ITAT allows appeal on delayed ESI & PF payments under Income Tax Act

The ITAT allowed the appeal, setting aside the order disallowing delayed payments of employees' contribution to ESI and PF under section 36(1)(v) of the Income Tax Act. The ITAT held that the Finance Act, 2021 amendments were prospective and that the High Court had consistently allowed such contributions if paid by the due date of filing the return of income. The Assessing Officer was directed to allow the claim of the assessee, and the judgment was pronounced on 4th October 2021.

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Issues:
1. Disallowance of delayed payments of employees' contribution to ESI and PF under section 36(1)(v) of the Income Tax Act.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) concerning the addition made to the assessee's income due to delayed payments of employees' contribution to ESI and PF. The Commissioner upheld the addition based on the amendments introduced by the Finance Act, 2021, to sections 36(1)(va) and 43B of the Act. The Commissioner ruled that the due date for payment of employees' contribution to ESI and PF was not governed by section 43B but by the respective Acts. The Commissioner applied the amendments retroactively, disregarding the assessee's argument that the issue was decided in their favor by the High Court.

The assessee contended that various ITAT Benches had ruled in favor of the assessee on this issue. The ITAT noted that the Finance Act, 2021 amendments were applicable prospectively from the assessment year 2021-22 onwards. Additionally, the jurisdictional High Court had consistently allowed employees' contribution to ESI and PF if paid by the due date of filing the return of income under section 139(1) of the Act. The ITAT cited specific cases where the High Court had ruled in favor of the assessee on this matter.

Therefore, the ITAT held that the claim of employees' contribution to ESI and PF could not be denied in the relevant year based on the Finance Act, 2021 amendments. The order disallowing the contribution was set aside, directing the Assessing Officer to allow the claim of the assessee. Consequently, the appeal of the assessee was allowed, and the judgment was pronounced on 4th October 2021.

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