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2022 (5) TMI 271 - AT - Income TaxDisallowance of employee s contribution of PF and ESI deposited belatedly but before due date of filing of return of income u/s 139(1) - HELD THAT - Where Assessee had paid employees contribution of PF and ESIC, though beyond due date(s) under respective Acts but prior to due date of filing the Return of income under sec. 139(1) of IT Act, the payments cannot be disallowed u/s. 43B. Respectfully following the order of this Bench in the case of Sanjay Porwal 2022 (4) TMI 898 - ITAT JAIPUR the disallowance made on account of employees contribution towards PF ESI deposited before due date of filing of return of income u/s 139(1) of the Act is deleted. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction and validity of the disallowance made under Section 143(1). 2. Disallowance of expenditure on account of employees' contribution towards PF/ESI under Section 36(1)(va). Issue-wise Detailed Analysis: 1. Jurisdiction and Validity of Disallowance under Section 143(1): The assessee argued that the disallowance made in the order under Section 143(1) dated 4-06-2020 was "bad in law and on facts of the case, for want of jurisdiction and various other reasons." However, this ground was deemed general in nature and did not require adjudication. 2. Disallowance of Expenditure on Account of Employees' Contribution towards PF/ESI: The main issue in this appeal was the disallowance of employees' contribution to PF and ESI, which was deposited late but before the due date of filing the return of income under Section 139(1) of the Income Tax Act, 1961. The assessee contended that as per binding precedents, if the payment is made before the due date of filing the return, no disallowance should be made under Section 43B. However, the CIT(A)/NFAC confirmed the disallowance by considering the amendment in Section 36(1)(va) and explanations to Section 43B, which were deemed retrospective. The CIT(A)/NFAC's order highlighted that the "employees' contribution was never intended to be covered by Sec 43B of the Act," and the late payment of PF and ESI was not covered by Section 43B. Consequently, the addition of Rs. 39,81,357/- was upheld. During the hearing, the assessee's representative cited various case laws where similar issues were decided in favor of the assessee. These cases included decisions from the Rajasthan High Court and other jurisdictions, consistently holding that contributions paid before the due date of filing the return cannot be disallowed under Section 43B or Section 36(1)(va). The Tribunal noted that the AO made an addition of Rs. 39,81,357/- due to late deposit of employees' PF & ESI, but the assessee had deposited these contributions before the due date of filing the return. The Tribunal referred to its previous orders and other judicial precedents, concluding that the amendment to Section 36(1)(va) and Section 43B by the Finance Bill, 2021, applies only from A.Y. 2021-22 and subsequent years, not retrospectively. The Tribunal cited several decisions, including those from the Rajasthan High Court, which supported the view that contributions paid before the due date of filing the return should not be disallowed. It was emphasized that the jurisdictional High Court's decisions are binding on the authorities within its jurisdiction. In conclusion, the Tribunal directed that the disallowance of Rs. 39,81,357/- made on account of employees' contribution towards PF & ESI, deposited before the due date of filing the return under Section 139(1), be deleted. The appeal of the assessee was partly allowed. Order Pronounced: The appeal of the assessee was partly allowed, and the disallowance of Rs. 39,81,357/- was deleted. The order was pronounced in the open court on 12/04/2022.
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