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2022 (6) TMI 1195 - AT - Income TaxLate deposit of employee contribution to PF and ESI u/s. 36(1)(va) - contribution of PF deposited belatedly but before due date of filing of return of income u/s. 139(1) - HELD THAT - The Bench has taken into consideration its various orders wherein similar issue has been decided in favour of the assessee on the issue in question. Recently the similar issue of late deposit of employees PF/ESIC contribution by the assessee but paid the same before due date of filing of return of income in the case of Sanjay Porwal 2022 (4) TMI 898 - ITAT JAIPUR wherein Issue was decided in favour of the assessee by holding that amendment in Section 36(1)(va) as well as Section 43B of the Act by way of inserting the explanation vide Finance Bill 2021 are applicable only from A.Y. 2021-22 and subsequent assessment years and therefore the said amendment is not applicable to the assessment year under consideration. Thus disallowance made on account of employees contribution towards PF/ESIC deposited before due date of filing of return of income u/s. 139(1) is deleted. Thus the solitary ground of appeal of the assessee is allowed.
Issues Involved:
1. Disallowance of employee's contribution to PF and ESI deposited belatedly but before the due date of filing the return of income under Section 139(1) of the Income Tax Act, 1961. Detailed Analysis: 1. Disallowance of Employee's Contribution to PF and ESI: The main issue in this appeal is the disallowance of the employee's contribution to PF and ESI, which was deposited late but before the due date of filing the return of income under Section 139(1) of the Income Tax Act, 1961. The assessee filed its return of income on 31.10.2018, which was processed under Section 143(1) of the Act, leading to an adjustment for the disallowance of deduction related to employees' contributions towards PF deposited belatedly. During the assessment proceedings, the Centralized Processing Center (CPC), Bangalore, confirmed the disallowance of Rs. 18,49,116/- due to the late deposit of employees' contributions towards PF. The assessee contested this adjustment before the Commissioner of Income Tax (Appeals) [CIT(A)]/National Faceless Appeal Centre (NFAC), arguing that as per binding precedents, if the payment is made to the government account before the due date of filing the return of income under Section 139(1), no disallowance should be made under Section 43B of the Act. The CIT(A)/NFAC did not accept the assessee's contention and upheld the disallowance, citing the amendment in Section 36(1)(va) of the Act, which introduced explanations (2) and (5) to Section 43B, considering them retrospective. The Hon'ble Rajasthan High Court and other High Courts have consistently held that if the employees' contributions to PF and ESIC are paid before the due date of filing the return of income under Section 139(1), such payments cannot be disallowed under Section 43B. The assessee argued that the Assessing Officer (AO) was not justified in making the addition of Rs. 18,49,116/- since the payment was made before the due date of filing the return of income. The CIT(A)/NFAC dismissed the assessee's appeal, stating that the appellant was not eligible for deduction under Section 43B for payments of employees' contributions to EPF/ESIC beyond the due dates under respective statutes. The AO was within his jurisdiction to disallow the claim based on the information in Form No. 3CD attached to the return of income. During the hearing, the assessee's Authorized Representative (AR) argued that the matter is covered by decisions of the ITAT Jaipur Bench and the Hon'ble Rajasthan High Court, which have allowed the deduction for late payments made before the due date of filing the return of income. The AR also cited various case laws supporting the claim. The Revenue's Departmental Representative (DR) supported the orders of the lower authorities. The Tribunal observed that the AO made an addition of Rs. 18,49,116/- for the late deposit of employees' PF/ESIC contributions, but the assessee deposited these contributions before the due date of filing the return of income under Section 139. The Tribunal noted that the CIT(A) upheld the AO's action, but the Tribunal had previously decided similar issues in favor of the assessee, holding that amendments to Sections 36(1)(va) and 43B by the Finance Bill, 2021, are applicable only from the assessment year 2021-22 and subsequent years. The Tribunal referred to its earlier decisions, including the case of Sanjay Porwal vs. CPC, Bengaluru/ITO, Ward 6(4), Jaipur, where it was held that the amendments are not applicable to the assessment year under consideration. The Tribunal also cited decisions from other Benches and High Courts, which consistently held that no disallowance should be made if the contributions are paid before the due date of filing the return of income. In conclusion, the Tribunal allowed the appeal of the assessee, deleting the disallowance of Rs. 18,49,116/- on account of employees' contributions towards PF/ESIC deposited before the due date of filing the return of income under Section 139(1). Conclusion: The appeal of the assessee is allowed, and the disallowance of Rs. 18,49,116/- on account of employees' contributions towards PF/ESIC deposited before the due date of filing the return of income under Section 139(1) is deleted.
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