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The main issue in both appeals pertains to the addition made by the Assessing Officer due to the late deposit of employees' share of PF & ESI, which were deposited after the due date but before the due date of filing the return of income. The Assessing Officer made these additions because the assessees did not deposit the employees' contributions as per the provisions of section 36(1)(va) of the Income Tax Act, 1961.
The CIT(A) confirmed the action of the Assessing Officer, citing amendments made to sections 36 and 43B by the Finance Act, 2021. The amendments clarified that the provisions of section 43B would not apply to determine the "due date" under section 36(1)(va).
The Finance Act, 2021, amended section 36 to include Explanation 2, clarifying that section 43B shall not apply for determining the "due date" under section 36(1)(va). Similarly, section 43B was amended to include Explanation 5, stating that its provisions shall not apply to sums received from employees to which section 2(24)(x) applies.
The assessees appealed, arguing that the issue is covered by various ITAT decisions, including those from the ITAT Jodhpur Bench. The Ld. Counsel for the assessee presented several supporting decisions from different ITAT benches, which were placed on record.
The ITAT considered the submissions and reviewed the material on record. It was undisputed that the assessees deposited the PF & ESI contributions late per section 36(1)(va) but before filing the return of income under section 139(1). The ITAT noted that similar issues had been adjudicated by various ITAT benches, including the Kolkata Bench in Harendra Nath Biswas vs. DCIT, where it was held that Explanation 5 of section 43B, inserted by the Finance Act, 2021, effective from 01.04.2021, does not apply retrospectively. Therefore, the law laid down by the jurisdictional High Court would apply.
In the case of Harendra Nath Biswas vs. DCIT, the ITAT Kolkata Bench followed the decision of the Hon'ble Calcutta High Court in Vijayshree Ltd., which held that the deletion of the amount paid by the employees' contribution beyond the due date was deductible under the amended provisions of section 43B. The ITAT Kolkata Bench concluded that the assessee's claim should be allowed since the contributions were deposited before filing the return of income.
Similarly, the ITAT Hyderabad Bench in Salzgitter Hydraulics Pvt. Ltd. vs. ITO held that the disallowance of ESI/PF contributions paid before the due date of filing the return but after the due date prescribed in the corresponding statutes was not sustainable, given the prospective application of the legislative amendments effective from 01.04.2021.
The ITAT Jodhpur Bench, in Mohangarh Engineers and Construction Company vs. CPC, Bangalore, also held that contributions paid before the due date of filing the return of income under section 139(1) could not be disallowed under section 43B read with section 36(1)(va), following the binding decisions of the Hon'ble Rajasthan High Court.
Given the identical facts and following the earlier ITAT orders, the ITAT Jodhpur Bench concluded that the additions made by the Assessing Officer and sustained by the CIT(A) were not justified. The contributions were deposited before the due date of filing the return of income under section 139(1) and prior to the amendment made by the Finance Act, 2021, effective from 01.04.2021. Therefore, the additions were deleted.
In the result, both appeals of the assessees were allowed.
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