2022 (6) TMI 1149 - AT - Income Tax

Delayed payment of employees contribution to ESI PF account within the due date provided under the PF ESI Act - HELD THAT - We note that the issue is no longer res integra. The decisions of Hon ble High Court Calcutta namely in the case of (i) CIT vs.- Vijayshree Ltd 2011 (9) TMI 30 - CALCUTTA HIGH COURT , PHILLIPS CARBON BLACK LIMITED 2014 (10) TMI 916 - CALCUTTA HIGH COURT , M/S COAL INDIA LIMITED. 2015 (8) TMI 1451 - CALCUTTA HIGH COURT and M/S. AKZO NOBEL INDIA LTD. VERSUS COMMISSIONER OF INCOME TAX KOL. -IV 2016 (6) TMI 1128 - CALCUTTA HIGH COURT - This aspect has been considered by the Coordinate Bench of ITAT Kolkata in the case of Lumino Industries Ltd. 2021 (11) TMI 926 - ITAT KOLKATA to allow the claim of deduction in respect of employees contribution shares towards ESI, PF, by the assessee before the due date of filing of return u/s 139(1) of the Act. Therefore the appeal of assessee succeeds and so, it is allowed in favour of assessee.

Summary

Issues Involved:
Appeals against orders passed by National Faceless Appeal Centre confirming addition of employees' contribution to ESI & PF accounts disallowed by Assessing Officer under section 36(1)(va) for AY 2017-18, 2018-19 & 2019-20.

Detailed Analysis:

1. Confirmation of Addition by CIT(A):
The primary issue in the appeals was the confirmation of additions made by the CIT(A) regarding the employees' contribution to ESI & PF accounts. The Assessing Officer disallowed these amounts under section 36(1)(va) due to failure in making payments within the due date. The assessee contended that the issue was covered by various judicial precedents, arguing for the deductibility of these contributions.

2. Judicial Precedents and High Court Decisions:
The ITAT noted that the matter had been extensively dealt with in judicial precedents and decisions of the Hon'ble High Court Calcutta. The amendment in section 36(1) and 43B by the Finance Act, 2021 was also considered. The ITAT Kolkata's decision emphasized that if employees' contributions were paid before the due date of filing the return, the deduction should be allowed. This interpretation was crucial in determining the deductibility of the contributions.

3. Retrospective vs. Prospective Amendment:
The discussion highlighted the retrospective or prospective nature of the amendment brought by the Finance Act, 2021. The ITAT Kolkata's analysis emphasized the legislative intent behind the amendment and its applicability from April 1, 2021, onwards. The decision clarified that the amendment was prospective, impacting the deductibility of employees' contributions for the relevant assessment years.

4. Decision and Order of ITAT:
Considering the precedents, the ITAT allowed the appeals of the assessee and deleted the additions made in all three years. The ITAT's decision aligned with the interpretation that timely payments of employees' contributions to ESI & PF accounts entitle the assessee to claim deductions. The ITAT's reliance on previous judgments and the legislative intent of the amendment supported the allowance of these deductions.

5. Final Outcome:
Based on the analysis of judicial precedents and the legislative amendment, the ITAT allowed all three appeals of the assessee, leading to the deletion of the additions in question. The order was pronounced on June 16, 2022, in favor of the assessee, emphasizing the importance of timely payments for claiming deductions related to employees' contributions.

This detailed analysis encapsulates the key aspects of the judgment, focusing on the issues raised, legal interpretations, precedents cited, and the ultimate decision rendered by the ITAT in favor of the assessee.