2022 (9) TMI 459 - AT - Income Tax

Delayed deposit of employee contribution to PF/ESI - payment made before due date of filing of return - HELD THAT - As relying on we find that the issue herein involved is squarely covered by the order passed by the Tribunal in the case of M/s Ind Synergy Limited 2022 (4) TMI 36 - ITAT RAIPUR direct the AO to vacate the disallowance made by him u/s.36(1)(va) of the Act qua the delayed deposit of the employees share of contribution of EPF/ESIC. The Ground of appeal allowed in terms of our aforesaid observations. Appeal of assessee allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeals.
2. Disallowance of employee's share of contributions towards PF and ESI due to delayed deposit.
3. Applicability of amendments made by the Finance Act, 2021 to Section 36(1)(va) and Section 43B.

Issue-wise Detailed Analysis:

1. Condonation of Delay:
The appeals filed by the assessee were delayed by 80 days. The delay was attributed to circumstances beyond the control of the assessee, which were neither deliberate nor due to a lackadaisical approach. The Departmental Representative did not object to the condonation. The Tribunal, drawing support from the Hon'ble Supreme Court's orders in Suo Moto Writ Petition (Civil) No.3 of 2020 and subsequent modifications, condoned the delay.

2. Disallowance of Employee's Contributions to PF/ESI:
The Centralized Processing Center (CPC) disallowed Rs.3,50,253/- due to delayed deposit of the employee's share of contributions towards PF and ESI, as per Section 36(1)(va) read with Section 43B of the Income-tax Act, 1961. The assessee contended that the contributions were deposited before the due date of filing the return of income, thus should not be disallowed. The Tribunal referenced its decision in M/s Ind Synergy Limited Vs. DCIT, where it was held that if contributions are deposited before the due date of filing the return, no disallowance should be made under Section 43B. Various High Courts, including Bombay, Delhi, Punjab & Haryana, Patna, Allahabad, Rajasthan, Karnataka, Calcutta, and Uttarakhand, have upheld similar views. The Tribunal concluded that both employer and employee contributions are covered under Section 43B, allowing the assessee's appeal and directing the AO to vacate the disallowance.

3. Applicability of Amendments by Finance Act, 2021:
The Tribunal addressed whether the amendments to Section 36(1)(va) and Section 43B by the Finance Act, 2021, which introduced "Explanation 5" and "Explanation 2" respectively, have retrospective effect. Referring to the ITAT Amritsar Bench's decision in Vinko Auto Industries Ltd. Vs. DCIT and other relevant cases, the Tribunal observed that these amendments are applicable prospectively from 01.04.2021, i.e., from AY 2021-22 onwards. Therefore, these amendments do not affect the assessee's case for the assessment years 2018-19 and 2019-20.

Separate Judgments:
The Tribunal applied the same reasoning and conclusions from the lead matter (ITA No.12/RPR/2022 for AY 2018-19) to the subsequent appeal (ITA No.13/RPR/2022 for AY 2019-20), allowing both appeals.

Conclusion:
The Tribunal allowed both appeals filed by the assessee, condoning the delay and directing the AO to vacate the disallowance of the employee's share of contributions towards PF and ESI, based on the settled legal position that contributions deposited before the due date of filing the return are not disallowable under Section 43B. The amendments by the Finance Act, 2021, were deemed applicable prospectively from AY 2021-22, thus not impacting the assessment years in question.