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2022 (5) TMI 132 - AT - Income TaxDisallowance 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:
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. Analysis: The case involved a challenge by the assessee against 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. The Central Processing Centre (CPC) initially made a disallowance, which was upheld by the National Faceless Assessment Centre (NFAC) citing the retrospective nature of the amendment brought by the Finance Act, 2021. However, the Tribunal referred to various judgments, including those of the Hon'ble Delhi High Court, to establish that no disallowance can be made if the payment of employees' contribution to PF/ESI was made before the due date of filing the return of income under section 139(1) of the Act. The Tribunal highlighted that the amendment brought by the Finance Act, 2021, was clarificatory and retrospective in nature. It relied on previous decisions and legal precedents to support the position 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 imposed. The Tribunal emphasized the importance of following judicial precedents and cited specific cases like CIT vs. AIMIL Ltd. and Vinay Cement to support its decision. Furthermore, the Tribunal discussed the implications of the deletion of the 2nd proviso to Section 43B and emphasized that the case should be governed by the application of the 1st proviso. It also noted that the employer could face penalties for delayed payments but could still claim benefits if the actual payment was made before filing the return, as per the principle laid down by the Supreme Court in Vinay Cement. The Tribunal ultimately ruled in favor of the assessee, allowing the appeal and dismissing those filed by the Revenue. In a subsequent judgment, the Tribunal in the case of Raj Kumar vs. ITD, CPC, Bengaluru reiterated that amendments regarding the due date of deposit of employees' contribution to PF/ESI were prospective beyond the Assessment Year 2021-22. The Tribunal held that payments made before the due date of filing the Income-tax return prior to AY 2021-22 could not be disallowed under section 36(1)(va). This decision was based on a thorough examination of various High Court judgments, provisions of the Income Tax Act, and the Finance Act 2021. In conclusion, the Tribunal directed the deletion of the disallowance sustained by the ld. CIT (A) and allowed the appeal filed by the assessee. The judgments highlighted the importance of timely payments and adherence to legal provisions, ultimately leading to a favorable outcome for the assessee.
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