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2022 (4) TMI 1621 - AT - Income TaxDisallowance u/s 36(1)(va) - delayed payment of employee s contributions to PF / ESI - assessee has made payments within the time allowed u/s 43B i.e. upto the due date u/s 139(1) for filing of return - HELD THAT - We observe that there are divergent views of Hon ble High Courts on the allowability of employees contributions to PF / ESI paid after due dates under the PF / ESI laws but within the time allowed u/s 43B. While the AR has relied upon various decisions favouring to the assessee, DR has quoted the decisions against the assessee. We are also informed by both sides that there is no decision of Hon ble jurisdictional High Court of Madhya Pradesh on this issue. In this situation, we are mindful of the decision in Vegetable Products Ltd. 1973 (1) TMI 1 - SUPREME COURT wherein the Hon ble Supreme Court has held that if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. In view of this, the decisions favouring the assessee shall get preference over the decisions against the assessee. Being so we hold that the employees contributions paid after due date under PF / ESI law but within the time allowed u/s 43B, are allowable as deduction. Regarding the amendments made through Finance Act, 2021, it is specifically mentioned by the legislature that the amendments are effective from 01.04.2021. We observe that employees contributions to PF / ESI paid after due date under PF / ESI laws but within the time allowed u/s 43B i.e. upto the due date u/s 139(1) for filing of return is allowable as deduction in computing taxable income of business and the assesse had rightly claimed the same. AO as well as Ld. CIT(A) were not justified in disallowing the claim of the assessee. We therefore delete the disallowance made by Ld. AO and confirmed by Ld. CIT(A). Decided in favour of assessee.
Issues Involved:
Multiple appeals against orders passed by the Commissioner of Income-Tax (Appeal) regarding disallowance of delayed payment of employees' contributions to Provident Fund/ Employees State Insurance (PF/ESI). Detailed Analysis: Background: The appeals were filed by different parties against the orders passed by the Commissioner of Income-Tax (Appeal) confirming the disallowance of delayed payment of employees' contributions to PF/ESI made by the Assessing Officer (AO). The issue was common to all appeals, and they were heard together. Delay in Filing Appeals: The registry noted delays in filing two appeals but considered them due to the Covid-19 Pandemic, following the Supreme Court's order granting an extension of the limitation period. The appeals were allowed to proceed without delay. Controversy: The main issue revolved around the disallowance under section 36(1)(va) of the Income-tax Act related to delayed payment of employees' contributions to PF/ESI. Arguments by Appellant: The appellant argued that the disallowance was unjustified as contributions were deposited within the time allowed under section 43B of the Act. They cited various High Court decisions and a specific ITAT judgment supporting their position. Arguments by Respondent: The respondent contended that disallowance was warranted, citing High Court decisions and recent amendments to the Act. They highlighted that amendments clarified disallowance even if payments were made within the section 43B timeframe. Judgment Analysis: The Tribunal considered divergent High Court views on the issue but favored decisions supporting the appellant, citing the principle of construing tax provisions in favor of the assessee when possible. It noted that recent amendments were effective from April 1, 2021, and not applicable to prior assessment years. Conclusion: The Tribunal ruled in favor of the appellants, stating that contributions paid within the section 43B timeframe were deductible. It held that the disallowance made by the AO and confirmed by the CIT(A) was unjustified, deleting the disallowance and allowing all the appeals. Disposition: All appeals by the assessees were allowed, and the disallowances made by the AO were deleted. The order was pronounced on April 8, 2022.
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