2022 (4) TMI 710 - AT - Income Tax

Disallowance of Employees' Contribution to EPF/ESI deposited belatedly - Amount claimed to have been paid before the due date of return of income under section 139(1) - Scope of amended provisions of section 36(1) (va) as well as section 43B vide Finance Bill, 2021 - HELD THAT - As after the amendment in the provisions of section 36(1) (va) read with section 43B vide Finance Bill, 2021, it is clear that the said amendment as per the memorandum of the Finance Bill is applicable only from the assessment year 2021-22. So far as the allowability of the deduction in respect of employees' contribution to EPF/ESI deposited before the due date of filing of return of income under section 139(1), the same is allowable for the year under consideration as amended provisions of section 36(1) (va) as well as 43B are applicable only from the assessment year 2021-22. Hence, this issue on principle is decided in favour of the assessee and against the Revenue. However, the Assessing Officer is directed to verify the actual date of payment of the Employees' Contribution towards EPF ESI and if the same is found deposited before the due date of filing of return under section 139(1) of the Income Tax Act, the same be allowed.

Issues Involved:
Disallowance of Employees' Contribution to EPF/ESI deposited belatedly but claimed to have been paid before the due date of return of income under section 139(1) of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Allowability of Late Deposit of EPF/ESI:
The primary issue in this appeal was whether the late deposit of Employees' Contribution to EPF/ESI, which was paid before the due date for filing the return of income under section 139(1), is allowable as a deduction. The assessee argued that the contributions were deposited before the due date for filing the return of income, thus complying with the law as interpreted by various judicial pronouncements.

2. Void Adjustment Notice:
The assessee contended that the adjustment notice issued under section 143(1)(a)(iv) was void ab initio as the parameters for such an adjustment were not satisfied. The assessee argued that there was no indication of disallowances in the audit report and that adjustments on disputed issues of law cannot be made under this section.

3. Judicial Precedents:
The assessee cited several judgments from the Supreme Court and High Courts, including:
- Vinay Cement Ltd. (SC)
- Shagun Foundry Pvt. Ltd. (Allahabad HC)
- CIT vs. Aimil Ltd. (Delhi HC)
- PCIT vs. Planman HR Pvt. Ltd. (Delhi HC)
These judgments held that if the employee contributions were deposited before the due date for filing the return under section 139(1), the amounts could not be disallowed under section 36(1)(va) read with section 2(24)(x).

4. Non-Jurisdictional High Court Judgment:
The assessee argued that the CIT (Appeal) incorrectly applied the judgment of the Madras High Court in Unifac Management Services (India) (P) Ltd., which was against judicial discipline given the contrary judgments of the jurisdictional High Court and the Supreme Court.

5. Misinterpretation of Apex Court Judgments:
The assessee claimed that the CIT (Appeal) misinterpreted the Supreme Court judgments in CIT vs. Alom Extrusions Ltd. and Allied Motors Pvt. Ltd. vs. CIT, leading to a miscarriage of justice.

6. Applicability of Finance Act 2021 Amendments:
The assessee argued that the amendments to section 36(1)(va) and section 43B by the Finance Act 2021, which clarified that these provisions apply prospectively from AY 2022-23, should not affect the current assessment year 2018-19.

Tribunal's Analysis:

1. Applicability of Amendments:
The Tribunal noted that the amendments to section 36(1)(va) and section 43B by the Finance Act 2021 were applicable only from AY 2021-22 onwards and not for the year under consideration (AY 2018-19).

2. Consistent View of Tribunal:
The Tribunal referred to its consistent view in several decisions, including Lavkush Sharma vs. Income Tax Officer, where it was held that if the employee contributions were deposited before the due date for filing the return under section 139(1), the deduction should be allowed.

3. Verification of Actual Payment Dates:
The Tribunal directed the Assessing Officer to verify the actual dates of payment of the Employees' Contribution towards EPF & ESI. If it is found that the contributions were deposited before the due date for filing the return under section 139(1), the deduction should be allowed.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, directing the Assessing Officer to verify the payment dates and allow the deduction if the contributions were deposited before the due date for filing the return under section 139(1). The Tribunal's decision was based on the consistent view of allowing such deductions if the payments were made before the due date for filing the return, despite the amendments brought by the Finance Act 2021, which were applicable prospectively.

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