2022 (11) TMI 303 - AT - Income Tax

Allowability of employees contribution of ESIC and PF - deposited beyond time mentioned in the respective Statutes but before filing income tax return u/s 139(1) - HELD THAT - As held in various courts that the payment of employee s contribution beyond the due date mentioned in the relevant statute but before the due date of filling the return of income u/s 139(1) is allowable expenditure. Assessee s appeal is allowed.

Summary

Issues:
1. Addition of Rs 65,161 on account of delay in depositing Employee's Contribution to PF/ESI Act.
2. Applicability of the amendment to Section 43B r.w.s 36(1)(va) r.w.s 143(1)(a)(iv) by Finance Act 2021.
3. Allowability of Employee Contribution to PF/ESI under Section 43B of the ITA 1961.
4. Opportunity provided before making the disallowance by DCIT (CPC), Bengaluru.
5. Interpretation of the order u/s 143(1) disallowing the amount.
6. Precedents set by Hon'ble Rajasthan High Court and Hon'ble Jurisdictional High Court.
7. Dismissal of SLP filed against the decision of Hon'ble SC.
8. Decision on the appeal filed by the Assessee.

Analysis:

1. The first issue pertains to the addition of Rs 65,161 due to a delay in depositing Employee's Contribution to PF/ESI Act. The Assessee challenged this addition made by the DCIT (CPC), Bengaluru under section 143(1) of the Income-tax Act, 1961. The grounds of appeal raised by the Assessee questioned the legality of this addition.

2. The second issue involves the applicability of the amendment to Section 43B r.w.s 36(1)(va) r.w.s 143(1)(a)(iv) by Finance Act 2021. The Assessee argued that this amendment is prospective and not applicable to the instant case, as it came into effect from April 01, 2021.

3. The third issue concerns the allowability of Employee Contribution to PF/ESI under Section 43B of the ITA 1961. The Assessee contended that even though such contributions are disallowable under section 36(1)(va) of the ITA 1961, they should be deductible under Section 43B.

4. The fourth issue raises the question of whether an opportunity was provided before making the disallowance by the DCIT (CPC), Bengaluru. The order under section 143(1) did not explicitly mention any opportunity being given to the Assessee before disallowing the amount.

5. The fifth issue involves the interpretation of the order under section 143(1) disallowing the amount. The lack of clarity regarding any opportunity provided to the Assessee before making the disallowance was a point of contention.

6. The sixth issue highlights the precedents set by the Hon'ble Rajasthan High Court and the Hon'ble Jurisdictional High Court. These precedents supported the Assessee's argument regarding the allowability of Employee Contribution to PF/ESI beyond the due date mentioned in the relevant statute but before the due date of filing the return of income.

7. The seventh issue mentions the dismissal of the Special Leave Petition (SLP) filed against the decision of the Hon'ble Supreme Court. This dismissal further reinforced the position taken by the Assessee in the present appeal.

8. The final issue addresses the decision on the appeal filed by the Assessee. The Appellate Tribunal, after considering the arguments, precedents, and legal provisions, allowed the Assessee's appeal, thereby overturning the addition made by the DCIT (CPC), Bengaluru. The Tribunal's decision was based on the interpretation of relevant statutes, precedents, and the legal principles governing such cases.