2021 (12) TMI 805 - AT - Income Tax

Tribunal rules for assessees, disallows Section 36(1)(va), deems Finance Act 2021 not applicable

The Tribunal ruled in favor of the assessees on all issues. The disallowances made under Section 36(1)(va) were directed to be deleted, the amendments by ... Delayed employees’ contribution towards Provident Fund - addition u/s 2(24)(x) and section 36(1)(va) - HELD THAT:- As decided in PLANMAN HR (P) LTD., 48, COMMUNITY CENTRE, NARAINA INDUSTRIAL AREA, PHASE-I, NEW DELHI. [2021 (7) TMI 686 - ITAT DELHI] Delayed payments of employee’s contribution to Provident Fund/ESIC is allowable if it is deposited before the return is filed u/s 139(1). In view of the legal position on the issue and the order of the Hon'ble ITAT, Delhi in the appellant’s own case [2017 (1) TMI 1598 - ITAT DELHI] the company is eligible for deduction made by the AO by invoking provisions of Section 36(1)(va) read with 2(24)(x) and 43B of the Act. The AO is, therefore, directed to delete the addition. - Decided in favour of assessee. Issues Involved:1. Whether the addition made under Section 36(1)(va) of the Income Tax Act, 1961 for delayed deposit of employees’ contribution to EPF and ESI but before the due date of filing the return is justified.2. Whether the amendments made by the Finance Act 2021 apply to the assessment year 2018-19.3. Whether the addition under Section 143(1) of the Income Tax Act, 1961 is valid.Issue-wise Detailed Analysis:1. Addition under Section 36(1)(va) for Delayed Deposit of Employees’ Contribution to EPF and ESI:The primary issue in these appeals was the disallowance of deductions claimed by the assessees for payments made towards employees’ contributions to EPF and ESI after the due date prescribed under the respective acts but before the due date of filing the return under the Income Tax Act. The respective Assessing Officers made disallowances under Section 36(1)(va) and Section 43B of the I.T. Act. The appellate orders confirmed these disallowances. The assessees argued that the issue was covered in their favor by various judicial decisions, including the case of DCIT vs. Planman HR (P) Ltd. and other High Court and ITAT orders. The Tribunal noted that the payments were made before the due date of filing the return and cited numerous precedents where such payments were allowed as deductions. The Tribunal decided in favor of the assessees, directing the Assessing Officers to delete the disallowances.2. Applicability of Amendments by the Finance Act 2021:One of the assessees contended that the amendments made by the Finance Act 2021, specifically the insertion of Explanation 2 in Section 36(1)(va) and Explanation 5 in Section 43B, should not apply to the assessment year 2018-19. The Tribunal observed that the amendments were to take effect from April 1, 2021, and would apply to the assessment year 2021-22 and subsequent years. Therefore, these amendments were not applicable to the assessment year in question, supporting the assessee's position.3. Validity of Addition under Section 143(1):The assessees argued that the addition under Section 143(1) was not valid as the power to make adjustments under this section could only be invoked when the claim was 'prima facie inadmissible.' The Tribunal agreed with the assessees, stating that if the Assessing Officer had doubts about the correctness of any claims, the proper procedure under Sections 143(2) and (3) should be followed. The Tribunal emphasized that the scope of powers under Section 143(1)(a) is similar to the powers to rectify a mistake apparent from the record under Section 154. Therefore, the additions made under Section 143(1) were not justified.Conclusion:The Tribunal ruled in favor of the assessees on all issues. The disallowances made under Section 36(1)(va) were directed to be deleted, the amendments by the Finance Act 2021 were deemed not applicable to the assessment year 2018-19, and the additions under Section 143(1) were found to be invalid. The appeals filed by the assessees were allowed for statistical purposes.