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2022 (4) TMI 223 - AT - Income TaxEmployees' contribution to PF and ESI - Delayed payment - scope of amendment to section 36(1)(va) and 43B - HELD THAT - An identical issue was considered by the Tribunal in the case of The Continental Restaurant Cafe Co. v. ITO 2021 (10) TMI 843 - ITAT BANGALORE held that amendment to section 36(1)(va) and 43B of the I.T. Act by Finance Act, 2021 will not have application for the relevant assessment year, namely A.Y. 2019-2020 - grant deduction in respect of employees' contribution to PF and ESI since the assessee has made payment before the due date of filing of the return of income u/s. 139(1) Hon'ble jurisdictional High Court in case of Essae Taroka (P.) Ltd. 2014 (3) TMI 386 - KARNATAKA HIGH COURT and Spectrum Consultants India (P.) Ltd. 2013 (7) TMI 414 - KARNATAKA HIGH COURT has affirmed the above view. In view of the judicial pronouncements cited supra, we hold that the amendment to section 36(1)(va) and 43B of the I.T. Act will not have application for the relevant assessment year, namely assessment year 2019-2020. Accordingly, we direct the A.O. to grant deduction in respect of employees' contribution to PF and ESI since the assessee has made the payment before the due date of filing of return u/s. 139(1) of the I.T. Act. It is ordered accordingly.
Issues Involved:
1. Disallowance of employees' contribution to PF and ESI. 2. Interpretation of amendments to section 36(1)(va) and 43B of the Income Tax Act. Issue 1: Disallowance of employees' contribution to PF and ESI: The appellant challenged the disallowance of employees' contribution to PF and ESI in the intimation under section 143(1) of the Income Tax Act. The appellant contended that the payments were made before the due date for filing the return of income under section 139(1) of the Act, relying on the judgment of the Hon'ble Karnataka High Court. The CIT(A) upheld the disallowance, citing a different judgment and the recent amendments to the Act. The Tribunal, after considering the arguments and precedents, allowed the appeal, emphasizing that the payment made before the due date of filing the return entitles the assessee to deduction, as per judicial decisions. The Tribunal also noted that the amendments brought about by the Finance Act, 2021, were not retrospective and thus did not apply to the relevant assessment year. Therefore, the Tribunal directed the Assessing Officer to grant deduction for the employees' contribution to PF and ESI. Issue 2: Interpretation of amendments to section 36(1)(va) and 43B of the Income Tax Act: The Tribunal analyzed the amendments to section 36(1)(va) and 43B of the Income Tax Act introduced by the Finance Act, 2021. It noted that the amendments were not clarificatory or retrospective in nature, as they altered the law adversely to the assessee. Citing relevant judicial pronouncements and precedents, the Tribunal concluded that the amendments did not apply to the assessment year 2019-2020. The Tribunal directed the Assessing Officer to grant deduction for the employees' contribution to PF and ESI, as the payment was made before the due date of filing the return under section 139(1) of the Act. The appeal was allowed based on these findings. In summary, the judgment by the Appellate Tribunal ITAT Bangalore addressed the issues of disallowance of employees' contribution to PF and ESI and the interpretation of amendments to the Income Tax Act. The Tribunal allowed the appeal, granting deduction for the employees' contribution as the payment was made before the due date of filing the return. The Tribunal held that the amendments were not retrospective and did not apply to the relevant assessment year, thereby directing the Assessing Officer to provide the deduction.
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