Tribunal allows appeal, deletes EPF disallowance, citing Finance Act 2021 amendments and High Court precedent.

The Tribunal allowed the appeal of the assessee, directing the deletion of the disallowance of Rs. 5,24,104/- related to the late payment of EPF. The decision was based on the view that the Finance Act 2021 amendments are prospective and the binding jurisdictional High Court decision in favor of the assessee.

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Issues Involved:
1. Addition of Rs. 5,24,104/- on account of late payment of Employees' Provident Fund (EPF).
2. Non-compliance with the jurisdictional Himachal Pradesh High Court decision in CIT vs Nipso Polyfabrika Ltd.

Issue-wise Detailed Analysis:

1. Addition of Rs. 5,24,104/- on account of late payment of EPF:

The assessee challenged the correctness of the order dated 08.07.2021 by the CIT(A) for the assessment year 2018-19, which upheld the addition made by the Assessing Officer (AO) of Rs. 5,24,104/- due to late payment of EPF. The assessee argued that the amount was paid before the due date of filing the return under section 139(1) of the Income Tax Act, 1961, and thus should be an allowable expenditure as per the Supreme Court judgment in Pr. CIT vs Rajasthan State Beverages Corporation Ltd.

The Tribunal acknowledged the delay in EPF payment as per the specific Act but noted that the return was filed within the due date under section 139(1). The disallowance was based on the Finance Act 2021 amendments to Sections 36(1)(va) and 43B, considered retrospective by the CIT(A). However, the Tribunal referenced multiple ITAT decisions, including those from the Delhi and Hyderabad Benches, which clarified that these amendments are prospective, effective from April 1, 2021.

The Tribunal cited several cases, such as Insta Exhibitions Pvt. Ltd. vs Addl. CIT and M/s Crescent Roadways Pvt. Ltd. vs Dy. CIT, which consistently held that the amendments are not retrospective. The Tribunal concluded that the disallowance was unsustainable since the amount was paid before the due date for filing the return, thus aligning with the legal position that the amendments are prospective.

2. Non-compliance with the jurisdictional Himachal Pradesh High Court decision in CIT vs Nipso Polyfabrika Ltd.:

The assessee contended that the CIT(A) did not follow the binding decision of the Himachal Pradesh High Court in CIT vs Nipso Polyfabrika Ltd., which should have been considered. The Tribunal confirmed that the jurisdictional High Court's decision in Nipso Polyfabrika Ltd. supported the assessee's position on employees' contribution, referencing the Supreme Court's decision in CIT vs Alom Extrusions Ltd. and the Delhi High Court's decision in CIT vs Aimil Ltd.

The Tribunal noted that the Himachal Pradesh High Court's decision was not considered by the CIT(A) and emphasized that this decision, which pertains to employees' contribution, is favorable to the assessee. The Tribunal reiterated that the amendments by the Finance Act 2021 are prospective and not applicable to the assessment year in question.

Conclusion:

The Tribunal allowed the appeal of the assessee, directing the deletion of the disallowance of Rs. 5,24,104/- related to the late payment of EPF. The Tribunal's decision was based on the consistent view that the Finance Act 2021 amendments are prospective and the binding jurisdictional High Court decision in favor of the assessee. The order was pronounced on 18th November 2021.

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