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2022 (2) TMI 937 - AT - Income TaxLate payments towards EPF and ESI under section 36(1)(va) - Payment before furnishing the return of income under section 139(1) - HELD THAT - As relying on RAJA RAM VERSUS THE ITO, WARD 3 AND SANCHI MANAGEMENT SERVICES PRIVATE LIMITED 2021 (11) TMI 370 - ITAT CHANDIGARH the impugned additions made by the Assessing Officer and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s. 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of employees' contribution to EPF and ESI under section 36(1)(va) of the Income Tax Act, 1961 due to late payment. 2. Prospective vs. retrospective application of the amendment by Finance Bill 2021. 3. Judicial consistency in the application of the law. Detailed Analysis: Issue 1: Disallowance of Employees' Contribution to EPF and ESI under Section 36(1)(va) Due to Late Payment The primary grievance of the assessees is the disallowance of contributions to EPF and ESI made beyond the due date prescribed under the relevant Act but before filing the return of income under section 139(1) of the Income Tax Act, 1961. The assessees contended that such contributions should not be disallowed as they were made before the filing of the return of income. The Tribunal noted that similar issues had been adjudicated in several cases, including the ITAT Chandigarh Bench in the case of Raja Ram Vs. ITO, Yamunanagar, and Sanchi Management Services Private Limited Vs. ITO, Chandigarh. The Tribunal observed that in these cases, it was held that contributions made before the due date of filing the return of income should not be disallowed. The Tribunal also referred to decisions from the ITAT Jodhpur Bench and ITAT Kolkata Bench, which supported the same view. Issue 2: Prospective vs. Retrospective Application of the Amendment by Finance Bill 2021 The assessees argued that the amendment by the Finance Bill 2021, which clarified the treatment of late payments of employees' contributions, is prospective and not retrospective. The Tribunal considered various judgments, including the Hon'ble Calcutta High Court in the case of Vijayshree Ltd., which held that the amendment introduced by the Finance Act, 2021, is applicable prospectively from 01.04.2021 and not retrospectively. The Tribunal also referred to the decision of the ITAT Hyderabad 'SMC' Bench in the case of Salzgitter Hydraulics Private Ltd., Hyderabad, which held that the legislative amendments apply prospectively and not to earlier assessment years. Issue 3: Judicial Consistency in the Application of the Law The assessees contended that the CIT(A) acted against the principles of judicial consistency by not following the judgments of higher courts and other appellate authorities. The Tribunal emphasized the importance of judicial consistency and referred to various High Court decisions, including the Hon'ble Rajasthan High Court in the case of CIT vs. State Bank of Bikaner & Jaipur, which consistently held that contributions made before the due date of filing the return of income should not be disallowed. The Tribunal highlighted that the CIT(A) should have followed the decisions of the jurisdictional High Courts, which are binding on all appellate authorities and the Assessing Officer under their jurisdiction. Conclusion The Tribunal concluded that the disallowances made by the Assessing Officer and sustained by the CIT(A) on account of late payments of employees' contributions to EPF and ESI, made before the due date of filing the return of income under section 139(1), should be deleted. The Tribunal allowed the appeals of the assessees, holding that the contributions made before the due date of filing the return of income should not be disallowed under section 36(1)(va) read with section 43B of the Income Tax Act, 1961. Order Pronouncement The order was pronounced on 01/02/2022, and the appeals of the assessees were allowed.
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