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2022 (12) TMI 208 - AT - Income TaxLate deposit of Provident Fund and ESI - Scope of amendment effected by Finance Act, 2021 to Sections 36(1)(va)/43B - HELD THAT - As far as the present forum is concerned, there are consistent orders of the ITAT Chandigarh Benches interpreting the relevant provisions wherein it has held that the amendments carried out in the relevant provisions is prospective in nature and not retrospective. Finance Act, 2021 has added Explanation 5 to Section 43B and Explanation 2 to Section 36(1)(va). The tax authorities have consistently held these to be clarificatory in nature and hence its applicability is retrospective. However, consistently by various orders Co-ordinate Benches have repeatedly held the amendments to be prospective in nature. While so holding, decisions of the jurisdictional High Court in the case of CIT Vs. Nuchem Limited. 2010 (2) TMI 959 - PUNJAB AND HARYANA HIGH COURT and CIT Vs. Hemla Embroidery Mills Pvt. Ltd. 2013 (2) TMI 41 - PUNJAB AND HARYANA HIGH COURT have been considered. It has been held that additions by way of disallowance cannot be made or sustained on the strength of the amendment effected by Finance Act, 2021 to Sections 36(1)(va)/43B of the Act as the legal position thereon is very clear - Decided in favour of assessee.
Issues Involved:
1. Correctness of the impugned order dated 09.05.2022. 2. Disallowance of Rs. 10,18,881/- due to late deposit of Provident Fund (PF) and Employees' State Insurance (ESI). 3. Applicability of amendments brought by the Finance Act, 2021. 4. Jurisdictional High Court decisions and their relevance to the case. Detailed Analysis: 1. Correctness of the Impugned Order Dated 09.05.2022: The appeal challenges the correctness of the order dated 09.05.2022 by the First Appellate Authority, NFAC Delhi, for the assessment year 2018-19. The appellant contends that the order is both against facts and erroneous in law. The Tribunal examined the submissions and the material available on record, concluding that the issue is no longer res-integra due to consistent orders from ITAT Chandigarh Benches. 2. Disallowance of Rs. 10,18,881/- Due to Late Deposit of PF and ESI: The disallowance was made under Section 36(1)(va) of the Income Tax Act on the grounds of late payment of PF/ESI, even though the payments were made before the filing of the return. The Tribunal noted that the payments were made before the due date of filing the return, as evidenced by the records. The Tribunal held that the disallowance could not be sustained based on the amendments introduced by the Finance Act, 2021, as these were considered prospective and not retrospective. 3. Applicability of Amendments Brought by the Finance Act, 2021: The Tribunal addressed the amendments made by the Finance Act, 2021, specifically Explanation 5 to Section 43B and Explanation 2 to Section 36(1)(va). The tax authorities viewed these amendments as clarificatory and hence retrospective. However, the Tribunal, following consistent orders of ITAT Chandigarh Benches and the jurisdictional High Court, held that these amendments are prospective. The Tribunal cited several cases, including CIT Vs. Nuchem Limited and CIT Vs. Hemla Embroidery Mills Pvt. Ltd., to support this stance. 4. Jurisdictional High Court Decisions and Their Relevance: The Tribunal referenced the jurisdictional High Court decisions, particularly CIT Vs. Nuchem Limited and CIT Vs. Hemla Embroidery Mills Pvt. Ltd., which held that the amendments by the Finance Act, 2021, are prospective. The Tribunal also considered decisions from other ITAT Benches and the jurisdictional High Court in the case of CIT vs. Nipso Polyfabrika Ltd., which supported the view that disallowances could not be made based on the amendments for periods before their applicability. Conclusion: The Tribunal allowed the appeal, directing the Assessing Officer to delete the disallowance of Rs. 10,18,881/-. The Tribunal emphasized that the legal position regarding the amendments by the Finance Act, 2021, is well settled as prospective, thus the disallowance could not be sustained. The decision was pronounced in the presence of the parties via Webex on 23rd September, 2022.
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