2021 (12) TMI 600 - AT - Income Tax

Delayed employees contribution to PF and Employee State Insurance u/s 36(1)(va) r.w.s. 2(24)(x) - Contribution deposited beyond the due date prescribed under relevant Act and deposited within due date by filing the return on u/s 139(1) - HELD THAT - We find no merit in the argument of the ld.DR since the explanation as provided in Finance Act 2021 prescribes that the amendment in both sec.36(va) as well as 43B by inserting corresponding explanation that although impugned PF comes in the form of provision and the same is applicable from 1/4/2021 onwards only. In the present case we are concerned with the asst. year 2017-18 and the amended provision could not be applied retrospectively as it is only applicable w.e.f 1/4/2021. Being so no disallowance could be made by the AO in respect of PF/ESI paid within the due date of filing return of income. Though, it was beyond the date mentioned in the respective Act. This view of ours is supported by various judgment relied on by the ld.AR. Accordingly the appeal of the assessee is allowed.

Summary

Issues: Disallowance of employees' contribution to PF and ESI beyond due date

Analysis:
1. The assessee contested the disallowance of ?28,72,795 towards employees' PF contribution and ?47,795 towards ESI, deposited after the due date but within the due date of filing the return under section 139(1) of the Act.
2. The CIT(A) upheld the disallowance under section 36(1)(va) read with section 2(24)(x) of the Act, leading to the appeal before ITAT.
3. The ITAT considered the timing of the remittance beyond the stipulated date but within the return filing due date.
4. Citing the judgment in Essac Teraoka (P.) Ltd. v. Dy. CIT, ITAT emphasized the allowance of deductions if payments are made by the due date of filing the return under section 139(1) of the Act.
5. Referring to the Karnataka High Court's ruling in CIT v. Sabari Enterprises, the ITAT reiterated the importance of timely payment as per the due date under relevant provisions.
6. The ITAT highlighted the Finance Act 2021's prospective nature regarding the amendment, clarifying that the disallowance cannot apply retrospectively to payments made within the due date of filing the return.
7. Relying on various judgments, the ITAT concluded that no disallowance could be made by the Assessing Officer for PF/ESI payments made within the due date of filing the return, despite being beyond the Act's specified date.
8. Consequently, the appeals were allowed in favor of the assessee, emphasizing the importance of timely payment within the return filing due date.

This detailed analysis covers the issues raised in the judgment regarding the disallowance of employees' contribution to PF and ESI, providing a comprehensive understanding of the ITAT's decision and the legal principles involved.