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ITAT allows appeal, rejects retrospective application of Finance Act amendment The ITAT ruled in favor of the assessee, allowing the appeal and deleting the disallowance of the employees' contribution amount to ESI and PF. The ITAT ...
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ITAT allows appeal, rejects retrospective application of Finance Act amendment
The ITAT ruled in favor of the assessee, allowing the appeal and deleting the disallowance of the employees' contribution amount to ESI and PF. The ITAT held that the Finance Act, 2021 amendment to sections 43B and 36(1)(va) is prospective, not retrospective, as argued by the Revenue. The jurisdictional High Court's previous decisions supported the assessee's position that payment before the due date of filing the return of income sufficed. Consequently, the disallowance was deemed unjustified, and the appeal was allowed in favor of the assessee.
Issues: 1. Addition of delayed payments of employees' contribution to ESI and PF under section 36(1)(va) of the Income Tax Act, 1961.
Analysis: The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the addition made to the income of the assessee for delayed payments of employees' contribution to ESI and PF. The Commissioner upheld the addition based on the amendment introduced by the Finance Act, 2021, to sections 43B and 36(1)(va) of the Act. The amendment clarified that the due date for payment of employees' contribution to ESI and PF, for claiming deduction under section 36(1)(va), is governed by their respective Acts, not by the due date specified in section 43B. The Commissioner considered this amendment as retrospective, brushing aside the assessee's argument that previous court decisions favored their case.
The issue has been addressed by the ITAT in various cases, consistently ruling in favor of the assessee. The ITAT held that the Finance Act, 2021 amendment to sections 43B and 36(1)(va) is prospective. In a specific case, it was noted that the jurisdictional High Court had previously ruled in favor of allowing employees' contribution to ESI and PF if paid by the due date of filing the return of income. Therefore, the ITAT concluded that the amendment cannot be applied retrospectively, and the addition made by the Revenue was unjustified.
In line with previous decisions, the ITAT dismissed the Revenue's argument that the amendment was retrospective. Since the employees' contribution to ESI and PF was paid before the due date of filing the return of income, the disallowance of the contribution amount was deemed unwarranted. The ITAT ruled in favor of the assessee, allowing the appeal and deleting the disallowance of the employees' contribution amount.
Therefore, based on the consistent decisions of the ITAT and the jurisdictional High Court's stance on the matter, the appeal of the assessee was allowed, and the disallowance of the employees' contribution amount was set aside.
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