Tribunal deletes late EPF payment addition, citing retrospective application of Income Tax Act provision.

The Tribunal allowed the appeal, deleting the addition made by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals) regarding late EPF payment. The Tribunal considered that although there was a delay in depositing the EPF contributions, they were made before filing the income tax return. Citing the judgment in CIT vs. Hemla Embroydery Mills (P.) Ltd., the Tribunal held that the second proviso to Section 43B of the Income Tax Act operated retrospectively, leading to the deletion of the addition.

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Issues:
Appeal against addition of late EPF payment

Analysis:
The appeal was filed by the assessee against the order of Ld. CIT(A)-4, Ludhiana confirming the addition of Rs. 10,84,619 made by the AO due to late payment of EPF, even though the payment was made before the due date of filing the income tax return. The AO invoked Section 36(1)(va) read with Section 43B of the Income Tax Act, 1961 to make the addition. The Ld. CIT(A) sustained the addition based on the observation that the EPF payments were made beyond the grace period allowed under the EPF Act. The assessee relied on judgments of the Hon'ble Punjab & Haryana High Court and the Hon'ble Gujarat High Court to contest the disallowance.

During the appeal proceedings, the assessee argued that the EPF/ESI contributions were deposited before filing the income tax return, hence the disallowance was unjustified. The Ld. Counsel cited the judgment of the Hon'ble Jurisdictional High Court in the case of CIT vs. Hemla Embroydery Mills (P.) Ltd. to support this argument. On considering the submissions and the material on record, it was acknowledged that there was a delay in depositing the contributions, but it was also recognized that the deposit was made before filing the return of income. Referring to the judgment in the case of CIT vs. Hemla Embroydery Mills (P.) Ltd., the Tribunal concluded that the second proviso to Section 43B of the Income-tax Act, 1961, was clarificatory in nature and operated retrospectively. Therefore, the addition made by the AO and sustained by the Ld. CIT(A) was deleted, and the appeal of the assessee was allowed.

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