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2022 (5) TMI 671 - AT - Income TaxEmployees contribution to ESIC and EPF u/s 43B read with 36(1)(va), paid after the due date but before the filing of the income tax return - HELD THAT - There is no dispute between the parties regarding the date of deposit of PF ESI, which clearly is beyond the prescribed date of deposit as applicable under the relevant section of the I.T. Act. Further, there is no dispute between the parties that the deposits were made before the filing of return of income for the relevant assessment year. As decided in SAGUN FOUNDRY PRIVATE LIMITED VERSUS COMMISSIONER OF INCOME TAX, KANPUR 2016 (12) TMI 1479 - ALLAHABAD HIGH COURT when contribution had been paid, prior to filing of return under Section 139(1), Assessee/employer would be entitled for deduction and since deletion of Second Proviso and amendment of First Proviso is curative and apply retrospectively w.e.f. 01.04.1988. Irrespective of the fact that deduction in respect of sum payable by employer contribution was involved, but Court did not restrict observations, findings and declaration of law to that context but looking to the objective and purpose of insertion of Section 43B applied it to both the contributions. It also observed clearly that Section 43B is with a non-obstante clause and therefore over ride even if, anything otherwise is contained in Section 36 or any provision of Act 1961. Therefore, we are clearly of the view that Section 43B is rightly applied in respect to both contributions i.e. employer and employee - Decided in favour of Assessee.
Issues Involved:
1. Disallowance of employees' contribution to ESIC and EPF under section 43B read with section 36(1)(va) of the Income Tax Act, due to late payment but before the filing of the income tax return. Issue-wise Detailed Analysis: 1. Disallowance of Employees' Contribution to ESIC and EPF: The primary issue in these appeals is the disallowance of Rs. 3,38,882/- for the Assessment Year 2018-19 and Rs. 8,19,475/- for the Assessment Year 2019-20. The disallowance was made under section 43B read with section 36(1)(va) of the Income Tax Act due to the late payment of employees' contributions to ESIC and EPF, although the payments were made before the filing of the income tax return. The assessee contended that these contributions should be allowed as deductions since they were made before the filing of the return. Arguments by the Assessee: The assessee's counsel argued that the issue is covered in favor of the assessee by the judgment of the Hon'ble Jurisdictional High Court in 'Sagun Foundry (P.) Ltd. vs. CIT', which relied on the Supreme Court's decision in 'CIT vs. Alom Extrusions Ltd.'. The counsel emphasized that contributions made before the filing of the income tax return should be allowed as deductions. Arguments by the Revenue: The Revenue's representative argued that the CIT(A) correctly sustained the disallowance, relying on various case laws. The representative also referred to an amendment by the Finance Act, 2021, which they claimed was clarificatory or curative and had retrospective effect, thus justifying the disallowance. Tribunal's Findings: The Tribunal reviewed the material on record and noted that there was no dispute regarding the dates of deposit, which were beyond the prescribed date but before the filing of the return. The Tribunal referred to the Allahabad High Court's judgment in 'Sagun Foundry (P.) Ltd. vs. CIT', which had addressed a similar issue and decided in favor of the assessee. The High Court had considered various judgments from different High Courts and the Supreme Court, concluding that contributions made before the filing of the return should be allowed. Amendment by Finance Act, 2021: The Tribunal acknowledged the amendment to section 36(1)(va) by the Finance Act, 2021, which clarified that section 43B does not apply to employees' contributions. However, the Tribunal noted that this amendment is prospective, effective from 1.4.2021, and not retrospective. The Allahabad Bench of the Tribunal, in 'JCIT, Circle-2, Allahabad vs. Bharat Pumps and Compressors Ltd.', had also held that the amendment applies from April 2021 only. Conclusion: The Tribunal concluded that the issue should be decided in favor of the assessee, following the judgment in 'Sagun Foundry'. Consequently, the disallowance of employees' contributions to ESIC and EPF was deleted for both assessment years. Order: The appeals of the assessee were allowed, and the disallowances made by the CIT(A) were deleted. The order was pronounced in the open court on 27/04/2022.
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