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2022 (3) TMI 1310 - AT - Income TaxLate payments towards EPF and ESI u/s 36(1)(va) - payment before furnishing the return of income under section 139(1) - HELD THAT - Admitted facts of the present case are that the payments of PF ESI contribution relating employee s contribution are before the due date of filing of return of income U/s 139(1) of the Act. We have noted that the issue under consideration is covered by the decision of the Coordinate Bench in case of M/s Mohanlal Khatri 2021 (11) TMI 1035 - ITAT JAIPUR wherein did not accept the Ld. CIT(A) s stand denying the claim of assessee since assessee delayed the employees contribution of EPF ESI fund and as per section 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds - We are of the view that the amendment brought in the statue i.e., by Finance Act, 2021, the provisions of Section 36(1)(va) r.w.s. 43B of the Act amended by inserting explanation 2 is prospective and not retrospective. Hence, the amended provisions of Section 43B r.w.s. 36(1)(va) of the Act are not applicable for the assessment year under consideration i.e. 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue raised in assessee s appeal is allowed. Decided in favour of assessee.
Issues Involved:
1. Legality of adjustments made under Section 143(1) of the Income Tax Act, 1961. 2. Disallowance of Employee's State Insurance Corporation (ESIC) and Provident Fund (PF) contributions under Section 36(1)(va) of the Income Tax Act, 1961. Detailed Analysis: 1. Legality of Adjustments under Section 143(1): The primary issue raised by the assessee was whether the adjustments made by the Assessing Officer (AO) under Section 143(1) were outside the purview of Section 143(1)(a). The assessee argued that the adjustments made were illegal, unjustified, arbitrary, and against the facts of the case. The AO had made adjustments in the intimation under Section 143(1) by disallowing ?5,61,32,750/- in respect of ESIC and PF contributions. 2. Disallowance of ESIC and PF Contributions under Section 36(1)(va): The assessee contended that the disallowance of ?5,61,32,750/- in respect of ESIC and PF contributions was incorrect as the contributions were deposited before the due date of filing the return of income under Section 139(1). The assessee relied on various judgments, including CIT vs. Rajasthan State Beverages Corporation Ltd. and CIT vs. State Bank of Bikaner & Jaipur, which held that PF and ESIC contributions paid after the due date under the respective Acts but before the due date of filing the return of income cannot be disallowed. The CIT(A) upheld the AO's decision, stating that the adjustment made by the AO fell under Section 143(1)(a)(ii) as it was an incorrect claim of deduction under Section 36(1)(va). The CIT(A) noted that the return of income (ROI) itself showed the delay in payments of employee’s contributions to PF/ESIC and that the deduction was not admissible based on the ROI and the information contained therein. Tribunal's Findings: The Tribunal considered the rival contentions and reviewed the orders of the authorities and the material on record. It was noted that the payments of PF and ESIC contributions were made before the due date of filing the return of income under Section 139(1). The Tribunal referred to several decisions, including those of the ITAT Jaipur Bench and the Hon’ble Delhi High Court in CIT vs. AIMIL Ltd., which supported the assessee's claim that contributions made before the due date of filing the return of income should not be disallowed. The Tribunal also considered the amendment brought by the Finance Act, 2021, which clarified that the provisions of Section 43B do not apply to employee contributions under Section 36(1)(va). The Tribunal held that this amendment is prospective and not retrospective, and thus, it does not apply to the assessment year 2018-19 but will apply from the assessment year 2021-22 onwards. Conclusion: The Tribunal concluded that the disallowance of ?5,61,32,750/- under Section 36(1)(va) was not justified as the contributions were made before the due date of filing the return of income. The Tribunal allowed the appeals of the assessees, setting aside the disallowance made by the AO and upheld by the CIT(A). Order: All the appeals of the assessees were allowed, and the order was pronounced in the open Court on 22/02/2022.
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