2021 (12) TMI 1289 - AT - Income Tax

Employees contribution to PF and ESI which has been deposited beyond the due date prescribed under relevant Act and deposited within due date by filing the return on u/s 139(1) - DR contention is that as per sec.43B(b) of the Income-tax Act and explanatory notes to Finance Act 1983, that Employees Contribution was never intended to be covered by sec.43B - scope of amendment - HELD THAT - We find no merit in the argument of the 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. - Decided in favour of assessee.

Issues Involved:

1. Validity of the appellate order passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre.
2. Disallowance of employees’ contribution to PF and ESI deposited beyond the due date under the relevant Act but within the due date of filing the return of income under section 139(1) of the Income-tax Act.
3. Applicability of section 43B and section 36(1)(va) of the Income-tax Act.
4. Levy of interest under sections 234B and 234C of the Income-tax Act.

Detailed Analysis:

1. Validity of the Appellate Order:

The assessee contended that the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), erred in passing the appellate order, making it void-ab-initio and bad in law. The appellate order was claimed to be passed without adhering to the binding decisions of the jurisdictional High Court and the Supreme Court, thereby making it liable to be quashed.

2. Disallowance of Employees’ Contribution to PF and ESI:

The core issue was the disallowance of ?2,19,930/- being employees’ contribution to PF and ESI, which was deposited beyond the due date prescribed under the relevant Act but within the due date for filing the return of income under section 139(1). The assessee argued that the contributions, although delayed under the specific Acts, were made within the permissible time frame for filing returns, thus should not be disallowed under section 36(1)(va) of the Income-tax Act. The assessee relied on the judgment in Essac Teraoka (P.) Ltd. v. Dy. CIT, where it was held that contributions made before the due date for filing returns are allowable.

3. Applicability of Section 43B and Section 36(1)(va):

The assessee cited several judgments, including CIT v. Sabari Enterprises, which clarified that contributions deposited before the due date for filing returns under section 139(1) are deductible. The deletion of the second proviso to section 43B by the Finance Act 2003, effective from April 1, 2004, further supported the assessee's claim. The judgments emphasized that the statutory provisions allow deductions if payments are made before the due date for filing returns, regardless of the due dates under the respective Acts.

The Revenue argued that the amendments made by the Finance Act 2021, which inserted explanations to sections 43B and 36(1)(va), clarified that employees’ contributions were never intended to be covered by section 43B and should be disallowed if not deposited within the due dates under the respective Acts. However, the Tribunal found no merit in this argument, stating that the amendments are applicable from April 1, 2021, and cannot be applied retrospectively to the assessment year 2017-18.

4. Levy of Interest under Sections 234B and 234C:

The assessee contested the levy of interest under sections 234B and 234C, denying liability for the interest levied. The Tribunal noted that interest under these sections is mandatory and consequential in nature.

Conclusion:

The Tribunal allowed the appeal of the assessee, ruling that no disallowance could be made for PF/ESI contributions paid within the due date for filing the return of income, even if deposited beyond the due date under the respective Acts. The amendments introduced by the Finance Act 2021 were not applicable retrospectively. The issue regarding the levy of interest under sections 234B and 234C was deemed consequential. The order was pronounced on December 27, 2021.

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