2022 (8) TMI 443 - AT - Income Tax

Delayed Employees contribution to PF ESIC and Labor Welfare Fund - AO disallowed the impugned amount on the ground that it was paid belatedly after the due date under the relevant Acts - Scope of amendment - HELD THAT - We hold that the amendment brought about in the Finance Act 2021 is only prospective and not retrospective and applies to assessment year 2022-23 and to subsequent assessment years thereto. Therefore we are of the considered opinion that the contribution to PF ESIC and Labour Welfare Fund paid after the specified due dates under the relevant Acts nevertheless paid before the due date for filing the return of income is allowable. The Assessing Officer is directed to allow the deduction as claimed. - Decided in favour of assessee.

Summary

Issues:
Disallowance of employees' contribution to PF, ESIC, and Labor Welfare Fund under section 36(1)(va) despite being paid before the due date for filing the return of income.

Analysis:
The appeal was filed against the order of Ld. CIT(A) regarding the disallowance of Rs. 30,93,567 under section 36(1)(va) for employees' contributions to PF, ESIC, and Labor Welfare Fund. The Assessing Officer disallowed the amount as it was paid after the due dates specified in relevant Acts. The assessee contended that the payments were made before the due date for filing the return of income. The Ld. AR cited judgments in favor of the assessee, emphasizing timely payment before the return filing due date. The Ld. DR did not dispute the timely deposit but relied on lower authorities' decisions.

The ITAT considered that the contributions were paid after the due dates specified by Acts but before the return filing due date. Various judgments supporting the assessee's claim were cited, including cases like Principal CIT vs. Rajasthan State Beverages Corporation Ltd. and CIT vs. Alom Extrusions Ltd. The ITAT noted that the Ld. CIT(A) did not consider these judgments and relied on decisions contrary to the jurisdictional High Court's stance. The ITAT emphasized that the Finance Act, 2021 amendment was prospective, not retrospective, and applied to subsequent assessment years. Referring to a co-ordinate bench's decision, the ITAT directed the Assessing Officer to allow the deduction claimed by the assessee.

In conclusion, the ITAT allowed the appeal, holding that the contributions to PF, ESIC, and Labor Welfare Fund, paid after specified due dates but before the return filing due date, were allowable deductions. The ITAT emphasized that the Finance Act, 2021 amendment was not retrospective and directed the Assessing Officer to allow the claimed deduction.