2022 (8) TMI 1268 - AT - Income Tax

Disallowance u/s 43B - delayed deposit of employees' contribution to PF ESIC - payments being made before due date of filing of return and proof submitted thereof - HELD THAT - Issue relating to delayed deposit of EPF/ESI has already been dealt with by various Hon'ble High Courts including the jurisdictional Hon'ble Bombay High Court in CIT vs. Ghatge Patil Transport Ltd. 2014 (10) TMI 402 - BOMBAY HIGH COURT wherein it was held that the decision of the Hon'ble Apex Court in CIT vs. Alom Extrusions Ltd. 2009 (11) TMI 27 - SUPREME COURT that the amendment to section 43B was applicable to both employer's as well as employees' contribution. Furthermore, the amendment brought out in the Finance Act, 2021 was only prospective and not retrospective thereby was applicable only to assessment year 2021-22 onwards and to subsequent years. We are of the considered opinion that the contribution towards EPF/ESI paid after the specified due date under the relevant Acts, but nevertheless paid before the due date of filing of the return of income under section 139(1) of the Act, is allowable. The Assessing Officer is directed to allow the deduction as claimed. Appeal of the assessee succeeds.

Summary

Issues:
1. Disallowance under section 43B despite payments made before due date.
2. Allowability of employee's contribution for PF and ESI.
3. Adjustment under section 143(a) by CPC beyond purview.

Issue 1: Disallowance under section 43B despite payments made before due date:
The appeal was filed against the order of Ld. CIT(A) under section 250 of the I.T. Act, 1961 for the assessment year 2018-19. The assessee contended that the Ld. CIT(A) erred in not considering the disallowance under section 43B despite payments being made before the due date of filing the return of income. The Tribunal set aside this ground for the Ld. CIT(A) to adjudicate. The issue revolved around the correct reporting of payments in Form 3CA CD and the applicability of section 43B. Various judgments, including those of the Bombay High Court and the Supreme Court, were cited in support.

Issue 2: Allowability of employee's contribution for PF and ESI:
The dispute centered on whether the employee's contribution for PF and ESI should be allowed as a deduction only when deposited by the employer within the prescribed due dates. The Ld. AR for the assessee argued that the impugned amount was deposited before the due date for filing the return of income, citing relevant case laws. The Ld. DR contended that section 43B applied only to the employer's contribution. The Tribunal referred to judgments by various High Courts and the Finance Act, 2021, concluding that contributions paid before the due date of filing the return of income were allowable deductions.

Issue 3: Adjustment under section 143(a) by CPC beyond purview:
The Ld. CIT(A) confirmed the adjustment under section 143(a) made by CPC under sections 43B and 36(1)(va). The assessee challenged this adjustment as being beyond the purview of section 143(1)(a) and not a prima facie adjustment. The Tribunal, after considering precedents and a co-ordinate bench decision, directed the Assessing Officer to allow the deduction claimed by the assessee. The appeal of the assessee was partly allowed based on the above analysis.

This judgment highlights the importance of timely payments and correct reporting under the Income Tax Act, emphasizing the deductibility of contributions made before the due date of filing the return of income. The Tribunal's decision was based on legal precedents and interpretations of relevant provisions, ensuring a fair outcome for the assessee in this case.