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2022 (2) TMI 343 - AT - Income TaxDelayed employee s contribution u/s 36(1)(va) - HELD THAT - Assessee made payment of the Employees share of PF/ESI on or before the due date for filing return of income for AY 2017-18 u/s.139(1) of the Act. Whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also? - On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act, deserves to be deleted. - Decided in favour of assessee.
Issues:
1. Allowability of employees' share of contribution to ESI. 2. Interpretation of amendments to section 36(1)(va) and 43B of the Income Tax Act. 3. Retrospective applicability of the amendments. 4. Judicial precedents and legal distinctions between employees' and employer's contributions. 5. Decision on the appeal against the order of CIT(A) related to Assessment Year 2019-20. 1. Allowability of employees' share of contribution to ESI: The appellant, an individual assessee, contested the addition made by the Centralized Processing Centre (CPC) regarding employees' share of contribution to ESI. The appellant argued that the contribution had been paid before the due date for filing the return under section 139(1) of the Act, relying on various judicial decisions to support the claim. 2. Interpretation of amendments to section 36(1)(va) and 43B: The CIT(A) referred to the amendments introduced by the Finance Act, 2021, to section 36(1)(va) and 43B of the Act. The amendments clarified that the provisions of section 43B shall not apply for determining the due date under section 36(1)(va). The CIT(A) emphasized the distinction between employees' and employer's contributions, highlighting that failure to pay employees' contribution before the due date would permanently negate the employer's claim for deduction under section 36(1)(va). 3. Retrospective applicability of the amendments: The CIT(A) concluded that the amendments by the Finance Act, 2021, were declaratory in nature and applied retrospectively. However, the Tribunal disagreed, noting that the explanatory memorandum to the Finance Act specified the applicability of the amendments only from 01.04.2021. The Tribunal held that these provisions cannot be construed as applicable retrospectively unless expressly stated by the legislature. 4. Judicial precedents and legal distinctions: The CIT(A) cited judicial pronouncements recognizing the legal distinction between employees' and employer's contributions, supporting the view that the amendments were clarificatory and not retrospective. The Hon'ble Karnataka High Court's decision in Essae Teraoka Pvt. Ltd. was referenced to assert that employees' contribution would be covered under section 43B if paid before the due date for filing the return of income. 5. Decision on the appeal: The Tribunal allowed the appeal of the assessee, disagreeing with the CIT(A)'s decision to uphold the addition made by the Assessing Officer. The Tribunal held that the impugned additions under section 36(1)(va) deserved to be deleted, emphasizing that the amendments were applicable only prospectively from 01.04.2021. The Tribunal granted relief to the assessee based on the interpretation of the law and relevant judicial decisions. This comprehensive analysis of the legal judgment highlights the key issues addressed by the Appellate Tribunal ITAT BANGALORE in the appeal filed by the assessee, providing detailed insights into the interpretation of the Income Tax Act and the applicability of recent amendments.
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