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2022 (3) TMI 382 - AT - Income TaxEmployees share of contribution to ESI to the extent not paid on or before the due date as mentioned in Sec 36(1)(va) - payments made beyond the due date prescribed under respective statutes, but before the due date prescribed u/s 139(1) - Scope of amendment by Finance Act, 2021, to section 36 1 va and 43B - HELD THAT - As in Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company 2021 (10) TMI 1196 - ITAT BANGALORE by following the dictum laid down in the case of Essae Teraoka Pvt. Ltd 2014 (3) TMI 386 - KARNATAKA HIGH COURT held that the assessee would be entitled to deduction 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) - Also further held by the ITAT that amendment by Finance Act, 2021, to section 36 1 va and 43B of the Act is not clarificatory. Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act 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 Vs. DCIT (supra), 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 - Decided in favour of assessee.
Issues: Challenge to addition under Profits & Gains from business for employees' share of ESI contribution not paid on time. Interpretation of amendments in sections 43B and 36(1)(va) of the Income-tax Act, 1961. Applicability of deductions for employees' contribution to PF & ESI.
Analysis: 1. The appellant contested an addition made under Profits & Gains from business for employees' ESI contribution not paid on time. The appellant argued that payments were made before the due date under section 139(1) of the Income-tax Act, 1961, relying on a Karnataka High Court decision. However, the CIT(A) upheld the addition based on amendments in sections 43B and 36(1)(va) and previous tribunal decisions. The appellant appealed to the tribunal. 2. The tribunal noted that the appellant remitted the employees' PF & ESI contributions before the due date under section 139(1) of the Act, as evidenced in the tax audit report. The tribunal referred to a previous judgment in the case of M/s. Shakuntala Agarbathi Company, where deductions were allowed for such contributions made before the due date of filing the return of income under section 139(1) of the Act. 3. The tribunal further emphasized that the Finance Act, 2021 amendments to sections 36(1)(va) and 43B were not clarificatory but altered the law adversely to the assessee. Citing the Supreme Court decision in M.M. Aqua Technologies Limited v. CIT, the tribunal concluded that the amendments were prospective and not retrospective. Several tribunal orders supported this view, confirming that the amendments were only applicable from the assessment year 2021-2022 onwards. 4. By following the precedent set by the jurisdictional High Court in Essae Teraoka Pvt. Ltd Vs. DCIT, the tribunal held that the employees' contribution paid before the due date of filing the return of income under section 139(1) of the Act is an allowable deduction. Consequently, the disallowance made by the Assessing Officer was overturned in favor of the appellant. 5. The tribunal acknowledged the contrary view taken by the Gujarat High Court in CIT vs. Gujarat Road Transport Corpn. and granted the revenue the liberty to seek rectification if the Supreme Court ruled in favor of the revenue. Ultimately, the tribunal allowed the appeal filed by the appellant. This detailed analysis of the judgment highlights the key legal arguments, interpretations of relevant provisions, and the final decision rendered by the tribunal in favor of the appellant.
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