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2022 (5) TMI 848 - AT - Income TaxAddition u/s 36((1)(va) - delayed payment of employees' contribution towards provident fund - adjustments u/s. 143(1) - HELD THAT - In the instant case, there is no dispute that the return was processed u/s. 143(1) and there was no scrutiny assessment made u/s. 143(3) of the Act. It is settled issue that no debatable issues are permitted to be made adjustments u/s. 143(1) of the Act. In the instant case, what was added in the intimation u/s. 143(1) was the employees contribution to PF. Hon'ble Madras High Court in the case of Redington (India) Ltd. 2020 (12) TMI 516 - MADRAS HIGH COURT held that employees contribution to PF and ESI is also allowable deduction, if, the same is paid before the due date for filing the return of income. This Tribunal in the case of Andhra Trade Development Corporation 2021 (5) TMI 263 - ITAT VISAKHAPATNAM held that debatable issues are not permitted to be made adjustments while processing the return of income u/s. 143(1) . On merits also, this Tribunal has consistently viewed that the employees contribution to PF and ESI is allowable deduction if the same is paid before the due date of filing the return of income - See M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD. AND VICA-VERSA 2016 (9) TMI 1040 - ITAT VISAKHAPATNAM - Decided in favour of assessee.
Issues Involved:
1. Legality of the addition made by the Centralized Processing Centre (CPC) under section 36(1)(va) of the Income Tax Act, 1961. 2. Validity of adjustments made under section 143(1) of the Income Tax Act, 1961. 3. Applicability of judicial precedents regarding the payment of employees' contribution to Provident Fund (PF) before the due date of filing the return of income. Issue-wise Detailed Analysis: 1. Legality of the Addition Made by CPC under Section 36(1)(va): The assessee, a registered firm, filed its return declaring a total income of Rs. 44,573/-. The CPC added Rs. 32,515/- under section 36(1)(va) due to delayed payment of employees' contribution towards PF, computing the total income at Rs. 77,088/-. The assessee contended before the Commissioner of Income Tax (Appeals) [CIT(A)] that the disallowance was inappropriate as the payments were made before the end of the previous year or the due date for filing the return. However, the CIT(A) dismissed the appeal, relying on amendments to sections 43B and 36(1)(va) by the Finance Act, 2021. 2. Validity of Adjustments Made Under Section 143(1): The Tribunal noted that the return was processed under section 143(1) without a scrutiny assessment under section 143(3). It is a settled issue that no debatable issues are permitted to be adjusted under section 143(1). The Tribunal referenced the case of Redington (India) Ltd. by the Hon'ble Madras High Court, which held that employees' contribution to PF is allowable if paid before the due date for filing the return. Additionally, the Tribunal cited its own decision in Andhra Trade Development Corporation, emphasizing that adjustments requiring verification with relevant documents are beyond the scope of section 143(1)(a). 3. Applicability of Judicial Precedents: The Tribunal consistently viewed that employees' contribution to PF is deductible if paid before the due date of filing the return. The Tribunal referenced multiple cases, including APEPDCL, Essae Teraoka (P) Ltd., and Tetra Soft (India) Pvt. Ltd., where it was held that contributions paid before the due date of filing the return are allowable deductions. The Tribunal also cited the Hon'ble Supreme Court's decision in CIT Vs. M/s. Vegetables Products Ltd., which favored the assessee when divergent views existed. Conclusion: The Tribunal concluded that the addition made by the CPC under section 143(1) was unsustainable and deleted it. On merits, the Tribunal held that employees' contribution to PF is allowable if paid before the due date for filing the return, following the consistent view in previous cases. Therefore, the appeal of the assessee was allowed. Order Pronounced: The appeal of the assessee was allowed, and the order was pronounced in open court on 07th April, 2022.
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