2021 (9) TMI 218 - AT - Income Tax

Delayed payment of Employees' Contribution to ESI Provident Fund - Addition invoking the provisions of Section 36(1)(va) -assessee submitted that the Employees Contribution towards Provident Fund and ESI had been deposited with in the time limit prescribed under section 139(1) - HELD THAT - In the present case it is not in dispute that the assessee deposited the amount in question before filing the return of income therefore, it was allowable deduction under section 43B of the Act. It is noticed that a similar issue having identical facts has been decided in the case of Hotel Surya 2021 (9) TMI 209 - ITAT CHANDIGARH wherein held second proviso to section 43B of the Income-tax Act, 1961, omitted by the Finance Act, 2003, with effect from April 1, 2004, was clarificatory in nature and was to operate retrospectively. Thus, the assessee, for the assessment year 2003-04, was entitled to deduction in respect of the employer's and employees' contributions to the employees' State Insurance and provident fund as the contributions had been deposited prior to the filing of the return under section 139(1) - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of Employees' Contribution to ESI and EPF.
2. Interpretation of Section 36(1)(va) and Section 43B of the Income Tax Act, 1961.

Issue 1: Disallowance of Employees' Contribution to ESI and EPF:
The appellant appealed against the order of the Ld. CIT(A) regarding the addition of ?1,09,260 on account of late deposit of Employees' Contribution to ESI and EPF. The Assessing Officer disallowed the amount under Section 36(1)(va) of the Act. The appellant contended that the contribution was deposited before filing the return under section 139(1) and should be allowed as per Section 43B of the Act. The Ld. CIT(A) upheld the addition, citing the judgment of the Hon'ble Gujarat High Court. The Tribunal noted that the issue was similar to previous cases where the deposit was made before filing the return. Referring to relevant case laws, the Tribunal held that the impugned addition was unjustified, and the appellant was entitled to deduction under Section 43B. The Tribunal followed the decisions of the ITAT, Chandigarh Bench 'B', and the Hon'ble Jurisdictional High Court, thereby deleting the addition and allowing the appeal.

Issue 2: Interpretation of Section 36(1)(va) and Section 43B of the Income Tax Act, 1961:
The crux of the matter revolved around the interpretation of Section 36(1)(va) and Section 43B of the Income Tax Act, 1961. The Tribunal emphasized that the appellant's deposit of the amount before filing the return made it eligible for deduction under Section 43B. Citing previous judgments and the non obstante clause in Section 43B, the Tribunal concluded that denying the deduction would be against the legislative intent. By aligning with the decisions of the ITAT, Chandigarh Bench 'B', and the Hon'ble Jurisdictional High Court, the Tribunal ruled in favor of the appellant, highlighting the retrospective application of the law and the importance of timely contributions to provident funds and ESI schemes. The impugned addition was deleted, emphasizing the significance of adhering to statutory timelines for such contributions.

In conclusion, the Tribunal allowed the appeal, setting aside the addition made by the Assessing Officer and upheld by the Ld. CIT(A). The judgment underscored the importance of timely deposits of Employees' Contribution to ESI and EPF, interpreting the provisions of Section 36(1)(va) and Section 43B in favor of the appellant based on previous legal precedents and the legislative intent behind the provisions.