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2022 (5) TMI 598 - AT - Income TaxEligibility to claim deduction of Employees' Contribution to PF/ESI in terms of Sec. 43B r.w.s. 36(1)(va) as well as 2(24)(x) - HELD THAT - As relying on M/S BENCO THERMAL TECHNOLOGIES PVT. LTD. VERSUS ASST. DIRECTOR OF INCOME TAX, BENGALURU 2022 (2) TMI 1217 - ITAT CHENNAI we direct revenue authorities to allow the deduction of Employees' Contribution to welfare funds like PF/ESI as claimed by the assessee in the return of income. The issue, on merits, stands decided in assessee's favor. Considering the submissions of Ld. Sr. DR, a liberty is given to revenue to seek rectification of this order in accordance with law for any valid reasons or in case the dues are found to have been deposited by the assessee beyond due date of furnishing of return of income u/s. 139(1). Assesse appeal allowed.
Issues Involved:
1. Eligibility of the assessee to claim deduction of Employees' Contribution to PF/ESI under Sec. 43B read with Sec. 36(1)(va) and Sec. 2(24)(x). 2. Condonation of delay in filing appeals. 3. Impact of the Finance Act, 2021 amendments on the applicability of Sec. 36(1)(va) and Sec. 43B. Detailed Analysis: 1. Eligibility to Claim Deduction of Employees' Contribution to PF/ESI: The primary issue revolves around the assessee's eligibility to claim deductions for Employees' Contribution to welfare funds like PF/ESI under Sec. 43B read with Sec. 36(1)(va) and Sec. 2(24)(x). The revenue authorities denied deductions because payments were made beyond the due dates specified in the relevant acts. The assessee argued that since the payments were made before the due date of furnishing the return of income under Sec. 139(1), deductions should be allowed. The Tribunal referred to its lead order in the case of M/s. Benco Thermal Technologies Private Ltd. V/s. Asstt. Director of Income Tax (ITA No. 281/Chny/2021 on 23.02.2022) and applied the same reasoning to the current appeals. The Tribunal noted that as per Sec. 43B, any sum payable by the employer to welfare funds is deductible if paid on or before the due date for filing the return of income under Sec. 139(1). The Tribunal also cited several judicial precedents, including decisions from the Hon'ble Karnataka High Court, Hon'ble Rajasthan High Court, and the Hon'ble Supreme Court, which supported the view that such contributions are deductible if paid before the filing due date, despite being late as per the relevant welfare fund statutes. 2. Condonation of Delay: The Tribunal acknowledged the delay in filing the appeals, which ranged from 2 days to 142 days. The assessee sought condonation of the delay, citing the COVID-19 pandemic and lockdowns as reasons. The revenue opposed this condonation. However, considering the pandemic situation and the contents of the condonation petition and affidavits, the Tribunal condoned the delay and proceeded to adjudicate the appeals on merits. 3. Impact of Finance Act, 2021 Amendments: The Tribunal discussed the amendments brought by the Finance Act, 2021, which clarified that Sec. 43B does not apply to employees' contributions to welfare funds. The Tribunal noted that these amendments, effective from 01/04/2021, apply prospectively to the Assessment Year 2021-22 and subsequent years. The Tribunal referred to its previous decision in Adyar Anand Bhawan Sweets India Pvt. Ltd. V/s. ACIT (134 Taxmann.com 56; 08.12.2021), which held that the amendments are prospective and not retrospective. The Tribunal concluded that for periods before the amendment, the predominant judicial view favored the assessee, allowing deductions for contributions paid before the due date for filing the return of income under Sec. 139(1). Conclusion: The Tribunal allowed the appeals, directing the revenue authorities to grant the deductions claimed by the assessee for Employees' Contribution to welfare funds like PF/ESI, provided the payments were made before the due date of furnishing the return of income under Sec. 139(1). The Tribunal also provided liberty to the revenue to seek rectification if valid reasons arise or if it is found that the contributions were deposited beyond the due date for filing the return of income. The appeals were pronounced in favor of the assessee on 11th April 2022.
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