Precedents Upheld: PF/ESI Contributions Pre-Due Date Deductible as per Section 36(1)(va)

The Tribunal allowed the appeal, following judicial precedents and holding that employees' contributions to PF/ESI paid before the due date of filing the return of income are allowable deductions. The Tribunal rejected the Revenue's interpretation of the amended section 36(1)(va) as retrospective, determining it to be prospective from the assessment year 2019-20. Consequently, the impugned additions made by the Assessing Officer were deleted, and the appeal of the assessee was allowed.

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Issues Involved:

1. Adjustment made to the return of income by adding a sum for failure to deposit employees' contribution to PF/ESI before the prescribed due dates.
2. Interpretation of section 36(1)(va) of the Income Tax Act, 1961, and its amendment by the Finance Act, 2021.
3. Applicability of judicial precedents and jurisdictional High Court decisions on the allowability of employees' contribution to PF/ESI.

Detailed Analysis:

Issue 1: Adjustment for Failure to Deposit Employees' Contribution to PF/ESI

The solitary issue in the appeal concerns the adjustment made to the return of income filed by the assessee by adding Rs. 87,22,105/- due to the failure to deposit employees' contribution to PF/ESI before the prescribed due dates as per section 36(1)(va) of the Income Tax Act, 1961. The addition was made in the intimation to the assessee under section 143(1) of the Act. Despite the contributions being paid before the due date of filing the return of income under section 139(1), the Revenue based its adjustment on the amendment to section 36(1)(va) and section 43B by the Finance Act, 2021, which stipulates that the due date for payment of employees' contribution is as specified in the respective Acts.

Issue 2: Interpretation of Section 36(1)(va) and Amendment by Finance Act, 2021

The core of the dispute lies in the interpretation of section 36(1)(va) and its amendment by the Finance Act, 2021. The amendment clarified that the due date for payment of employees' contribution to PF/ESI is as specified in the respective Acts, and not the due date for filing the return of income under section 139(1). The Revenue contended that this amendment is clarificatory and retrospective, applying to the assessment year in question (2018-19). However, the Tribunal noted that the amendment was prospective, effective from assessment year 2019-20, and thus not applicable to the present case.

Issue 3: Applicability of Judicial Precedents

The Tribunal referred to various judicial precedents, including decisions by the Hon'ble Jurisdictional High Court and other Benches of the ITAT, which have consistently held that employees' contributions to PF/ESI paid before the due date of filing the return of income under section 139(1) are allowable as deductions. Specifically, the Tribunal cited cases such as Raja Ram Vs. ITO, Yamunanagar, and Sanchi Management Services Private Limited Vs. ITO, Chandigarh, where similar issues were adjudicated in favor of the assessee. The Tribunal also referenced the decision of the Hon'ble Calcutta High Court in Vijayshree Ltd., which followed the Supreme Court's ruling in CIT vs. Alom Extrusion Ltd., holding that the amendment to section 43B was curative and applicable retrospectively, thus allowing deductions for contributions paid before the due date of filing the return.

Conclusion:

The Tribunal concluded that the facts of the present case were identical to those in the cited precedents. Therefore, it followed the earlier orders of the different Benches of the ITAT and the jurisdictional High Court, deleting the impugned additions made by the Assessing Officer and sustained by the CIT(A) on account of deposits of employees' contributions to PF/ESI prior to the amendment by the Finance Act, 2021. Consequently, the appeal of the assessee was allowed.

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