Tribunal rules in favor of assessee, allowing PF & ESI contributions - sec. 36(1)(va) disallowance set aside

The Tribunal ruled in favor of the assessee, setting aside the disallowance of Employees' contribution of PF & ESI under sec. 36(1)(va) for late remittance. The decision was based on the prospective application of the Finance Act, 2021 amendments and consistent with previous judgments and the view of the Hon'ble Karnataka High Court. The Tribunal directed the AO to delete the impugned additions, ultimately allowing the appeals of the assessee.

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Issues:
Challenge to disallowance of Employees contribution of PF & ESI u/s 36(1)(va) for remitting dues beyond due date.

Analysis:
The assessee contested the disallowance of Employees contribution of PF & ESI u/s 36(1)(va) for late remittance. The payments were made after due dates under respective statutes but before the due date for filing income tax return u/s 139(1). The CPC disallowed these payments during processing u/s 143(1) and rejected rectification applications u/s 154. The Ld CIT(A) upheld the disallowance based on the Finance Act, 2021 amendment to sec.36(1)(va). The assessee then appealed to the Tribunal challenging the decision.

The Tribunal noted a similar issue in a previous case and referenced the view that the amendment to sec.36(1)(va) has prospective application. The Tribunal cited the decision of the Hon'ble Karnataka High Court in a related case to support this view. The Tribunal delved into the amendments made by the Finance Act, 2021 to sec.36(1)(va) and sec.43B, emphasizing the distinction between employees' and employer's contributions. The CIT(A) deemed the amendments as clarificatory and applicable retrospectively, leading to the dismissal of the Assessee's appeal.

The Assessee further appealed to the Tribunal, presenting case laws where similar disallowances were rejected. The Tribunal considered these cases and the decision of the Hon'ble Karnataka High Court in Essae Teraoka Pvt. Ltd. The Tribunal analyzed the retrospective application of the Finance Act, 2021 amendments, concluding that the additions made under sec.36(1)(va) deserved deletion. Following precedent, the Tribunal directed the AO to delete the impugned additions in both years, ultimately allowing the appeals of the assessee.

In conclusion, the Tribunal ruled in favor of the assessee, setting aside the disallowance of Employees contribution of PF & ESI u/s 36(1)(va) for remitting dues beyond the due date prescribed under the respective statutes. The decision was based on the prospective application of the Finance Act, 2021 amendments and consistent with previous judgments and the view of the Hon'ble Karnataka High Court.

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