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2022 (5) TMI 92 - AT - Income TaxDisallowance of payment of employees contribution towards Provident Fund and ESI under section 36(1)(va) read with section 43B - HELD THAT - This issue stands covered by series of decisions of this Tribunal following various judgments of Hon ble High Courts including Delhi High Court that, if the payment of employees contribution to PF/ESI though has been made beyond the amendment of statutory date but much before filing of return of income, then no disallowance can be made - See FLYING FABRICATION VERSUS DEPUTY COMMISSIONER OF INCOME TAX 2021 (11) TMI 1041 - ITAT DELHI . As amendment regarding due date of deposit of employees contribution of PF/ESI are prospective, i.e., beyond AY 2021-22 and the same is allowed if it is paid before the due date of filing of Income-tax return prior to AY 2021-22 and same cannot be disallowed u/s 36(1)(va) - Decided in favour of assessee.
Issues Involved:
Challenge to disallowance of payment of employees' contribution towards Provident Fund and ESI under section 36(1)(va) read with section 43B of the Income-tax Act, 1961. Detailed Analysis: The appeal was filed against the order passed by the National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2018-19 regarding the disallowance of payment of employees' contribution towards Provident Fund and ESI under section 36(1)(va) read with section 43B of the Income-tax Act, 1961. The NFAC upheld the disallowance, citing the retrospective nature of the amendment brought by the Finance Act, 2021, which clarified the applicability of the provisions. However, a series of decisions by the Tribunal and various High Courts, including the Delhi High Court, established that if the payment of employees' contribution to PF/ESI was made before the due date of filing the return of income, no disallowance could be made. The Tribunal referred to the judgment in the case of Flying Fabrication vs. DCIT and emphasized that the claim based on binding judicial precedents should not be disallowed merely based on an intimation order passed before the amendment in Section 36(1)(va) brought by the Finance Act, 2021. The Tribunal highlighted the principle laid down by the Supreme Court in Vinay Cement case and reiterated that the employer could benefit if the actual payment was made before filing the return. Moreover, a series of judgments by the Jurisdictional High Court, such as CIT vs. PM Electronics Ltd., CIT vs. SPL Industries Ltd., and CIT vs. Dharmendra Sharma, supported the same principle based on the Vinay Cement case. The Tribunal concluded that prior to the amendment effective from 01.04.2021, no disallowance could be made for the payment of employees' contribution to PF and ESI made before the due date of filing the return of income u/s.139(1). Subsequently, in a recent judgment of the Tribunal in the case of Raj Kumar vs. ITD, CPC, Bengaluru, it was held that the amendments regarding the due date of deposit of employees' contribution of PF/ESI were prospective beyond AY 2021-22. The Tribunal emphasized that no disallowance was warranted for belated payment of employees' contribution if deposited before the due date of filing the Income Tax Return. The disallowance sustained by the CIT (A) was directed to be deleted, and the appeal filed by the assessee was allowed. In summary, the judgments and legal precedents established that the disallowance of payment of employees' contribution towards Provident Fund and ESI under section 36(1)(va) read with section 43B of the Income-tax Act, 1961, could not be made if the payment was made before the due date of filing the return of income, based on the principles laid down by the Supreme Court and various High Courts. The retrospective nature of the amendment brought by the Finance Act, 2021, was clarified, and the Tribunal consistently ruled in favor of the assessee based on the established legal principles.
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