2022 (7) TMI 935 - AT - Income Tax

Delayed deposit of employees contribution of provident fund ESIC - Addition u/s 36(1)(va) r.w.s. 43B - Scope of amendment - HELD THAT - As the amendment was brought in finance Act 2021 w.e.f 1-4-2021.The law was not framed/amended in the relevant Assesseement year and any legal proposition which cast additional burden/liability on the assessee cannot be implemented retrospectively. We considering the overall facts, circumstances, judicial decisions, are of the reasoned view that the amendment to section 36(1)(va) of the Act will not be applicable to Assessment Year 2017-18. The assessee has deposited the employees contribution of provident fund ESIC before the due date u/sec 139(1) of the Act. Accordingly, we set-aside the order of the CIT(A) and direct the assessing officer to delete the disallowance and allow the grounds of appeal in favour of the assessee.

Issues Involved:
1. Confirmation of disallowance of employees' contribution to PF/ESIC due to delayed payment.
2. Applicability of amendments introduced by the Finance Act 2021.
3. Interpretation of retrospective versus prospective application of the amendments.
4. Adherence to jurisdictional High Court decisions.
5. Application of the Doctrine of Promissory Estoppel.

Detailed Analysis:

Issue 1: Confirmation of Disallowance of Employees' Contribution to PF/ESIC Due to Delayed Payment
The assessee filed returns for A.Y. 2017-18, disclosing an income of Rs. 7,65,06,360/-. The Assessing Officer (A.O.) found a delay in depositing employees' contributions to PF and ESIC, totaling Rs. 10,17,765/-. The A.O. added this amount to the total income, citing non-compliance with the respective Acts. The CIT(A) upheld this addition, leading the assessee to appeal to the Tribunal.

Issue 2: Applicability of Amendments Introduced by the Finance Act 2021
The core argument revolved around whether the amendments to Section 36(1)(va) introduced by the Finance Act 2021 were applicable retrospectively or prospectively. The assessee argued that these amendments, effective from 1-4-2021, should apply prospectively, i.e., from A.Y. 2021-22 onwards. The CIT(A) considered the amendments as retrospective, which the assessee contested.

Issue 3: Interpretation of Retrospective Versus Prospective Application of the Amendments
The Tribunal referred to multiple judicial precedents, including the case of M/s BI Worldwide India Pvt Ltd. Vs. DCIT and Shri Satish Kumar Sinha Vs. ITO, which held that amendments affecting the legal position adversely to the assessee cannot be presumed to be retrospective. The Tribunal emphasized that the Finance Act 2021 explicitly stated the amendments were effective from 1-4-2021, thus applicable prospectively.

Issue 4: Adherence to Jurisdictional High Court Decisions
The Tribunal considered the jurisdictional High Court's decision in Essae Teraoka (P.) Ltd. v. DCIT, which allowed deductions for employees' contributions to PF and ESIC if paid before the due date of filing returns under Section 139(1). This decision differed from the Gujarat High Court’s stance and was pivotal in the Tribunal’s reasoning.

Issue 5: Application of the Doctrine of Promissory Estoppel
The assessee argued that the Doctrine of Promissory Estoppel should apply, as the Finance Bill 2021 clarified the amendments' effective date. The Tribunal agreed, noting that any legal provision imposing additional burdens cannot be applied retrospectively unless explicitly stated.

Conclusion:
The Tribunal concluded that the amendments to Section 36(1)(va) by the Finance Act 2021 were prospective and not applicable to A.Y. 2017-18. Since the assessee deposited the contributions before the due date for filing returns under Section 139(1), the disallowance was unwarranted. Consequently, the Tribunal set aside the CIT(A)’s order and directed the A.O. to delete the disallowance, allowing the appeals in favor of the assessee. This decision was also applied to the subsequent appeal for A.Y. 2018-19, given the identical nature of the issues involved.

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