2022 (3) TMI 144 - AT - Income Tax

Disallowance of employee s and employer s contribution towards PF ESI being deposited after the due date as prescribed under the governing Act of PF ESI - HELD THAT - Under these given facts where the alleged sum has been deposited before the due date of filing return of income u/s 139(1) of the Act whether disallow once u/s 36(1)(va) is called for and secondly whether the amendment brought in by Finance Act, 2021 by way of insertion of Explanation- 2 to Clause- va of Section 36(1) whether retrospective or prospective in nature, we find that this Tribunal in the case of Lumino Industries Ors. 2021 (11) TMI 926 - ITAT KOLKATA has elaborately dealt with this issue in light of the settled judicial precedence holding that no disallowance was called for u/s 36(1)(va) of the Act under the given facts and circumstances. - Decided in favour of the assessee.

Summary

Issues:
Delay in filing appeal due to pandemic circumstances, disallowance of employee's and employer's contribution towards PF & ESI, retrospective or prospective nature of Finance Act 2021 amendment.

Analysis:
The Tribunal noted a delay of 23 days in filing the appeal due to pandemic circumstances, condoned the delay, and proceeded to hear the case on merits. The issues raised in both appeals were common, specifically regarding disallowance of employee's and employer's contribution towards PF & ESI deposited after the due date. The Tribunal observed that the contributions were deposited before the due date of filing the return of income under Section 139(1) of the Act. Referring to a previous case, the Tribunal held that no disallowance was warranted under Section 36(1)(va) based on settled judicial precedence. The Tribunal analyzed the retrospective or prospective nature of the Finance Act 2021 amendment and concluded that the legislative intent was clear that the amendment was prospective, applying from April 1, 2021. Therefore, the disallowances made by the Assessing Officer were deleted, and the appeals of the assesses were allowed.

The Tribunal considered the arguments put forth by the ld. D/R in support of the order of the ld. CIT(A) and thoroughly examined the records and documents before them. The Tribunal highlighted that the contributions towards PF & ESI were deposited before the due date of filing the return of income, leading to the conclusion that no disallowance was warranted under Section 36(1)(va) of the Act. The Tribunal referenced a previous case to support their decision and emphasized the importance of legislative intent in determining the retrospective or prospective nature of the Finance Act 2021 amendment. By analyzing the legislative intent and relevant judicial precedents, the Tribunal concluded that the amendment was prospective, thereby setting aside the disallowances made by the Assessing Officer.

The Tribunal, after considering the contentions of both parties and reviewing the relevant facts and documents, decided to hear and dispose of both appeals together. The Tribunal found that the issues raised in the appeals were common, specifically related to the disallowance of contributions towards PF & ESI deposited after the prescribed due date. Referring to the amendment brought by the Finance Act 2021, the Tribunal examined whether the retrospective or prospective nature of the amendment applied in this case. By referencing judicial precedents and legislative intent, the Tribunal concluded that the amendment was prospective, leading to the deletion of the disallowances made by the Assessing Officer. Consequently, the Tribunal allowed the appeals of the assesses, setting aside the findings of the ld. CIT(A) and directing the AO to allow the deductions related to the contributions towards PF & ESI.