2022 (8) TMI 1526 - AT - Income Tax

Delayed payment of PF and ESIC - payment maid beyond the due date under the respective Act but before the due date of filing of return of income - HELD THAT - As it is noticed that in TV Today Network Ltd 2022 (8) TMI 361 - DELHI HIGH COURT has categorically held that the amendment to section 36(1)(va) by the Finance Act, 2021 is to operate prospectively and it also noticed that the issue with regard to allowability of PF and ESIC paid beyond the prescribed date but within the due date of filing of return, same is allowable. We are of the view that the view as taken by the Ao and ld CIT(A) is erroneous and same stands reversed. Appeal of the assessee stands allowed.

Summary

Issues Involved:
Appeal against disallowance of PF and ESIC paid beyond due date but before filing return under Income Tax Act for assessment year 2019-2020. Interpretation of amendment in provisions of section 36(1)(va) and 43B by Finance Act, 2021 - retrospective or prospective nature.

Analysis:

Issue 1: Disallowance of PF and ESIC payments
The appeal was against the disallowance made by the Assessing Officer (AO) and confirmed by the ld CIT(A) regarding PF and ESIC payments made beyond the due date but before the filing of the return under the Income Tax Act. The appellant argued that the issue was covered by a decision of a Co-ordinate Bench of the Tribunal in a specific case where it was held that if two views are possible in interpreting tax laws, the one favorable to the assessee should be preferred. Citing various judgments, including CIT vs. Gwalior Rayon Silk Mfg. Co. Ltd., it was emphasized that provisions for deduction, exemption, and relief should be interpreted liberally and in favor of the assessee. The Tribunal, considering these arguments and the specific circumstances of the case, directed the deletion of the disallowance, stating that payments made within the due date of filing the return could not be disallowed.

Issue 2: Interpretation of Amendment in Provisions
The second issue revolved around the interpretation of the amendment in provisions of section 36(1)(va) and 43B by the Finance Act, 2021. The appellant contended that the amendment should operate prospectively, as held by the Hon'ble Delhi High Court in a specific case. The High Court's decision clarified that an amendment "for removal of doubts" should not be presumed to be retrospective if it alters or changes the law as it stood before. The Senior DR argued for a retrospective application of the amendment, highlighting the absence of any decision by the Jurisdictional High Court treating the amendment as prospective. However, the Tribunal, considering the Delhi High Court's ruling and the nature of the amendment, concluded that the amendment should be applied prospectively. Therefore, the view of the AO and ld CIT(A) was deemed erroneous, and the appeal of the assessee was allowed.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the importance of interpreting tax laws in a manner favorable to the assessee when multiple views are possible. The judgment also clarified the prospective application of the amendment in provisions of section 36(1)(va) and 43B by the Finance Act, 2021, based on the decision of the Hon'ble Delhi High Court.