2022 (1) TMI 341 - AT - Income Tax

Tribunal: Amendment not retrospective, employees' PF/ESI contribution allowed

Shri Santosh Mahla Versus C.P.C., Bengaluru/ I.T.O., Ward-Behror.

The Tribunal held that the amendment to Section 36(1)(va) and Section 43B by the Finance Bill, 2021, is not retrospective and does not apply to the ... Disallowance of employees contribution of PF and ESI deposited belatedly but before due date of filing of return of income u/s 139(1) - whether the amendment brought to Section 36(1)(va) as well as 43B of the Act is applicable retrospective or from assessment year 2021-22 as it is specifically stated in the memorandum of Finance Bill, 2021? - HELD THAT:- As decided in case of M/s Kogta Financial (India) Ltd [2022 (1) TMI 250 - ITAT JAIPUR] admittedly and undisputedly, the employees’ contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) - D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says “these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years”. In the instant case, the impugned assessment year is assessment year 2018-19 and therefore, the said amended provisions cannot be applied in the instant case. The addition by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the deposit of the employees’s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted - Appeal of the assessee is allowed. Issues Involved:1. Disallowance of employees' contribution to PF and ESI due to delayed payment but deposited before the due date of filing the return of income under Section 139(1) of the Income Tax Act, 1961.2. Applicability of the amendment to Section 36(1)(va) and Section 43B of the Income Tax Act by the Finance Bill, 2021.Issue-wise Detailed Analysis:1. Disallowance of Employees' Contribution to PF and ESI:The primary issue in this appeal is the disallowance of the employees' contribution towards PF and ESI, which was deposited belatedly but before the due date for filing the return of income under Section 139(1) of the Income Tax Act, 1961. The assessee contended that as per binding precedents, if the payment is made before the due date of filing the return, no disallowance should be made under Section 43B of the Act. However, the CIT(A) confirmed the disallowance, considering the amendment in Section 36(1)(va) and Section 43B, which was deemed retrospective in nature.2. Applicability of the Amendment to Section 36(1)(va) and Section 43B by the Finance Bill, 2021:The Tribunal examined whether the amendment brought by the Finance Bill, 2021, to Section 36(1)(va) and Section 43B is applicable retrospectively or from the assessment year 2021-22. The Tribunal noted that prior to this amendment, the issue of allowability of employees' contribution towards PF and ESI was settled in favor of the assessee by various High Courts, including the Jurisdictional High Court. The Tribunal referenced the decision in the case of M/s Kogta Financial (India) Ltd. Vs CPC, where it was held that the amendments are applicable only from the assessment year 2021-22 and subsequent years, and not retrospectively.The Tribunal further cited the decision of the Delhi Benches in the case of Chatru Mal Garg Vs ACIT, which supported the view that no disallowance under Section 36(1)(va) is called for when the amounts are deposited before filing the return of income. The Tribunal emphasized that the explanatory memorandum to the Finance Bill, 2021, explicitly states that the amendments will take effect from 1st April 2021 and apply to assessment year 2021-22 and subsequent years.Conclusion:The Tribunal concluded that the amendment to Section 36(1)(va) and Section 43B of the Act by the Finance Bill, 2021, is not applicable to the assessment year under consideration (2019-20). Consequently, the disallowance made on account of employees' contribution towards PF and ESI deposited before the due date of filing the return of income under Section 139(1) of the Act was deleted. The appeal of the assessee was allowed, and the order pronounced in the open court on 5th January 2022.