2022 (10) TMI 157 - AT - Income Tax

Non-deposit of employee's share of ESI and EPF before the due date - Scope of amendments made through Finance Act, 2021 - HELD THAT - Admittedly the assessee has deposited the impugned contributions to the PF/ ESI though after due date as prescribed under the relevant provisions of PF / ESI Act but within the time allowed u/s 43B i.e. up to the due date u/s 139(1) for filing of income. Regarding the amendments made through Finance Act, 2021 legislature itself has categorically stated that the amendments shall apply to the assessment year 2021-22 and subsequent assessment years. Therefore these amendments are not applicable to the assessment years preceding the assessment-year 2021-22 i.e. not applicable upto assessment-year 2020-21. Hon'ble Delhi High Court in Pr. CIT Vs. Pro Interactive India Pvt. Ltd 2018 (9) TMI 2009 - DELHI HIGH COURT had re-affirmed the aforesaid findings while relying judgment in CIT Vs. AIMIL Ltd 2009 (12) TMI 38 - DELHI HIGH COURT so the reliance by DR on judgment date 6/9/18 in CIT Vs. Bharat Hotels Ltd. 2018 (9) TMI 798 - DELHI HIGH COURT cannot be sustained. In the light of the aforesaid the grounds raised stand decided in favour of the Assessee.

Summary

Issues:
- Disallowance of Rs. 4,90,572 under section 36(1)(va) of the Income Tax Act, 1961
- Applicability of the amendment brought by Finance Act, 2021 in Section 36

Analysis:

Issue 1: Disallowance under section 36(1)(va)
The appeal was filed against the order of the CIT(A) confirming the disallowance of Rs. 4,90,572 under section 36(1)(va) of the Income Tax Act, 1961. The Assessee argued that the amounts were deposited before the due date of filing the original return, making them allowable under section 43B of the IT Act. The Assessee cited various case laws to support their argument, emphasizing that the actual payment before the due date of filing the return should be considered. The Assessee also referred to the legislative intent highlighted in the case of PCIT Vs. Pro Interactive Service India Pvt. Ltd, indicating that belated payments of PF and ESI should not be treated as deemed income of the employer under section 2(24)(x) of the Act. The Revenue, on the other hand, contended that there was no error in the findings of the Tax Authorities below, citing the judgment in CIT v. Bharat Hotels Ltd (2019) 410 ITR 417 (Delhi) (HC).

Issue 2: Applicability of the amendment brought by Finance Act, 2021
The Assessee raised a ground of appeal regarding the applicability of the amendment brought by the Finance Act, 2021 in Section 36, contending that the amendment is applicable prospectively from 01st April, 2021. The legislature explicitly stated that the amendments would apply to the assessment year 2021-22 and subsequent years. It was highlighted that the amendments were not applicable to assessment years preceding 2021-22. The ITAT Benches in Kolkata, Hyderabad, and Jodhpur, along with the Co-ordinate Bench at Delhi, discussed the applicability of the amendments in various cases, emphasizing that the amendments were not retroactive. The judgment in Pr. CIT Vs. Pro Interactive India Pvt. Ltd reaffirmed the applicability of the amendments in line with the legislative intent, supporting the Assessee's position.

In conclusion, the ITAT allowed the appeal of the Assessee, directing the deletion of the impugned addition. The judgment emphasized the importance of considering the actual payment before the due date of filing the return and upheld the applicability of the amendments brought by the Finance Act, 2021 from 01st April, 2021 onwards.