2022 (4) TMI 285 - AT - Income Tax

Disallowing employee contribution of EPF and ESI u/s 36(1)(va) deposited before filing income tax return - HELD THAT - There is no dispute that prior to the amendment brought by the Finance Bill 2021 in Section 36(1)(va) as well as Section 43B of the Act the issue of allowability of employees contribution towards PF and ESI and depositing the same in the government account before the due date of filing of return of income U/s 139(1) of the Act was settled and decided in favour of the assessee by various binding precedents of Hon ble High Courts including the Jurisdictional High Court. Whether the amendment brought to Section 36(1)(va) as well as 43B of the Act is applicable retrospective or from assessment year 2021-22 as it is specifically stated in the memorandum of Finance Bill 2021 ? - As decided in M/S KOGTA FINANCIAL (INDIA) LTD. VERSUS CPC BENGALURU. 2022 (1) TMI 250 - ITAT JAIPUR issue was decided in favour of the assessee by holding that amendment in Section 36(1)(va) as well as Section 43B of the Act by way of inserting the explanation vide Finance Bill 2021 are applicable only from A.Y. 2021-22 and subsequent assessment years and therefore the said amendment is not applicable to the assessment year under consideration. - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of employee contribution to EPF and ESI under Section 36(1)(va) of the Income Tax Act, 1961.

Detailed Analysis:

Condonation of Delay in Filing the Appeal:
The assessee filed an application for condonation of a 2-day delay in filing the appeal, attributing the delay to technical issues with the ITAT e-filing website. The assessee attempted to file the appeal on 29-12-2021 but succeeded only on 30-12-2021, with the hard copy submitted on 31-12-2021. The Tribunal, referencing the Supreme Court judgment in Collector, Land Acquisition vs. Mst. Katiji, emphasized a liberal approach to condonation of delay, focusing on substantial justice over technicalities. The delay was deemed beyond the control of the assessee and without malafide intent, leading to the acceptance of the condonation application.

Disallowance of Employee Contribution to EPF and ESI:
The core issue was the disallowance of ?7,89,648/- for late payment of employee contributions to EPF and ESI, despite being deposited before the due date for filing the income tax return under Section 139(1). The CIT(A) upheld the disallowance based on the Finance Act, 2021 amendments to Sections 36(1)(va) and 43B, which were argued to apply retrospectively.

The Tribunal examined the facts and relevant case laws, including decisions from various High Courts and the Supreme Court, which consistently held that contributions paid before the due date of filing the return should not be disallowed. The Tribunal cited the case of M/s Kogta Financial (India) Ltd. Vs CPC, where it was held that the amendments by the Finance Act, 2021, are applicable prospectively from the assessment year 2021-22 and not retrospectively.

Moreover, the Tribunal referenced decisions from the Delhi and Bangalore Benches, which supported the view that the amendments do not apply to assessment years prior to 2021-22. The Tribunal concluded that the disallowance was unjustified and directed the deletion of the addition, thus allowing the appeal in favor of the assessee.

Conclusion:
The appeal was allowed, with the Tribunal condoning the delay in filing and deleting the disallowance of the employee contributions to EPF and ESI, emphasizing that the amendments to the relevant sections by the Finance Act, 2021, apply prospectively and not to the assessment year in question.