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2021 (12) TMI 1045 - AT - Income TaxLate remittance of employees contribution to PF and ESI - Payment prior to the due date of filing of the return of income u/s 139(1) - HELD THAT - Tribunal in the case of M/s. Shakuntala Agarbathi Company Vs. DCIT 2021 (10) TMI 1196 - ITAT BANGALORE by following the dictum laid down in the case of Essae Teraoka Pvt. Ltd 2014 (3) TMI 386 - KARNATAKA HIGH COURT had held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) - the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration Employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee and the disallowance made by the AO is deleted. - Decided in favour of assessee.
Issues involved:
1. Disallowance of employee contribution to PF and ESI under section 36(1)(va). 2. Charging of interest under section 234A, B, C. 3. Applicability of amendment to section 36(1)(va) and 43B of the Income Tax Act. Detailed Analysis: 1. Disallowance of employee contribution to PF and ESI under section 36(1)(va): The appellant contested the disallowance of ?11,39,506 under section 36(1)(va) for employee contributions to PF and ESI made by the assessing officer (AO). The appellant argued that the contributions were made before the due date of filing the return under section 139(1) of the Income Tax Act. The CIT(A) upheld the disallowance, stating that only the employer's contribution is eligible for deduction under section 43B, not the employee's. However, the Tribunal, citing a previous case and a judgment by the jurisdictional High Court, ruled in favor of the assessee, allowing the deduction for employee contributions made before the due date of filing the return. The Tribunal also clarified that the amendment to section 36(1)(va) and 43B by the Finance Act, 2021, was not clarificatory and had prospective application from 01.04.2021 onwards. 2. Charging of interest under section 234A, B, C: The appellant denied the liability for interest charged under sections 234A, B, C, contending it was contrary to the law and facts of the case. However, the judgment did not provide specific details on the outcome of this issue, focusing primarily on the disallowance of employee contributions. 3. Applicability of amendment to section 36(1)(va) and 43B of the Income Tax Act: The Tribunal clarified that the amended provisions of section 43B and 36(1)(va) were not applicable for the assessment years under consideration. Relying on the decision of the jurisdictional High Court, the Tribunal held that employee contributions paid before the due date of filing the return of income were allowable deductions. The Tribunal emphasized that the Finance Act, 2021 amendment was not retrospective and directed the AO to grant the deduction for employees' contributions to ESI made before the due date of filing the return. The judgment highlighted previous Tribunal orders supporting the prospective nature of the amendment. In conclusion, the Tribunal allowed the appeal filed by the assessee, directing the AO to grant the deduction for employee contributions to ESI made before the due date of filing the return, based on the relevant provisions and judicial precedents.
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