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2022 (1) TMI 988 - AT - Income TaxLate remittance of employees contribution to PF and ESI - HELD THAT - As in the case of Essae Teraoka Pvt. Ltd Vs. DCIT 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) of the I.T.Act. It was further held by the ITAT that amendment by Finance Act, 2021, to section 36 1 va and 43B of the Act is not clarificatory. Therefore, 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. By following the binding decision of the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the 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
Issues Involved:
1. Appeal against CIT(A)'s order dated 14.09.2021 for the assessment year 2019-2020. 2. Disallowance of employees' contribution to PF and ESI under section 43B of the Income Tax Act. 3. Interpretation of amendments to section 36(1)(va) and 43B by Finance Act, 2021. 4. Applicability of interest under sections 234A, 234B, and 234C of the Act. Analysis: Issue 1: Appeal against CIT(A)'s order The appeal was filed against the CIT(A)'s order dated 14.09.2021 for the assessment year 2019-2020. The grounds raised by the appellant challenged the legality of the appellate order and the dismissal of the appeal without following binding judicial precedents. The appellant also contested the confirmation of adjustments made under section 143(1)(a) by CPC. Issue 2: Disallowance of employees' contribution to PF and ESI The dispute revolved around the disallowance of the employees' contribution to PF and ESI under section 43B of the Income Tax Act. The appellant claimed entitlement to deduction based on timely payments made before the due date of filing the return u/s 139(1) of the Act. The CIT(A) rejected the appeal, citing that only the employer's contribution is eligible for deduction under section 43B. However, the Tribunal, following the jurisdictional High Court's decision, allowed the deduction for employees' contributions made before the due date. Issue 3: Interpretation of amendments by Finance Act, 2021 The Tribunal analyzed the amendments to section 36(1)(va) and 43B introduced by the Finance Act, 2021. It was established that the amendments were not clarificatory but altered the law adversely to the assessee. The Tribunal held that the amendments were not retrospective and did not apply to the relevant assessment year 2019-2020. Citing judicial pronouncements and precedents, the Tribunal directed the Assessing Officer to grant deduction for employees' contribution to ESI made before the due date of filing the return. Issue 4: Applicability of interest under sections 234A, 234B, and 234C The appellant contested the levy of interest under sections 234A, 234B, and 234C of the Act. The Tribunal considered the arguments and found the interest levied to be erroneous, directing its deletion. In conclusion, the Tribunal allowed the appeal, deleting the disallowance of employees' contribution to PF and ESI, and directing the deletion of erroneously levied interest. The judgment emphasized adherence to binding judicial precedents and the correct interpretation of statutory amendments for determining tax liabilities.
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