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2022 (1) TMI 82 - AT - Income TaxDelayed payment of employees contribution to PF and ESI paid after the due dates prescribed in the relevant Statutes but before the due date of filing of return under section 139(1) - HELD THAT - A similar issue relating to the disallowance on account of delayed payment of employees contribution towards PF and ESI was involved in the case of Lumino Industries Limited and after considering the relevant provisions of the Income Tax Act as amended from time to time as well as the relevant judicial pronouncements on the issue, this Tribunal in the case of Lumino Industries Limited 2021 (11) TMI 926 - ITAT KOLKATA . We delete the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of delayed payment of employees contribution towards PF and ESI - Decided in favour of assessee.
Issues Involved:
Disallowance of ?18,13,430/- due to delayed payment of employees' contribution to PF and ESI. Detailed Analysis: 1. Background and Appeal: The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 21.09.2021. The solitary issue pertains to the disallowance of ?18,13,430/- made by the Assessing Officer (AO) and confirmed by the CIT(A) due to delayed payment of employees' contribution to PF and ESI, which was paid after the due dates prescribed in the relevant statutes but before the due date of filing of return under section 139(1) of the Income Tax Act, 1961. 2. Arguments and Tribunal’s Observation: The Tribunal observed that a similar issue was involved in the case of Lumino Industries Limited. It was noted that the AO disallowed the payment based on CBDT Circular No. 22/2015 and judicial pronouncements, including the Hon’ble Gujarat High Court decision in M/s Gujarat State Road Transport and ITAT (Mumbai) decision in M/s LKP Securities. The CIT(A) upheld the AO's decision, considering the amendment by Finance Act, 2021, as clarificatory and retrospective. 3. Assessee’s Argument: The assessee argued that the amendment by Finance Act, 2021, is prospective, not retrospective, citing the Hon’ble Supreme Court’s decision in M/s M.M. Aqua Technologies Ltd. vs. CIT, Delhi. The Supreme Court held that a retrospective provision in a tax act cannot be presumed to be retrospective if it alters the existing law. The assessee also cited the Constitution Bench decision in CIT vs. Vatika Township Pvt. Ltd., emphasizing that the legislative intent must be clear for an amendment to be retrospective. 4. Revenue’s Argument: The Revenue supported the decision of the lower authorities, citing the Hon’ble Delhi High Court's decision in CIT vs. Bharat Hotel Ltd., which favored the Revenue's stance on disallowing the delayed payment of employees' contribution. 5. Tribunal’s Analysis and Decision: The Tribunal noted that the Finance Act, 2021, explicitly states that the amendment will take effect from 1st April 2021, applying to AY 2021-22 and subsequent years. Therefore, the amendment is prospective. The Tribunal also referenced the Hon’ble Jurisdictional Calcutta High Court’s decisions, which allowed the deduction if the payment was made before the due date of filing the return under section 139(1). The Tribunal further noted that the decision of the Hon’ble Delhi High Court in Bharat Hotels Ltd. did not consider the earlier Division Bench judgment in CIT vs. Aimil Ltd., which favored the assessee. The Tribunal emphasized that in cases of conflicting decisions, the view favoring the assessee should be followed, as held by the Hon’ble Supreme Court in Vegetable Products Ltd. 6. Conclusion: The Tribunal concluded that the amendment brought by Finance Act, 2021, is prospective and not applicable to the assessment year under consideration. It set aside the CIT(A)’s order and directed the AO to allow the deduction of employees' contribution to PF and ESI, as the payment was made before the due date of filing the return under section 139(1). Consequently, the appeal of the assessee was allowed. Order Pronouncement: The order was pronounced in the open Court on December 07, 2021.
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