2022 (7) TMI 488 - AT - Income Tax

Delay in payment towards Provident Fund, ESIC and any Other Welfare Fund u/s. 36(1)(va) r.w.s. 43B and 2(24)(x) - HELD THAT - As contributions made by employees on account of PF ESIC were deposited beyond the due date prescribed under the Act. But at the same time it is admitted fact on record that the said payment has been deposited well before the date of filing the return of income by the asses see company. Identical issue has been decided by the Hon'ble Bombay High Court in case of CIT V. Ghatge Patil Transporters Ltd. 2014 (10) TMI 402 - BOMBAY HIGH COURT by confirming the order passed by the Tribunal that deduction claimed by the asses see on account of employees contribution to PF ESIC well before the due date of filing return of income is allowable deduction. Hon'ble High Court of Bombay in case of Ghatge Patil Transporters Ltd. 2014 (10) TMI 402 - BOMBAY HIGH COURT held that both employees' and employer's contribution are covered under amendment to section 43B and covered under judgment of Hon'ble Supreme Court in case of CIT vs. Alom Extrusions Ltd. 2009 (11) TMI 27 - SUPREME COURT and such deduction claimed by the assessee is allowable. Since the amended provisions contained under section 43B read with section 36(1)(va) of the Act are not applicable for the year under consideration i.e. A.Y. 2017-18 as the amendment will be effective from A.Y. 2021-22 and the AO/Ld. CIT(A) have erred in disallowing the same. Consequently, impugned order passed by the Ld. CIT(A) is set aside and appeal filed by the assessee is allowed.

Summary

Issues involved:
1. Disallowance of alleged delay in payment towards Provident Fund, ESIC, and other welfare funds under section 36(1)(va) r.w.s. 43B and 2(24)(x) of the Income Tax Act for the assessment year 2017-18.

Detailed Analysis:
1. The appellant, M/s. Neev Infrastructure Pvt. Ltd., appealed against the order passed by the Commissioner of Income Tax (Appeals) regarding the disallowance of Rs. 6,68,547 on account of alleged delay in payment towards Provident Fund, ESIC, and other welfare funds. The grounds of appeal included arguments about the Assessing Officer's error, disregarding relevant case laws, and the retrospective nature of the amendment made to section 36(1)(va) by the Finance Act, 2021.

2. The appellant, engaged in the business as a builder, developer, civil contractor, and manufacturer of ready mix concrete, filed its income tax return for the assessment year 2017-18. The Assessing Officer noted that certain payments towards Provident Fund and ESIC were made late by the assessee, leading to the disallowance under section 2(24)(X) read with section 36(1)(va) of the Income Tax Act, 1961.

3. The contention that the payments were made before the date of filing the return was declined by the Assessing Officer, resulting in the disallowance of the late payments. The matter was then taken to the Commissioner of Income Tax (Appeals), who upheld the disallowance, prompting the appellant to appeal to the Tribunal.

4. The Tribunal heard the arguments from both parties and reviewed the orders of the lower revenue authorities along with the available documents. The issue revolved around the late payment made by the assessee towards Provident Fund and ESIC, which were deposited after the due date prescribed under the Act.

5. The table presented by the appellant showed the nature of payments, employees' contributions, due dates, and actual dates of payment. While the contributions were made after the due dates, they were deposited before the filing of the income tax return by the assessee company.

6. The Tribunal referred to previous judgments, including the decision of the Hon'ble Bombay High Court in CIT V. Ghatge Patil Transporters Ltd., which allowed deductions for employees' contributions to PF & ESIC made before the due date of filing the return. The Tribunal also cited the judgment of the Hon'ble Supreme Court in CIT vs. Alom Extrusions Ltd. to support the allowance of such deductions.

7. Considering the applicable provisions of section 43B read with section 36(1)(va) of the Act, the Tribunal concluded that the amendment was not effective for the assessment year 2017-18 and, therefore, the disallowance made by the Assessing Officer and the Commissioner of Income Tax (Appeals) was erroneous. Consequently, the Tribunal set aside the impugned order and allowed the appeal filed by the assessee.

This detailed analysis covers the issues involved in the legal judgment regarding the disallowance of late payments towards Provident Fund, ESIC, and other welfare funds for the assessment year 2017-18.