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2022 (4) TMI 955 - AT - Income TaxDelayed remittances of employees contribution towards PF/ESI - assessee has submitted that the employee s contribution to PF ESI has been remitted on or before the due date of furnishing of return of income under section 139(1) - HELD THAT - As decided in M/S. ADYAR ANANDA BHAVAN SWEETS INDIA P LTD. 2021 (12) TMI 558 - ITAT CHENNAI held that the payment of employees contribution in regard to PF ESI if made before the due date of filing of return of income u/s.139(1) of the Act, the same is allowable as deduction as per the provisions of Section 2(24)(x) r.w.s. 36(1)(va) r.w.s. 43B. The amendment brought in the statute 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 2018-19 but will apply from assessment year 2021-22 and subsequent assessment years. Hence, this issue of assessee s appeal is allowed.
Issues Involved:
1. Disallowance of delayed remittances of employees' contribution towards PF/ESI under section 36(1)(va) of the Income Tax Act, 1961. 2. Applicability of the amendment brought by the Finance Act, 2021 to section 36(1)(va) and section 43B of the Income Tax Act, 1961. Detailed Analysis: 1. Disallowance of delayed remittances of employees' contribution towards PF/ESI: The case revolves around the disallowance of ?9,05,002/- by the CPC, Bengaluru, under section 36(1)(va) of the Income Tax Act, 1961, due to alleged delayed remittances of employees' contribution towards PF/ESI. The assessee filed its return of income for the assessment year 2018-19 admitting NIL income. The CPC, Bengaluru, completed the assessment by making an addition of ?9,05,002/- to the returned income. The disallowance was confirmed by the ld. CIT(A)-NFAC, who observed that the assessee, liable to audit under section 44AB of the Act, was required to credit the contributions to the relevant funds on or before the due dates prescribed under the respective laws. Failure to do so would result in disallowance under section 36(1)(va) of the Act. 2. Applicability of the amendment brought by the Finance Act, 2021: The assessee argued that the issue was covered in its favor by the decision of the Coordinate Benches of the Tribunal in the case of Adyar Ananda Bhavan Sweets India P. Ltd. v. ACIT. The Tribunal noted that the Hon'ble High Court of Madras in the case of M/s. Industrial Security and Intelligence India P Ltd. held that if the employees' contribution towards PF and ESI is deposited before the due date of filing the return of income under section 139(1) of the Act, no disallowance could be made. This position was supported by several other High Court decisions, including the Delhi High Court in CIT v. Amil Ltd. The Tribunal also examined the amendment brought by the Finance Act, 2021, which inserted Explanation 2 to section 36(1)(va) and Explanation 5 to section 43B, clarifying that the provisions of section 43B do not apply to employees' contributions. The Tribunal referred to the memorandum explaining the provisions of the Finance Act, 2021, which indicated that the amendment would take effect from 01.04.2021 and apply to the assessment year 2021-22 and subsequent assessment years. The Tribunal reviewed the CIT(A)'s observations and the decision of the Hon'ble Supreme Court in CIT vs. Vatika Township Pvt. Ltd., which held that unless a contrary intention appears, legislation is presumed not to have retrospective operation. The Tribunal concluded that the amendment brought by the Finance Act, 2021, was prospective and not retrospective. Therefore, the provisions of section 36(1)(va) r.w.s. 43B as amended by the Finance Act, 2021, would apply from the assessment year 2021-22 onwards and not to the assessment year 2018-19. Conclusion: The Tribunal allowed the appeal filed by the assessee, directing the Assessing Officer to allow the claim of deduction as claimed by the assessee for the assessment year 2018-19. The grounds raised by the assessee were allowed, and the appeal was decided in favor of the assessee. The order was pronounced on 29th March, 2022, at Chennai.
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