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2022 (4) TMI 1264 - AT - Income TaxDelayed payment of PF contribution regarding employees' contribution - Revenue has disputed that the employees' contribution received by the assessee would be treated as income of the assessee because the same has not been deposited in the Government account within the due date as prescribed under the respective Acts - whether by the Finance Act, 2021, the provisions of Section 36(1)(va) by inserting the Explanation 2 r.w.s. 43B of the Act have been amended, whereby it is clarified that the provisions of Section 43B of the Act shall not apply and shall be deemed ought to have been applied for the purpose of determining the due date under this clause? - HELD THAT - In the present case before insertion of Explanation 2 to Section 36(1)(va) of the Act, there is ambiguity regarding due date of payment of employees' contribution on account of provident fund and ESI, whether the due date is as per the respective Acts or up to the due date of filing of return of income of the assessee. As noted by Hon'ble Supreme Court in the case of CIT vs. Vatika Township Pvt. Ltd 2014 (9) TMI 576 - SUPREME COURT an amendment made to a taxing statute can be said to be intended to remove hardship only of the assessee and not of the Department. Imposing of a retrospective levy on the assessee would cause undue hardship and for that reason Parliament specifically chose to make the proviso affective from a particular date. In the present case also, the amendment brought out by Finance Act, 2021 w.e.f. 01.04.2021 i.e. for and from assessment year 2021-22 of Explanation-2 to s. 36(1)(va) of the Act and not retrospectively. Thus, from the above, it is clear that 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:
1. Disallowance of employee's contribution to PF & ESI by CIT(A) under section 36(1)(va) r.w.s. 43B of the Income Tax Act, 1961. 2. Applicability of the amended provisions introduced by the Finance Act, 2021, regarding the due date for payment of employees' contribution to PF & ESI. 3. Interpretation of the insertion of Explanation 2 to Section 36(1)(va) of the Act as retrospective or prospective. Analysis: Issue 1: Disallowance of employee's contribution to PF & ESI The appeal was filed against the order of the CIT(A) disallowing the deduction claimed on account of Employees' contribution to PF & ESI. The CIT(A) invoked the amended provisions of section 36(1)(va) r.w.s. 43B of the Act, treating the applicability of the amended provisions as retrospective. The CIT(A) relied on the decision of Hon'ble Gujarat High Court and the Finance Bill 2021. The appellant contended that the amount was paid before the due date of filing the return u/s. 139(1) of the Act, thus should be allowable u/s. 43B of the Act. Issue 2: Applicability of amended provisions The Tribunal considered the amendment brought in by the Finance Act, 2021, to section 36(1)(va) of the Act, especially the insertion of Explanation 2. The Tribunal noted that the amendment aimed to provide certainty about the applicability of provisions of Section 43B of the Act despite belated payment of employees' contribution. The Tribunal analyzed the memorandum explaining the provisions to Finance Act, 2021, which clarified the effective date of the amendment as 01.04.2021, applicable from assessment year 2021-22 and subsequent years. Issue 3: Interpretation of Explanation 2 as retrospective or prospective The Tribunal examined whether the amendment introduced by the Finance Act, 2021, through Explanation 2 to Section 36(1)(va) of the Act was retrospective or prospective. The Tribunal emphasized that the amendment was intended to remove hardship for the assessee and not the Department. Referring to legal precedents, the Tribunal concluded that the amendment was prospective, effective from 01.04.2021, and would apply from assessment year 2021-22 onwards. Therefore, the Tribunal allowed the appeal of the assessee based on the prospective nature of the amended provisions. In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the amended provisions of Section 43B r.w.s. 36(1)(va) of the Act were not applicable for the assessment year 2018-19 but would apply from assessment year 2021-22 and subsequent years. The Tribunal pronounced the order in open court on 07th April, 2022.
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