2022 (7) TMI 671 - AT - Income Tax

Delayed deposit of employee's contribution towards PF and ESIC - Scope of amendment - HELD THAT - Admittedly the assessee has deposited the impugned contributions to the PF/ESI though after due date as prescribed under the relevant provisions of PF/ESI Act but within the time allowed u/s. 43B i.e. up to the due date u/s. 139(1) for filing of income. Regarding the amendments made through Finance Act, 2021, it is specifically mentioned by the legislature that the amendments are effective from 01.04.2021. As decided in M/S. EXPRESS ROADWAY P. LTD. case 2021 (10) TMI 514 - ITAT DELHI as soon as employees contribution towards provident fund or ESI is received by the assessee by way of deduction or otherwise from the salary/wages of the employees, it will be treated as 'income' at the hands of the assessee. It clearly follows therefrom that if the assessee does not deposit this contribution with provident fund/ESI authorities, it will be taxed as income at the hands of the assessee. However, on making deposit with the concerned authorities, the assessee becomes entitled to deduction under the provisions of Section 36(1)(va) of the Act. Section 43B(b), however, stipulates that such deduction would be permissible only on actual payment. This is the scheme of the Act for making an assessee entitled to get deduction from income insofar as employees' contribution is concerned. It is in this backdrop we have to determine as to at what point of time this payment is to be actually made - Decided in favour of assessee.

Summary

Issues:
1. Challenge to reversal of disallowance under Section 36(1)(va) of the Income Tax Act.
2. Applicability of amendments made through Finance Act, 2021.
3. Interpretation of relevant provisions regarding employees' contributions towards PF and ESIC.
4. Comparison with precedents from ITAT Benches and High Courts.

Detailed Analysis:
1. The appeal before the Appellate Tribunal ITAT Delhi involved a challenge by the revenue against the reversal of disallowance under Section 36(1)(va) of the Income Tax Act. The Assessing Officer had disallowed Rs. 2,06,32,763/- on account of delayed deposit of employee's contribution towards PF and ESIC. The CIT(A) had decided in favor of the assessee, leading to the revenue's appeal.

2. The Tribunal considered the applicability of amendments made through the Finance Act, 2021. The legislative intent was clarified to be effective from 01.04.2021, applying to the assessment year 2021-22 and subsequent years. It was emphasized that these amendments were not applicable to assessment years preceding 2021-22, as per various decisions of ITAT Benches, including references to specific cases to support this interpretation.

3. The Tribunal delved into the interpretation of relevant provisions concerning employees' contributions towards PF and ESIC. It was noted that the assessee had deposited the contributions within the time allowed under Section 43B, despite being after the due date prescribed by PF/ESI Acts but within the due date for filing income tax return under Section 139(1). Citing legal precedents and the scheme of the Act, the Tribunal affirmed that the assessee was entitled to deduction under Section 36(1)(va) upon actual payment, aligning with the principles established in previous judgments.

4. The Tribunal referred to decisions from the Hon'ble Delhi High Court and ITAT Benches to support its findings. Notably, references were made to cases such as CIT vs. AIMIL Limited and SPL Industries vs. CIT to emphasize the treatment of employees' contributions as income in the hands of the assessee and the conditions for claiming deductions. The Tribunal ultimately upheld the findings of the CIT(A), concluding that there was no error in the decision, and dismissed the appeal.

In conclusion, the Tribunal's detailed analysis covered various legal aspects, interpretations of provisions, and comparisons with relevant precedents to arrive at a decision regarding the challenge to the disallowance under Section 36(1)(va) of the Income Tax Act.