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2022 (1) TMI 632 - AT - Income TaxDelay in remittance of provident fund PF and Employees State Insurance ESI - As argued Appellant had remitted the same before the due date for filing of return of income under section 139(1) - Scope of amendment in both sec.36(va) as well as 43B - 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.
Issues:
Erroneous adjustment of delay in remittance of provident fund (PF) and Employees State Insurance (ESI) Analysis: The appeal concerns the disallowance of the delayed remittance of employees' contribution to PF and ESI by the Assessing Officer (AO) and Commissioner of Income-tax (Appeals) (CIT(A)). The issue revolves around a sum of ?87,59,286/- deposited beyond the due date prescribed under the relevant Act but within the due date by filing the return of income under section 139(1) of the Act. The AO disallowed this amount under section 36(1)(va) r.w.s 2(24)(x) of the Act, which was confirmed by the CIT(A). The crux of the matter is whether the delayed remittance should be disallowed despite being made before the due date for filing the return of income. The appellant's argument is supported by judgments from the Karnataka High Court, emphasizing the importance of payment before the due date under section 139(1) of the IT Act. The appellant relied on the judgment in the case of Essac Teraoka (P.) Ltd. v. Dy. CIT, which highlighted the provision allowing an extension for employers to make contributions to funds like provident fund until the due date for filing the return of income under section 139 of the IT Act. The judgment differentiated between the consequences under the PF Act/PF Scheme/ESI Act for not depositing contributions on time and the eligibility for deduction under the IT Act if payments are made before the due date for filing returns. The appellant also cited the judgment of the Karnataka High Court in CIT v. Sabari Enterprises, emphasizing the statutory provisions allowing deductions for payments made before the due date applicable for submitting income tax returns. Moreover, the appellant referenced various judgments to support their case, including decisions from different tribunals and high courts. The key argument against disallowance was based on the Finance Act 2021, which clarified that the amendment to sections 36(va) and 43B, introducing explanations regarding PF and ESI contributions, is applicable from April 1, 2021, onwards. As the case pertained to the assessment year 2017-18, the amended provisions could not be applied retrospectively. Therefore, no disallowance could be made for PF/ESI payments made within the due date for filing the return of income, despite being beyond the dates specified in the respective Acts. In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the disallowance of delayed remittance of PF and ESI contributions was not justified under the prevailing legal framework. The judgment highlighted the significance of timely payments before the due date for filing income tax returns and the limitations on retrospective application of amended provisions introduced by the Finance Act 2021.
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