2022 (3) TMI 468 - AT - Income Tax

Disallowance towards employees contribution towards PF ESI - deposits before the due date of filing the return of income u/s 139(1) - HELD THAT - This Tribunal in the case of Harendra Nath Biswas 2021 (7) TMI 942 - ITAT KOLKATA has dealt the very same issue holding that Explanation-2 introduced by the Finance Act, 2021 in Section 36(1)(va) of the Act is prospective in nature and therefore, in view of the settled judicial precedence including the judgment of Hon ble jurisdictional High Court in the case of Commissioner of Income-tax, Circle -I, Kolkata vs. Vijay Shree Ltd. 2011 (9) TMI 30 - CALCUTTA HIGH COURT disallowance should not be made of the said amount if it has been deposited before the due date of filing the return of income u/s 139(1). Thus no disallowance was called for u/s 36(1)(va) of the Act in the case of the assessee as the assessee deserves a relief as per the provisions of Section 43B of the Act as the alleged amount has been deposited before the due date of filing the return of income u/s 139(1) - Decided in favour of assessee.

Summary

Issues:
Appeal against disallowance of delayed payment of employees' contribution towards PF&ESI.

Detailed Analysis:
The appeal pertains to the Assessment Year 2018-19 and challenges the disallowance of ?30,72,623 towards employees' contribution towards PF&ESI. The assessee contends that the contribution was deposited before the due date of filing the return of income under Section 139(1) of the Income Tax Act, deserving relief based on a previous Tribunal decision. The Revenue, represented by the ld. D/R, supports the lower authorities' order.

The Tribunal notes that the disallowance is contested by the assessee, who deposited the employees' contribution before the due date. The ld. CIT(A) upheld the disallowance citing an amendment by the Finance Act, 2021, which was deemed retrospective. However, the Tribunal refers to a previous case, Harendra Nath Biswas, where it was held that the amendment is prospective. Citing the judgment of the jurisdictional High Court in Commissioner of Income-tax vs. Vijay Shree Ltd., disallowance should not apply if the contribution is deposited before the due date of filing the return of income under Section 139(1) of the Act.

The Tribunal, based on the precedent set by the Harendra Nath Biswas case, rules in favor of the assessee, stating that no disallowance under Section 36(1)(va) of the Act is warranted as the contribution was made before the due date. As the Revenue failed to provide any binding precedence, the Tribunal reverses the finding of the ld. CIT(A) and allows the grounds raised by the assessee. Consequently, the appeal of the assessee is allowed.

In conclusion, the Tribunal's decision is based on the interpretation of the provisions of Section 43B of the Income Tax Act, emphasizing the importance of timely deposit of employees' contribution towards PF&ESI and the impact of retrospective amendments introduced by the Finance Act, 2021. The judgment highlights the significance of meeting statutory deadlines and judicial precedents in determining the allowability of expenses related to employees' contributions.