ITAT grants deduction for employees' ESI contribution in 2019-2020 assessment year.

The ITAT allowed the appeal, directing the Assessing Officer to grant deduction for employees' contribution to ESI for the assessment year 2019-2020. The judgment extensively analyzed the legal issues raised, including the applicability of relevant sections of the Income Tax Act and judicial precedents, ultimately ruling in favor of the appellant based on timely payment of the contribution before the due date for filing the return.

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Issues:
1. Appeal against CIT(A)'s order
2. Disallowance of employees' contribution to ESI
3. Applicability of section 43B and 36(1)(va) of the Income Tax Act
4. Levying of interest u/s. 234B & 234C

Issue 1: Appeal against CIT(A)'s order
The appeal was directed against the CIT(A)'s order dated 02.08.2021 concerning the assessment year 2019-2020. The grounds raised by the appellant challenged the appellate order's validity, citing errors in dismissing the appeal without following binding judicial decisions and confirming adjustments made by CPC under section 143(1)(a).

Issue 2: Disallowance of employees' contribution to ESI
The appellant, a partnership firm, contested the disallowance of employees' contribution to ESI in the return of income. The CIT(A) considered conflicting judicial pronouncements and the amendment to sections 43B and 36(1)(va) of the Income Tax Act by the Finance Act, 2021. The ITAT, after hearing submissions, held that the appellant was entitled to deduction as the contribution was paid before the due date for filing the return u/s. 139(1) of the I.T. Act, in line with the judgment of the jurisdictional High Court.

Issue 3: Applicability of section 43B and 36(1)(va) of the Income Tax Act
The ITAT analyzed whether the amendment by the Finance Act, 2021 to section 36(1)(va) and 43B of the I.T. Act was clarificatory and retrospective. Referring to relevant judgments, including the Hon'ble Supreme Court's decision in M.M. Aqua Technologies Limited v. CIT, the ITAT concluded that the amendment adversely affected the appellant and was not retrospective. The ITAT directed the Assessing Officer to grant deduction for employees' contribution to ESI for the relevant assessment year.

Issue 4: Levying of interest u/s. 234B & 234C
The appellant denied liability to pay interest under sections 234B & 234C of the Act. However, the ITAT's decision did not specifically address this issue in the detailed analysis provided.

In conclusion, the ITAT allowed the appeal filed by the assessee, directing the Assessing Officer to grant deduction for employees' contribution to ESI for the assessment year 2019-2020. The judgment provided a detailed analysis of the legal issues raised, citing relevant judicial precedents and statutory provisions to support its decision.

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