ITAT allows appeal on ESI & PF contributions, citing Finance Act 2021 amendments.

The ITAT allowed the assessee's appeal, setting aside the Ld.CIT(A)'s disallowance of the addition made on account of delayed payment of ESI and PF. The ITAT held that the amendments by the Finance Act, 2021 applied prospectively from assessment year 2021-22 onwards. Emphasizing the jurisdictional High Court's consistent stance that employees' contributions to ESI and PF were deductible if paid by the due date of filing the return of income, the ITAT directed the AO to allow the assessee's claim. The decision was pronounced on October 4, 2021.

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Issues:
Addition made on account of delayed payment of ESI and PF

Analysis:
The appeal was filed against the order of the Learned Commissioner of Income Tax (Appeals) regarding the addition made on account of delayed payment of ESI and PF. The issue revolved around the interpretation of the amendments made by the Finance Act, 2021 to section 36(1)(va) and section 43B of the Income Tax Act, 1961. The Ld.CIT(A) upheld the addition, stating that the due date for payment of employees' contribution to ESI and PF, for claiming deduction, was not governed by section 43B but by the due date specified in their respective Acts. The Ld.CIT(A) applied the amendments retrospectively to pending matters, disregarding the jurisdictional High Court's decisions in favor of the assessee.

The assessee argued that various ITAT Benches had ruled in favor of the assessee on this issue. The ITAT considered decisions from different Benches, including Hyderabad and Chandigarh, supporting the assessee's position. The Revenue failed to present any contrary judgments or distinguishing facts. The ITAT acknowledged that the employees' contribution to ESI and PF had been allowed as a deduction based on decisions of the jurisdictional High Court, where contributions deposited by the due date of filing of the return of income were considered allowable.

After reviewing the orders of the coordinate Benches and other decisions, the ITAT concluded that the amendments made by the Finance Act, 2021 were applicable prospectively, from assessment year 2021-22 onwards. The ITAT emphasized that the jurisdictional High Court had consistently held that employees' contribution to ESI and PF was allowable if paid by the due date of filing the return of income under section 139(1) of the Act. Therefore, the ITAT set aside the Ld.CIT(A)'s disallowance and directed the AO to allow the claim of the assessee. Consequently, the appeal of the assessee was allowed, and the order was pronounced on October 4, 2021.

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