Tribunal overturns tax assessment, citing timely deposit of ESI & EPF contributions under amended law.

The Tribunal allowed the appeal, setting aside the CIT(A)'s order and deleting the addition made by the Assessing Officer. The decision was based on the interpretation of the relevant provisions of the Act, specifically regarding the timing of deposit of ESI & Employees Provident Fund Contribution and the applicability of the amendment introduced by the Finance Act of 2021. The Tribunal held that since the contributions were deposited before the due date of filing the return of income, as per the amended provision, the disallowance under section 36(1)(va) was not justified.

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Issues:
Disallowance under section 36(1)(va) of the Act for delayed deposit of ESI & Employees Provident Fund Contribution.

Analysis:

Issue 1: Disallowance under section 36(1)(va) of the Act for delayed deposit of ESI & Employees Provident Fund Contribution

The appeal pertained to the A.Y. 2019-20 against an order passed by the National Faceless Appeal Centre (NFAC) in an appeal filed by the assessee before the CIT(A)-9, Hyderabad. The sole issue in this appeal was the disallowance under section 36(1)(va) of the Act for the delayed deposit of ESI & Employees Provident Fund Contribution. The Tribunal considered the relevant amendment introduced by the Finance Act of 2021, specifically Explanation (v) to section 43B of the Act, which clarified that Employees Contribution to the P.F and ESI deposited by the employer after the due date is not allowable. The Tribunal referred to a previous case where it was held that the amendment is applicable prospectively. The Tribunal emphasized that if the PF and ESI contributions are remitted to the respective accounts before the due date of filing the return of income, they are required to be allowed as deductions. This view was supported by judicial precedents, including a case before the Hon'ble Punjab & Haryana High Court. The Tribunal concluded that since the assessee had deposited the Employees Contribution to the PF and ESI before the date of filing the return of income, as per the amended provision applicable to the relevant A.Y., the disallowance was not justified. Therefore, the assessee's appeal was allowed, setting aside the order of the CIT(A) and deleting the addition made by the Assessing Officer on this issue.

In conclusion, the Tribunal's decision was based on the interpretation of the relevant provisions of the Act, taking into account the specific timing of the deposit of ESI & Employees Provident Fund Contribution and the applicability of the amendment introduced by the Finance Act of 2021. The Tribunal's decision aligned with established judicial precedents and upheld the principle that if the contributions are remitted before the due date of filing the return of income, they should be allowed as deductions.

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