2024 (10) TMI 801 - AT - Income Tax

Adjustment on account of payment of employees contribution to National Pension Scheme (NPS) u/s 36(1)(va) made while passing intimation order u/s 143(1) - AO disallowed the said amount on ground that such remittances were made beyond date as prescribed in respective Pension Fund Regulatory and Development Authority Act, 2013 and the said amount was added to income of assessee and tax demanded thereon. HELD THAT - We observe that in the case of Adani Petronet (Dahej) Port (P.) Ltd. 2024 (8) TMI 357 - ITAT AHMEDABAD the assessee company which was engaged in port activities, filed its return of income claiming employees contribution under any other welfare fund namely National Pension System (NPS) as business expenditure. ITAT noted that there was no due date prescribed in respective PFRDA Act, 2013 as to when payment was required to be made to NPS account. Further, all payments were duly made before filing of return of income as per section 139(1) - ITAT held that the impugned adjustment made on payment under NPS was not justified and amount in question was to be treated as allowable under Section 43B(b). It would also be useful to reproduce the Notification dated 31.03.2021 issued by the Department of Pension and Pensioners Welfare which specifies that the National Pension System Rules, 2021 shall apply only to Government servant and not to public at large. In view of the above notification, we note applies specifically to Government Servants including Civilian Government Servant in Defence Services. Appeal of the assessee is allowed.

Issues Involved:

1. Validity of the order under Section 250 of the Income Tax Act by the CIT(A).
2. Disallowance of Rs. 3,34,28,177/- related to employee contributions to the National Pension Scheme (NPS) under Section 36(1)(va).
3. Applicability of Section 43B to employee contributions to NPS.
4. Consideration of judicial precedents and legislative amendments in the context of NPS contributions.

Issue-wise Detailed Analysis:

1. Validity of the order under Section 250 of the Income Tax Act by the CIT(A):

The appellant challenged the order passed by the Ld. CIT(A) under Section 250, arguing that it was arbitrary, erroneous, and contrary to the provisions of law and facts. The appellant contended that the CIT(A) failed to consider the facts and submissions made by the appellant, rendering the order bad in law and deserving cancellation.

2. Disallowance of Rs. 3,34,28,177/- related to employee contributions to the National Pension Scheme (NPS) under Section 36(1)(va):

The core issue revolved around the disallowance of Rs. 3,34,28,177/- for late payments of employee contributions to the NPS. The CIT(A) upheld the Assessing Officer's disallowance, drawing parallels with judicial precedents concerning Provident Funds (PF) and Employees' State Insurance (ESI). The CIT(A) observed that the amount represented late payments and was added as unpaid employee contributions under Section 43B.

3. Applicability of Section 43B to employee contributions to NPS:

The appellant argued that the amount was deposited before the filing of the income tax return under Section 139(1) and should be allowed as a deduction. The appellant cited legal precedents indicating that late payments of PF and ESI contributions could still be claimed as deductions under Section 43B if made before the return filing deadline. However, the CIT(A) noted that amendments in the Finance Bill of 2021 clarified that Section 43B does not apply to amounts received from employees, reinforcing that it pertains solely to employer contributions.

4. Consideration of judicial precedents and legislative amendments in the context of NPS contributions:

The appellant's counsel argued that the CIT(A) erroneously applied principles relevant to PF and ESI contributions to NPS contributions, which are governed by the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013. The counsel highlighted that the PFRDA Act does not specify a due date for NPS contributions, and all payments were made before the return filing deadline. The counsel relied on favorable rulings from ITAT Ahmedabad in similar cases, where employee contributions to NPS were recognized as valid when made before the return filing deadline.

The tribunal considered the rival contentions and judicial precedents, including the cases of Adani Petronet (Dahej) Port (P.) Ltd. and Adani Hazira Port Ltd., where it was held that the impugned adjustment on NPS payments was not justified due to the absence of a prescribed due date in the PFRDA Act. The tribunal also noted that the National Pension System Rules, 2021, apply only to government servants and not to the public at large.

Conclusion:

In light of the above discussion and judicial precedents, the tribunal allowed the appeal of the assessee. The tribunal concluded that the disallowance of employee contributions to NPS was not justified, as all payments were made before the filing of the return of income, and there was no due date prescribed by the PFRDA Act. The order was pronounced in open court on 14/10/2024.

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