Assessee's Appeal Allowed: Deduction for PF/ESI Contribution Disallowed Payment Allowed

The appeal by the assessee challenging the disallowance of Rs. 4,71,179/- on account of delayed payment of employees' contribution to Provident Fund (PF) and Employees' State Insurance (ESI) was allowed. The Tribunal held that the payments made before the due date of filing the return under section 139(1) of the Income Tax Act, 1961, were allowable deductions, citing precedents and clarifying that the amendment brought by the Finance Act, 2021, was prospective and did not apply to the assessment year under consideration. The disallowance was deleted, following established legal principles and decisions.

---

---

Issues Involved:
1. Disallowance of Rs. 4,71,179/- due to delayed payment of employees' contribution to PF and ESI.

Detailed Analysis:

Disallowance of Rs. 4,71,179/- Due to Delayed Payment of Employees' Contribution to PF and ESI:

The appeal by the assessee challenges the disallowance of Rs. 4,71,179/- made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)] due to delayed payment of employees' contribution to Provident Fund (PF) and Employees' State Insurance (ESI). The payments were made after the due dates prescribed in the relevant statutes but before the due date of filing the return under section 139(1) of the Income Tax Act, 1961.

The Tribunal observed that a similar issue was addressed in the case of Lumino Industries Limited. In that case, the Tribunal held that if the employees' share towards PF is remitted before the due date of filing the return of income under section 139(1) of the Act, the deduction is allowable. The AO had disallowed the payment based on CBDT Circular No. 22/2015 and decisions from the Hon'ble Gujarat High Court and ITAT (Mumbai), which stated that employees' contribution to PF/ESI is allowable only if deposited within the due dates prescribed under the respective Acts.

The CIT(A) upheld the AO's action, considering the amendment brought by the Finance Act, 2021, which clarified that Section 43B does not apply to Section 36(1)(va) and is deemed to never have applied to sums received from employees. The CIT(A) viewed this amendment as clarificatory and retrospective.

The assessee's representative argued that the amendment is prospective, citing the Supreme Court's decision in M/s. M.M. Aqua Technologies Ltd. vs. CIT, which held that a retrospective provision in a tax act cannot be presumed to be retrospective if it alters the law as it stood earlier. The representative also referred to the Constitution Bench decision in CIT vs. Vatika Township Pvt. Ltd., which emphasized that legislative intent should be discerned from the "Notes on Clauses" appended to the Finance Bill.

The Tribunal noted that the Finance Act, 2021, explicitly states that the amendments will take effect from April 1, 2021, and apply to the assessment year 2021-22 and subsequent years. Therefore, the amendment is prospective. The Tribunal also considered the binding decisions of the Hon'ble Jurisdictional Calcutta High Court, which held that payments made before the due date of filing the return under section 139(1) are allowable deductions.

The Tribunal concluded that the amendment brought by the Finance Act, 2021, is prospective and does not apply to the assessment year under consideration. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to allow the deduction for the employees' contribution towards PF and ESI, as the payments were made before the due date of filing the return.

Conclusion:
The appeal by the assessee is allowed, and the disallowance of Rs. 4,71,179/- on account of delayed payment of employees' contribution towards PF and ESI is deleted, following the precedent set in the case of Lumino Industries Limited and the binding decisions of the Hon'ble Jurisdictional Calcutta High Court.

---