2022 (10) TMI 218 - AT - Income Tax

Delayed deposit of the employee s share of contributions towards Provident fund (PF) and Employees State Insurance (ESI) by the assessee - HELD THAT - As relying on case of Ind Synergy Lyd. 2022 (4) TMI 36 - ITAT RAIPUR as the employees contributions to PF and ESI was deposited by the assessee before the due date of filing of its return of income for the year under consideration, therefore, the same being saved by the provisions of Sec. 43B of the Act could not have been disallowed by the A.O. We, thus, in the backdrop of our aforesaid deliberations setaside the order of the CIT(A) and vacate the disallowance made by the A.O -Appeal of the assessee is allowed.

Summary

Issues Involved:
- Disallowance of Foreign Travels Expenses
- Disallowance of employees' contribution towards PF and ESIC
- Applicability of Sec. 43B of the Income-tax Act

Analysis:
1. The appeal challenged the order passed by the CIT(Appeals) and the A.O under Sec. 143(3) of the Income-tax Act for assessment year 2013-14. The assessee contested the disallowance of Rs.5,48,921 for Foreign Travels Expenses and Rs.16,15,349 for employees' contribution towards PF and ESIC.
2. The AR for the assessee did not press the appeal ground related to Foreign Travels Expenses. The A.O had disallowed the employees' contribution amount due to delayed deposits.
3. The assessee appealed to the ITAT against the CIT(A)'s decision. The AR argued that since the contributions were deposited before the due date of filing the return, no disallowance was warranted under Sec. 43B of the Act.
4. The DR contended that the legislative amendments clarified that delayed deposits of employee contributions would not be saved by extended time periods under Sec. 43B.
5. The ITAT considered the arguments and referred to a previous case where a similar issue was addressed. The Tribunal held that employees' contributions to welfare funds fall under Sec. 43B of the Act, citing various High Court judgments supporting this view.
6. The ITAT also discussed the applicability of recent amendments introduced by the Finance Act, 2021, and concluded that they are effective from A.Y 2021-22 onwards, not retroactively. Therefore, the ITAT set aside the disallowance of employees' contributions made by the A.O.
7. The ITAT followed the precedent set in a similar case and directed the A.O to vacate the disallowance of employees' contributions towards PF and ESIC. The general grounds of appeal were dismissed as not pressed.
8. Consequently, the ITAT allowed the appeal of the assessee based on the aforementioned observations and legal analysis.