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2022 (5) TMI 1329 - AT - Income TaxLate deposit of employees' contribution to ESI PF - Deposits well before the due date of filing of return of income u/s. 139(1) - HELD THAT - CIT(A) has referred to the amendment brought in by the Finance Act, 2021 wherein an explanation has been introduced to Sections 36(1)(va) and u/s. 43B of the Income Tax Act. It is a consistent position across various Benches of the Tribunal including Chandigarh Benches that the amendment which has been brought in by the Finance Act, 2021 shall apply w.e.f. assessment year 2021-22 and subsequent assessment years and the impugned assessment year being assessment year 2019-20, the said amendment cannot be applied in the instant case. Therefore, the addition made by way of adjustment while processing the return of income u/s. 143(1) so made by the CPC towards the deposit of employees' contribution towards ESI and PF paid before the due date of filing of the return of income u/s. 139 of the Act, is hereby directed to be deleted and the ground of appeal is allowed.
Issues:
1. Disallowance of late deposit of employees' contribution to ESI & PF. 2. Applicability of the amendment introduced by the Finance Act, 2021. 3. Claiming education cess as an allowable expenditure. Issue 1: Disallowance of late deposit of employees' contribution to ESI & PF The appeal was filed against the order of the Learned Commissioner of Income Tax (Appeals) regarding the disallowance of Rs. 3,41,858 towards late deposit of employees' contribution to ESI & PF for the assessment year 2019-20. The assessee argued that the contribution was deposited before the due date of filing the return of income u/s. 139 of the Act, relying on judicial precedents. The Department, however, supported the disallowance based on the amendment introduced by the Finance Act, 2021. The Tribunal noted the divergent views of different High Courts but emphasized following the decisions of the jurisdictional Punjab & Haryana High Court. The Tribunal held that the amendment was applicable prospectively from assessment year 2021-22 onwards and thus directed the deletion of the disallowance made by the CPC. Issue 2: Applicability of the amendment introduced by the Finance Act, 2021 The amendment introduced by the Finance Act, 2021, added an explanation to sections 36(1)(va) and 43B of the Income Tax Act. The Department argued that the amendment clarified that employees' contribution should be allowed as a deduction only if paid within the prescribed due dates, supporting the retrospective application of the amendment. However, the Tribunal, considering various High Court decisions and Tribunal Benches, held that the amendment applied prospectively from assessment year 2021-22 onwards. As the impugned assessment year was 2019-20, the Tribunal directed the deletion of the disallowance. Issue 3: Claiming education cess as an allowable expenditure The assessee sought to claim education cess as an allowable expenditure, but during the hearing, the assessee decided not to press this ground of appeal. Consequently, the Tribunal dismissed this ground as not pressed. The appeal of the assessee was partly allowed based on the decisions regarding the disallowance of late deposit of employees' contribution to ESI & PF. In conclusion, the Tribunal allowed the appeal partly, directing the deletion of the disallowance made by the CPC on the late deposit of employees' contribution to ESI & PF for the assessment year 2019-20. The Tribunal emphasized the prospective application of the amendment introduced by the Finance Act, 2021, and dismissed the claim regarding education cess as an allowable expenditure as not pressed by the assessee during the hearing.
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