43B of the Income-tax Act, 1961.

Detailed Analysis:
1. The appeal was filed against the order passed by the ld. CIT (Appeals)-2, New Delhi for the Assessment Year 2018-19 regarding the disallowance of payment of employees' contribution towards Provident Fund and ESI under section 36(1)(va) read with section 43B of the Income-tax Act, 1961.
2. The CPC had initially made a disallowance, which was upheld by NFAC, citing the retrospective nature of the amendment brought by Finance Act, 2021, through Explanation 5 in section 43B and amending clause (va) of section 36(1).
3. The Tribunal referred to various judgments, including those of the Hon'ble High Courts, to establish that if the payment of employees' contribution to PF/ESI was made before the due date of filing the return of income, no disallowance could be made, even if it was beyond the statutory date but before filing the return.
4. The Tribunal relied on the judgment of Hon'ble Delhi High Court in the case of CIT vs. AIMIL Ltd. and other related judgments to support the position that no disallowance can be made if the payment of employees' contribution to PF and ESI was made before the due date of filing the return of income under section 139(1).
5. The Tribunal also considered a recent judgment in the case of Raj Kumar vs. ITD, CPC, Bengaluru, where it was held that the amendment regarding the due date of deposit of employees' contribution of PF/ESI was prospective beyond AY 2021-22 and allowed if paid before the due date of filing the Income-tax return prior to AY 2021-22, thereby directing the deletion of the disallowance sustained by the ld. CIT (A).
6. Ultimately, the Tribunal allowed the appeal filed by the assessee, concluding that no disallowance was warranted for the belated payment of the employee's contribution to the respective ESI and EPF fund if deposited before the due date of filing the Income Tax Return.

This detailed analysis of the judgment highlights the legal reasoning and precedents considered by the Tribunal in deciding the appeal against the disallowance of payment of employees' contribution towards Provident Fund and ESI under the relevant sections of the Income-tax Act, 1961.

← Previous Next →