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2022 (3) TMI 837 - AT - Income TaxLate remittance of employees contribution to PF and ESI under the respective Acts - Employees 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 Involved:
1. Disallowance of employees' contribution towards Provident Fund and Employee State Insurance under section 36(1)(va) of the Act. 2. Applicability of the amendment to section 36(1)(va) and section 43B by the Finance Act, 2021. 3. Interpretation of the judgment of the Jurisdictional High Court in the case of Essae Teraoka (P) Ltd. 4. Deduction of employees' contribution to PF and ESI based on the due date of filing the return of income under section 139(1) of the Act. Analysis: 1. The issue revolved around the disallowance of employees' contribution towards Provident Fund and Employee State Insurance under section 36(1)(va) of the Act. The appellant contended that the contributions were made before the due date of filing the return of income under section 139(1) of the Act and hence should be allowed as a deduction under section 43B. The CIT(A) held that only the employer's contribution is entitled to deduction under section 43B. However, the Tribunal, following the judgment of the jurisdictional High Court, ruled in favor of the assessee, allowing the deduction of employees' contribution as well. 2. The Tribunal addressed the applicability of the amendment to section 36(1)(va) and section 43B introduced by the Finance Act, 2021. It was argued that the amendment was clarificatory and retrospective. However, based on judicial precedents and the judgment of the jurisdictional High Court, the Tribunal held that the amendment was not clarificatory and had prospective application from 01.04.2021 onwards. Therefore, the amended provisions were not applicable to the relevant assessment year, and the assessee was entitled to the deduction. 3. The interpretation of the judgment of the Jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd. was crucial in determining the allowance of employees' contribution to PF and ESI. The Tribunal relied on this judgment to establish that if the payment of employees' contribution was made before the due date of filing the return of income, it should be considered for deduction. This interpretation was pivotal in deciding in favor of the assessee. 4. The Tribunal emphasized the importance of the due date of filing the return of income under section 139(1) of the Act in determining the deductibility of employees' contribution to PF and ESI. By following the precedent set by the jurisdictional High Court and considering the timely payment made by the assessee, the Tribunal concluded that the disallowance made by the Assessing Officer was unwarranted, and the deduction should be allowed. In conclusion, the Tribunal allowed the appeal filed by the assessee, directing the Assessing Officer to grant the deduction for employees' contribution to ESI, as it was paid before the due date of filing the return of income under section 139(1) of the Act.
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