2021 (10) TMI 844 - AT - Income Tax

Delayed employees contribution to PF and ESI - as submitted that the assessee has remitted the employees contribution to PF and ESI before the due date of filing of the return u/s 139(1) - scope of amendment to section 36(1)(va) and 43B - HELD THAT - We hold that the amendment to section 36(1)(va) and 43B of the I.T.Act will not have application for the relevant assessment year, namely assessment year 2018-2019. Accordingly, we direct the A.O. to grant deduction in respect of employees contribution to PF and ESI since the assessee has made the payment before the due date of filing of return u/s 139(1). - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of employees' contribution to PF and ESI.
2. Interpretation of amendments to section 36(1)(va) and 43B of the Income Tax Act, 1961.

Issue 1: Disallowance of employees' contribution to PF and ESI:
The appeal involved the disallowance of employees' contribution to PF and ESI by the assessee. The assessee contended that the contributions were made before the due date of filing the return under section 139(1) of the Income Tax Act, relying on a judgment of the Hon'ble Karnataka High Court. The CIT(A) upheld the disallowance, citing amendments to section 36(1)(va) and 43B of the Act. The Tribunal, considering a similar case precedent, held that the assessee was entitled to deduction as the payment was made before the due date of filing the return, in line with the Karnataka High Court's judgment.

Issue 2: Interpretation of amendments to section 36(1)(va) and 43B:
The Tribunal analyzed whether the amendments to section 36(1)(va) and 43B of the Income Tax Act, introduced by the Finance Act, 2021, were clarificatory and declaratory. Citing a recent Supreme Court judgment, the Tribunal concluded that the amendments altered the law adversely to the assessee and were not retrospective. The Tribunal referred to various tribunal orders to support the prospective nature of the amendments. Consequently, the Tribunal held that the amendments did not apply for the relevant assessment year, directing the Assessing Officer to grant deduction for employees' contribution to PF and ESI made before the due date of filing the return under section 139(1) of the Act.

In conclusion, the Tribunal allowed the appeal filed by the assessee, directing the Assessing Officer to grant deduction for the employees' contribution to PF and ESI. The judgment emphasized adherence to the due dates specified under the Acts and the applicability of legal precedents in determining the allowability of deductions.