2022 (2) TMI 175 - AT - Income Tax

Delayed remittances of employees contribution towards PF/ESI - Scope of amendment brought in by the Finance Act 2021 in section 36(1)(va) - HELD THAT - Respectfully following the above decision of the Coordinate Bench in the case of Adyar Ananda Bhavan Sweets India P. Ltd. 2021 (12) TMI 558 - ITAT CHENNAI we hold that the amended provisions of section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year 2019-20 but will apply from the assessment year 2021-22 and subsequent assessment years. Accordingly we direct the Assessing Officer to allow the claim of deduction as claimed by the assessee. Thus the grounds raised by the assessee are allowed.

Summary

Issues Involved:
1. Disallowance of delayed remittances of employees' contribution towards PF/ESI.
2. Applicability of the Finance Act, 2021 amendment to Section 36(1)(va) and Section 43B of the Income Tax Act, 1961.

Detailed Analysis:

1. Disallowance of Delayed Remittances of Employees' Contribution towards PF/ESI:
The assessee filed its return for the assessment year 2019-20, which was processed by the CPC, Bengaluru, resulting in the addition of ?1,54,85,498/- to the income under Section 36 of the Income Tax Act, 1961, due to delayed remittances of employees' contribution towards PF/ESI. The CIT(A)-NFAC confirmed this disallowance, relying on the decision in CIT v. Apollo Tyres Ltd. The assessee contended that the remittances were made before the due date of filing the return under Section 139(1) of the Act. The Tribunal noted that the Coordinate Bench in Adyar Ananda Bhavan Sweets India P. Ltd. v. ACIT had held that if the employees' contribution is deposited before the due date of filing the return, no disallowance should be made.

2. Applicability of the Finance Act, 2021 Amendment to Section 36(1)(va) and Section 43B:
The CIT(A)-NFAC observed that the Finance Act, 2021, amended Section 36(1)(va) to clarify that the provisions of Section 43B do not apply to employees' contributions and deemed this amendment to be retrospective. However, the Tribunal disagreed, citing the Supreme Court's decision in CIT vs. Vatika Township Pvt. Ltd., which held that amendments are presumed to be prospective unless explicitly stated otherwise. The Tribunal noted that the amendment was intended to apply from the assessment year 2021-22 onwards, as clarified by the explanatory memorandum to the Finance Act, 2021. The Tribunal held that the amendment is prospective and does not apply to the assessment year 2019-20.

Conclusion:
The Tribunal concluded that the amended provisions of Section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year 2019-20 but will apply from the assessment year 2021-22 and subsequent years. Consequently, the Tribunal directed the Assessing Officer to allow the claim of deduction as claimed by the assessee. The appeal filed by the assessee was allowed.

Order:
The appeal filed by the assessee is allowed, and the order was pronounced on 31st January 2022 at Chennai.