2021 (7) TMI 942 - AT - Income Tax

Addition u/s. 36(1)(va) read with Section 2(24)(x) - delayed deposit of employees contribution to PF and ESI - assessee contributing/depositing the same before the due date of filing of return of income u/s. 139(1) - HELD THAT - We do not accept the Ld. CIT(A)'s stand denying the claim of assessee since assessee delayed the employees contribution of EPF ESI fund and as per the binding decision in Vijayshree Ltd. 2011 (4) TMI 63 - ITAT KOLKATA u/s. 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds and we allow the appeal of the assessee.

Summary

Issues:
1. Disallowance of employees' contribution to PF and ESI u/s. 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961.

Analysis:
The appeal was filed against the order of Ld. CIT(A)-National Faceless Appeal Centre for Assessment year 2019-20, challenging the disallowance of a sum on account of delayed deposit of employees' contribution to PF and ESI. The CPC disallowed the amount due to late deposit, invoking Section 36(1)(va) of the Act. The assessee contended that the contribution was made before the due date of filing the return of income u/s. 139(1) of the Act. The Ld. CIT(A) rejected the assessee's arguments, relying on Explanation-5 below section 43B, introduced by the Finance Act, 2021. However, the ITAT Kolkata did not accept this reasoning, citing the non-retrospective nature of Explanation-5 and referred to the decision of the Hon'ble Calcutta High Court in the case of CIT vs. Vijayshree Ltd. The ITAT emphasized that the law laid down by the High Court would apply to the relevant assessment year, leading to the allowance of the appeal.

The ITAT Kolkata highlighted the decision of the Hon'ble Calcutta High Court in the case of CIT vs. Vijayshree Ltd., where the issue revolved around the deletion of the addition by the AO concerning Employees' Contribution to ESI and PF under Section 36(1)(va) read with Section 2(24)(x) of the Act. The Tribunal, considering the Supreme Court's decision in CIT vs. Alom Extrusion Ltd., held that the deletion was justified. The Revenue's appeal was dismissed as the amendment to the relevant provision was considered curative and required retrospective application. Consequently, the ITAT Kolkata dismissed the Revenue's appeal, emphasizing that no substantial question of law was involved.

In conclusion, the ITAT Kolkata rejected the Ld. CIT(A)'s stance and allowed the appeal of the assessee, emphasizing that the delayed deposit of employees' contribution to EPF & ESI fund did not warrant disallowance under u/s. 36(1)(va) of the Act. Citing the binding decision of the Hon'ble High Court in Vijayshree Ltd., the ITAT ruled in favor of the assessee, allowing the appeal.