2022 (9) TMI 962 - AT - Income Tax

Delayed ESI/PF payments - Disallowance u/s. 36(1)(va) - HELD THAT - We allow the appeals of the assessee.ESI/PF payments etc. were paid before filing of the return u/s. 139(1) on 26.09.2019. Accordingly, disallowance sustained by the ld. CIT(A) considering the legal position as set out herein above, the order passed cannot be upheld - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing appeals.
2. Disallowance under Section 36(1)(va) of the Income Tax Act.

Detailed Analysis:

1. Condonation of Delay in Filing Appeals:
The appeals faced delays of 70 days and 238 days, respectively. The assessee argued that the effective delays were only 3 days and 22 days, respectively, after excluding the COVID-19 period as per the Apex Court's directions. The delays were attributed to uncontrollable circumstances, such as the illness of the assessee's father and local COVID-19 outbreaks. The Senior Departmental Representative (DR) did not object to the condonation, considering the Apex Court's decision. The Tribunal found the delays justified and condoned them.

2. Disallowance under Section 36(1)(va) of the Income Tax Act:
The core issue was the disallowance of employees' contributions to Provident Fund (PF) and Employees' State Insurance (ESI) under Section 36(1)(va) due to delayed payments. The assessee argued that the contributions were deposited before the due date for filing the return under Section 139(1), which was 30.09.2019. This fact was confirmed and undisputed by the Senior DR.

The Tribunal noted that the issue was no longer res-integra, citing various orders from the ITAT and jurisdictional High Court. The Tribunal referenced the case of Vardhman Textiles Ltd., Ludhiana Vs DCIT, Ludhiana, and other similar cases, which held that amendments to Section 36(1)(va) and Section 43B by the Finance Act, 2021, were prospective and not retrospective. The Tribunal emphasized that the amendments would apply from the assessment year 2021-22 onwards.

The Tribunal also cited decisions from other ITAT benches, which consistently held that disallowance under Section 36(1)(va) could not be made if the contributions were deposited before the due date for filing the return under Section 139(1). The Tribunal concluded that the disallowance was not sustainable and directed its deletion.

In ITA 368/CHD/2022, the Tribunal noted that the ESI/PF payments were made before filing the return under Section 139(1) on 26.09.2019. Hence, the disallowance sustained by the CIT(A) could not be upheld, and the same reasoning applied as in the earlier cases.

Conclusion:
The Tribunal allowed the appeals of the assessees, condoning the delays and deleting the disallowances under Section 36(1)(va) for the respective assessment years. The order was pronounced in the Open Court on 18th July, 2022.