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2022 (2) TMI 113 - AT - Income TaxDeduction 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) - HELD THAT - As the amended provisions of section 43B as well as 36(1)(va) 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 2014 (3) TMI 386 - KARNATAKA HIGH COURT 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 and the disallowance made by the Assessing Officer is deleted. - Decided in favour of assessee.
Issues:
1. Disallowance of employees' contribution to PF and ESI fund. 2. Interpretation of amendments to section 36(va) and 43B of the Income Tax Act. 3. Applicability of amendments by Finance Act, 2021. 4. Scope of relief under section 154 of the Income Tax Act. 5. Charging of interest under sections 234A, 234B, and 234C of the Act. Issue 1: Disallowance of employees' contribution to PF and ESI fund: The appeal concerned the disallowance of a sum towards late remittance of employees' contribution to PF and ESI under the respective Acts. The assessee contended that the payments were made before the due date of filing the return u/s 139(1) of the Income Tax Act and thus should be deductible under section 43B. The CIT(A) rejected the appeal, deeming the issue debatable and holding that the Finance Act, 2021 amendments to section 36(1)(va) and 43B were clarificatory and retrospective. However, the Tribunal, following a High Court judgment, allowed the deduction as the payments were made before the due date, ruling that the amendments were not retrospective. Issue 2: Interpretation of amendments to section 36(va) and 43B: The Tribunal analyzed the amendments by the Finance Act, 2021 to sections 36(va) and 43B of the Income Tax Act. It held that the amendments were not clarificatory and had an adverse impact on the assessee's position, thus not retrospective. Citing various Tribunal orders, the Tribunal concluded that the amendments were only prospective, effective from 01.04.2021, and would apply from the assessment year 2021-2022 onwards. Issue 3: Applicability of amendments by Finance Act, 2021: The Tribunal clarified that the amended provisions of section 43B and 36(1)(va) were not applicable for the relevant assessment years. It emphasized that the High Court's decision supported deduction for employees' contribution paid before the due date of filing the return of income, thus allowing the deduction and deleting the disallowance made by the Assessing Officer. Issue 4: Scope of relief under section 154 of the Income Tax Act: The CIT(A) had rejected the appeal, stating that the relief sought was not within the scope of section 154, considering it debatable. However, the Tribunal disagreed, asserting that there was no debate involved as per the High Court judgment. It clarified that the section 143(1)(a) of the Act only allows prima facie adjustments to the returned income, and the High Court's decision supported the deduction in this case. Issue 5: Charging of interest under sections 234A, 234B, and 234C: The appellant denied liability to be charged interest under these sections. However, the judgment did not provide specific details or analysis regarding this issue. In conclusion, the Tribunal allowed the appeal, directing the Assessing Officer to grant the deduction for employees' contribution to ESI since the payments were made before the due date of filing the return of income. The judgment highlighted the non-retrospective nature of the amendments by the Finance Act, 2021 and emphasized the precedent set by the High Court in allowing such deductions.
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