Tribunal rules amendments in Finance Act 2021 not retroactive, favoring assessee on employee-employer contributions.

The Tribunal allowed the appeals of the assessee, holding that the amendments introduced by the Finance Act, 2021 were prospective and not applicable retrospectively. The Tribunal ruled in favor of the assessee for both assessment years, emphasizing the distinction between employee's and employer's contributions under the Income Tax Act and the impact of the amendments on due dates and deductions. The impugned additions under section 36(1)(va) were deemed to be deleted for both AY 2018-19 and 2019-20.

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Issues:
Appeals against orders of CIT(A) relating to Assessment Years 2018-19, 2019-20 regarding disallowance of employee's share of contribution to Provident Fund (PF) under section 36(1)(va) of the Income Tax Act.

Analysis:
1. Issue of Disallowance of Employee's Share of PF Contribution for AY 2018-19:
The assessee, a firm, filed a return of income for AY 2018-19 declaring income. The Centralized Processing Centre (CPC) assessed the total income by making an addition representing employees' share of PF contribution not paid before the due date. The assessee contended that the contribution was paid before the due date for filing the return u/s.139(1) of the Act, relying on various court decisions. However, the CIT(A) dismissed the appeal, citing amendments made by the Finance Act, 2021 to section 36(1)(va) and 43B. The CIT(A) highlighted the distinction between employee's and employer's contributions under the Act, emphasizing the different treatment for due dates and consequences of non-payment.

2. Amendment to Section 36(1)(va) and 43B by Finance Act, 2021:
The CIT(A) interpreted the amendments introduced by the Finance Act, 2021, which inserted Explanation-2 to section 36(1)(va) and Explanation-5 to section 43B. These explanations clarified that the provisions of section 43B shall not apply for determining the "due date" under section 36(1)(va) and for sums received by the assessee from employees. The CIT(A) held that the amendments were declaratory in nature and applied retrospectively by necessary intendment of deeming nature.

3. Issue of Disallowance of Employee's Share of PF Contribution for AY 2019-20:
In AY 2019-20, a similar dispute arose regarding the employee's share of PF contribution. The CIT(A) made an identical addition to the total income. The assessee appealed before the Tribunal, presenting arguments supported by previous decisions. The Tribunal noted that the amendments by the Finance Act, 2021 were prospective, effective from 1.4.2021, and not applicable retrospectively. Relying on previous tribunal decisions, the Tribunal held that the impugned additions under section 36(1)(va) deserved to be deleted for both assessment years.

4. Conclusion:
The Tribunal allowed both appeals of the assessee, emphasizing that the amendments made by the Finance Act, 2021 were prospective and not applicable with retrospective effect. The decisions of the Tribunal were in line with the view that the impugned additions under section 36(1)(va) should be deleted for both assessment years. The judgment highlighted the legal distinction between employee's and employer's contributions and the impact of the amendments on the due dates and deductions under the Income Tax Act.

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