2022 (10) TMI 653 - AT - Income Tax

Late payment of Employees contribution to EPF and other Welfare Funds - no payment till the due date, mentioned in the respective Acts, but before the due date of filing return of income u/s. 139(1) - HELD THAT - As relying on RAJA RAM 2021 (11) TMI 370 - ITAT CHANDIGARH additions made by the AO and sustained by the Ld. CIT(A) on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s. 139(1) under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee.

Issues Involved: Adjustment made to the return of income by adding Rs. 10,04,063/- due to the failure of the assessee to deposit employees' contribution to PF/ESI before the prescribed due dates.

Issue-wise Detailed Analysis:

1. Adjustment to Return of Income:
The solitary issue in the appeal concerns the adjustment made to the return of income filed by the assessee. The adjustment was made under section 143(1) of the Income Tax Act, adding Rs. 10,04,063/- because the assessee failed to deposit the employees' contribution to PF/ESI on or before the due dates prescribed under section 36(1)(va) of the Act. The assessee did deposit the contributions before the due date for filing the return of income under section 139(1) of the Act.

2. Interpretation of Section 36(1)(va) and Section 43B:
The Revenue Authorities based their adjustment on the Finance Act, 2021 amendments to sections 36(1)(va) and 43B. The amendments clarified that the due date for payment of employers' contribution prescribed under section 43B would not apply to employees' contributions under section 36(1)(va). However, the assessment year in question is 2017-18, which is before the amendment. The authorities argued that the amendment is clarificatory and retrospective.

3. Assessee's Contention:
The assessee's counsel argued that the issue is covered by the ITAT, Chandigarh Bench's common order dated 20/10/2021 in similar cases (Raja Ram Vs. ITO, Yamunanagar and Sanchi Management Services Private Limited Vs. ITO, Chandigarh). The counsel maintained that contributions paid before the due date of filing the return under section 139(1) should be allowable as deductions.

4. Revenue's Argument:
The Revenue's representative supported the orders of the lower authorities, reiterating that the amendment is clarificatory and should be applied retrospectively.

5. Tribunal's Analysis:
The Tribunal noted that identical issues have been adjudicated by various ITAT benches, including the ITAT, Jodhpur Bench, in cases with similar facts. In these cases, it was held that contributions paid before the due date of filing the return under section 139(1) are allowable as deductions, even if paid after the due dates prescribed under the respective Acts. The Tribunal cited several decisions, including those from the ITAT Kolkata and Hyderabad Benches, supporting this view.

6. Jurisdictional High Court Decisions:
The Tribunal referred to the Rajasthan High Court's decisions, which consistently held that contributions paid before the due date of filing the return under section 139(1) cannot be disallowed under sections 43B or 36(1)(va). The Tribunal emphasized that these decisions are binding on the authorities within the jurisdiction of the Rajasthan High Court.

7. Conclusion:
Given the binding precedents and the fact that the assessment year in question predates the Finance Act, 2021 amendment, the Tribunal held that the disallowance sustained by the CIT(A) should be deleted. The appeal of the assessee was allowed, and the disallowance of Rs. 10,04,063/- was deleted.

Order Pronounced:
The order was pronounced on 29.09.2022, allowing the appeal of the assessee.

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