2021 (12) TMI 598 - AT - Income Tax

Disallowance of Employees contribution of PF ESI u/s 36(1)(va) remitting the dues beyond the due date prescribed under the respective Statutes - HELD THAT - We notice that an identical issue has been examined by the co-ordinate bench in the case of Shri Gopalakrishna Aswini Kumar 2021 (10) TMI 952 - ITAT BANGALORE wherein the co-ordinate bench has expressed the view that the amendment made to sec.36(1)(va) of the Act will have prospective application and hence the decision rendered in the case of M/s Essae Teraoka (P.) Ltd 2014 (3) TMI 386 - KARNATAKA HIGH COURT . Thus we hold that the additions made in both the years are liable to be deleted. Accordingly, we set aside the orders passed by Ld CIT(A) in both the years under consideration and direct the AO to delete the impugned additions in both the years - Decided in favour of assessee.

Summary

Issues:
Challenge to disallowance of Employees contribution of PF & ESI u/s 36(1)(va) for remitting dues beyond due date.

Analysis:
The assessee contested the disallowance of Employees contribution of PF & ESI u/s 36(1)(va) for late remittance. The payments were made after due dates under respective statutes but before the due date for filing income tax return u/s 139(1). The CPC disallowed these payments during processing u/s 143(1) and rejected rectification applications u/s 154. The Ld CIT(A) upheld the disallowance based on the Finance Act, 2021 amendment to sec.36(1)(va). The assessee then appealed to the Tribunal challenging the decision.

The Tribunal noted a similar issue in a previous case and referenced the view that the amendment to sec.36(1)(va) has prospective application. The Tribunal cited the decision of the Hon'ble Karnataka High Court in a related case to support this view. The Tribunal delved into the amendments made by the Finance Act, 2021 to sec.36(1)(va) and sec.43B, emphasizing the distinction between employees' and employer's contributions. The CIT(A) deemed the amendments as clarificatory and applicable retrospectively, leading to the dismissal of the Assessee's appeal.

The Assessee further appealed to the Tribunal, presenting case laws where similar disallowances were rejected. The Tribunal considered these cases and the decision of the Hon'ble Karnataka High Court in Essae Teraoka Pvt. Ltd. The Tribunal analyzed the retrospective application of the Finance Act, 2021 amendments, concluding that the additions made under sec.36(1)(va) deserved deletion. Following precedent, the Tribunal directed the AO to delete the impugned additions in both years, ultimately allowing the appeals of the assessee.

In conclusion, the Tribunal ruled in favor of the assessee, setting aside the disallowance of Employees contribution of PF & ESI u/s 36(1)(va) for remitting dues beyond the due date prescribed under the respective statutes. The decision was based on the prospective application of the Finance Act, 2021 amendments and consistent with previous judgments and the view of the Hon'ble Karnataka High Court.