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2021 (12) TMI 1251 - AT - Income TaxDelayed payment of employees contribution to Provident Fund (PF) and Employees State Insurance (ESI) - Scope amendment made to section 36(1)(va) by Finance Act 2021 w.e.f. 1.4.2021 and the corresponding amendment made to section 43B by inserting Explanation 5 - HELD THAT - As per the settled legal principle, delayed payment of contribution to PF and ESI including employee s contribution, is allowable as deduction under section 43B r.w.s 36(1)(va) of the Act if it is paid before the due date of return of income prescribed under section 139 (1) of the Act. Undisputedly, in the facts of the present appeal the employees contribution to PF and ESI were paid before the due date of return of income prescribed under section 139(1) of the Act. However, assessee s claim has been disallowed by applying the amended provisions of section 36(1)(va) and 43B of the Act. Though, the amendment to the aforesaid provisions restricting the applicability of section 43B to employee s contribution to PF and ESI as well as explaining the due date of payment of the aforesaid dues have been brought into the statute by Finance Act 2021 w.e.f. 1.4.2021, however, Commissioner (Appeals) has applied them to the impugned assessment year by stating that the amendments will have retrospective operation as they are clarificatory in nature. However, as find this issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench in case of Mr. Vansh Jain vs DCIT 2021 (10) TMI 620 - ITAT DELHI wherein as held that the amended provisions would apply prospectively w.e.f. assessment year 2021-2022. Thus as assessee s claim of deduction has to be allowed. - Decided in favour of assessee.
Issues:
Dispute over disallowance of deduction for delayed payment of employees' contribution to Provident Fund (PF) and Employees State Insurance (ESI). Analysis: The appeal pertains to disallowance of deduction claimed for delayed payment of employees' contribution to PF and ESI. The assessee filed the return of income declaring total income, but the Centralised Processing Centre disallowed the deduction as payments were not made within the due date. The Commissioner (Appeals) upheld the disallowance citing amendments to section 36(1)(va) and section 43B by Finance Act 2021, making the deduction inapplicable if payments were not made by the due date. The assessee argued that the amendments should apply prospectively from assessment year 2021-22. The ITAT noted that the employees' contributions were paid before the due date of return of income under section 139(1) of the Act. The ITAT referred to a decision by a Coordinate Bench in a similar case and held that the amended provisions should apply prospectively from the assessment year 2021-2022. The ITAT allowed the appeal, deleting the disallowance. The ITAT considered the arguments and the precedent set by the Coordinate Bench regarding the applicability of the amended provisions to the deduction claimed for delayed payment of employees' contribution to PF and ESI. The ITAT emphasized that the contributions were paid before the due date of the return of income, making them eligible for deduction under section 43B r.w.s 36(1)(va) of the Act. The ITAT rejected the retrospective application of the amendments by the Commissioner (Appeals) and upheld the assessee's claim for deduction based on the Coordinate Bench's decision. The ITAT highlighted the legislative intent to allow deductions for payments made before the due date of filing the income tax return. It referred to various decisions and judgments supporting the allowance of deductions for belated payments of employees' contribution to PF and ESI, provided they are paid before the due date of filing the return of income. The ITAT also examined the amendment made by the Finance Act 2021 and clarified that it does not apply to the assessment year in question. Based on the legal principles and precedents cited, the ITAT allowed the appeal and deleted the disallowance of the deduction claimed by the assessee. In conclusion, the ITAT allowed the appeal by the assessee, emphasizing that the deduction claimed for delayed payment of employees' contribution to PF and ESI should be allowed as the contributions were paid before the due date of filing the income tax return. The ITAT rejected the retrospective application of the amended provisions and upheld the assessee's claim for deduction based on established legal principles and precedents.
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