Tribunal allows appeals, rejects disallowances on EPF & ESI contributions pre-deposit.

The Tribunal allowed the appeals of the assessees, deleting the disallowances of contributions towards EPF and ESI. The disallowances made by the Assessing Officer and sustained by the CIT(A) were deemed unjustified as the contributions were deposited before the due date of filing the income tax return under section 139(1) of the Income Tax Act, 1961. The Tribunal relied on binding precedents from various High Courts and earlier ITAT orders in reaching this decision.

---

---

Issues Involved:
1. Disallowance of Rs. 3,41,798 on account of late payments towards EPF and ESI under section 36(1)(va) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Disallowance of Rs. 3,41,798 on account of late payments towards EPF and ESI under section 36(1)(va) of the Income Tax Act, 1961:

The primary grievance of the assessees is the disallowance of Rs. 3,41,798 made by the Assessing Officer (A.O.) due to late payments towards Employees' Provident Fund (EPF) and Employee State Insurance (ESI) contributions. The contributions were deposited beyond the due date as per the PF and ESIC Act but before the due date for filing the Income Tax Return (ITR) under section 139(1) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) [CIT(A)] sustained this disallowance.

The assessees argued that the issue is covered by the ITAT, Chandigarh Bench's common order dated 20/10/2021 in ITA Nos. 191 & 192/Chd/2021 for the assessment years 2017-18 & 2018-19. The Tribunal had held that contributions deposited before the due date of filing the return of income under section 139(1) should not be disallowed under section 36(1)(va).

The Tribunal considered various precedents, including the ITAT Jodhpur Bench's order dated 28.09.2021 in ITA Nos. 71 & 72/Jodh/2021, where it was held that contributions paid before the due date of filing the return of income should be allowed as deductions. The Tribunal also referenced the Kolkata ITAT's decision in the case of Harendra Nath Biswas vs. DCIT, ITA No. 186/Kol/2021, which followed the Hon'ble Calcutta High Court's ruling in Vijayshree Ltd., stating that the amendment to section 43(B) by the Finance Act, 2003, was curative and should be applied retrospectively.

Further, the Tribunal noted that the Finance Act, 2021, introduced Explanation 5 to section 36(1)(va), effective from 01.04.2021, which clarified that contributions must be paid within the due dates specified under the respective Acts. However, this amendment was not retrospective and hence not applicable for the assessment years under consideration.

The Tribunal also referenced decisions from various High Courts, including the Hon'ble Rajasthan High Court, which consistently held that contributions paid before the due date of filing the return of income should not be disallowed. The Tribunal emphasized that the jurisdictional High Court's decisions are binding and must be followed.

Based on these precedents and the binding nature of the jurisdictional High Court's rulings, the Tribunal concluded that the disallowances made by the A.O. and sustained by the CIT(A) were not justified. Consequently, the Tribunal deleted the disallowances in all the appeals.

Conclusion:

The appeals of the assessees were allowed, and the disallowances of contributions towards EPF and ESI made by the A.O. and sustained by the CIT(A) were deleted, as the contributions were deposited before the due date of filing the return of income under section 139(1) of the Income Tax Act, 1961. The Tribunal followed the binding precedents set by various High Courts and earlier orders of the ITAT.

---