2022 (8) TMI 123 - AT - Income Tax

Disallowance out of PF ESI contributions to the employees, which was not paid within the due date provided - HELD THAT - Recently we have considered this aspect 2022 (3) TMI 961 - ITAT KOLKATA , wherein we took note of the earlier order of ITAT, Kolkata dated 09.03.2022 whereby the Tribunal considered the impact of amendment brought into section 36(1) as well as 43B by Finance Act, 2021 and held that if employees' contribution received by an assessee and paid to ESI and PF accounts before the due date of filing of the return, then the assessee will be eligible to claim the deduction of such amounts. With the assistance of Ld. representatives, we have specifically gone through the record and find that payments have been made within the due dates of filing of the return. With the above observation, these appeals of the assessee are treated as allowed. The disallowances stand deleted - Decided in favour of assessee.

Summary

Issues:

1. Disallowance of employees' contribution towards PF & ESI.

Analysis:

Issue 1: Disallowance of employees' contribution towards PF & ESI

The appeal pertained to the deletion of an addition made by the Assessing Officer under section 36(1)(va) read with section 2(24)(x) due to non-deposit of employees' PF & ESI contributions within the prescribed due date. The appellant contended that the payments were made before the return filing due date, citing precedents such as CIT vs. Vijayshree Ltd. and others. The Tribunal noted the limited scope of the issue and granted an early hearing, proceeding to decide the appeal despite objections. The Tribunal had previously considered similar issues in other cases, including Lumino Industries Ltd. vs. ACIT, where the impact of the Finance Act, 2021 amendment on sections 36(1) and 43B was discussed.

The Tribunal examined the retrospective or prospective nature of the Finance Act, 2021 amendment, clarifying that if employees' contributions were remitted before the due date of filing the return, they could be allowed as a deduction. The Tribunal referred to the legislative intent behind the amendment and noted that it was prospective, applying from April 1, 2021. Relying on various judicial decisions and the binding precedent of the Jurisdictional High Court, the Tribunal set aside the CIT(A)'s order and directed the AO to allow the deduction for employees' contribution shares towards ESI, PF, paid before the return filing due date.

Following the precedent set by a Coordinate Bench, the Tribunal allowed the appeal of the assessee and deleted the disallowance of employees' contributions towards PF & ESI. The Tribunal emphasized that payments made within the due dates of filing the return were eligible for deduction, ultimately ruling in favor of the assessee.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the timely payment of employees' contributions towards PF & ESI as a crucial factor in determining the eligibility for deduction, in line with the legislative amendments and judicial precedents cited during the proceedings.

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