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2021 (10) TMI 1043 - AT - Income TaxDelayed payment qua employees share of ESI and PF - deposit of employees contribution qua ESI PF after the prescribed dates as per the relevant Acts i.e. ESI PF, but before filing of return u/sec. 139(1) - contention of the Assessee is that PF and ESI contribution of Employees, if paid within the due date of filing of return of income u/s 139(1) of the Act, then the same is allowable for deduction as per section 43B - HELD THAT - We are of the considered view that as in the instant case, the employees contribution qua ESI PF for the Asst. Year 2019-20 has been deposited before the due date of furnishing the return of income u/sec. 139(1) of the Act and therefore cannot be subjected to disallowance, consequently, the addition sustained by the ld. Commissioner (NFAC) is liable to be deleted. - - Decided in favour of assessee.
Issues Involved:
1. Whether the belated payment of employees' contribution towards ESI and PF is allowable as a deduction under Section 43B of the Income Tax Act, 1961. Detailed Analysis: 1. Belated Payment of Employees' Contribution Towards ESI and PF: The primary issue in these appeals was whether the delayed payment of employees' contribution to ESI and PF, if made before the due date of filing the return under Section 139(1) of the Income Tax Act, 1961, is allowable as a deduction under Section 43B. Assessment and Initial Disallowance: The Assessee, a co-operative society engaged in manufacturing and selling sugar, filed its return of income on 31/10/2019 for the assessment year 2019-20. The assessment was completed on 16/09/2020, where an addition of ?1,19,93,542/- was made for the delayed payment of employees' share of ESI and PF. Commissioner's Findings: The Assessee challenged this addition before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), who dismissed the appeal. The Commissioner relied on judgments from the Hon'ble Madras High Court, Hon'ble Gujarat High Court, and Hon'ble Kerala High Court, which supported the Revenue's stance that belated payment of employees' contribution is not allowable as a deduction under Section 43B. The Commissioner also referred to CBDT Circular No. 22/2015, which clarified that the provisions of Section 43B do not apply to employees' contributions to welfare funds governed by Section 36(1)(va). Assessee's Contentions: The Assessee contended that if the employees' contribution to ESI and PF is paid within the due date of filing the return under Section 139(1), it should be allowed as a deduction under Section 43B. The Assessee cited favorable judgments from the Hon'ble Karnataka High Court, Hon'ble Rajasthan High Court, and Hon'ble Punjab & Haryana High Court. Tribunal's Analysis: The Tribunal noted that there are divergent judgments from various High Courts on this issue. However, the Tribunal relied on the principle established by the Hon'ble Supreme Court in the case of CIT vs. M/s. Vegetables Products Ltd., which states that if two reasonable constructions of a taxing provision are possible, the construction that favors the Assessee should be adopted. The Tribunal also referred to its jurisdictional Co-ordinate Bench's decision in the case of DCIT vs. M/s. Eastern Power Distribution Company of A.P. Ltd., which held that if the employees' contribution is deposited before the due date of filing the return, no disallowance can be made under Section 43B. Conclusion: The Tribunal concluded that as the employees' contribution to ESI and PF for the assessment year 2019-20 was deposited before the due date of filing the return under Section 139(1), it cannot be subjected to disallowance. Consequently, the addition sustained by the Commissioner (NFAC) was deleted. Result: Both appeals under consideration (ITA Nos. 25 & 28/VIZ/2021) were allowed, and the disallowance of ?1,19,93,542/- was deleted. Order Pronounced: The order was pronounced in open court on 23rd September 2021.
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