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of <h1>ITAT grants deduction for employees' ESI contribution in 2019-2020 assessment year.</h1> <h3>M/s Shakuntala Agarbathi Versus The Dy. Commissioner of Income Tax (CPC), Bangalore</h3> M/s Shakuntala Agarbathi Versus The Dy. Commissioner of Income Tax (CPC), Bangalore - TMI Issues:1. Appeal against CIT(A)'s order2. Disallowance of employees' contribution to ESI3. Applicability of section 43B and 36(1)(va) of the Income Tax Act4. Levying of interest u/s. 234B & 234CIssue 1: Appeal against CIT(A)'s orderThe 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 ESIThe 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 ActThe 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 & 234CThe 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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