Tribunal rules in favor of assessee, disallowance under Income Tax Act not justified

The Tribunal allowed the appeals of the assessee, holding that the disallowance of Rs. 69,602/- under section 36(1)(va) of the Income Tax Act was not justified. Contributions towards EPF and ESI, although delayed, were made before the due date of filing the return of income, following precedents and legislative amendments. The Tribunal directed the deletion of the disallowance, ruling in favor of the assessee. The order was pronounced on 29/11/2021.

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Issues Involved:
1. Disallowance of Rs. 69,602/- under section 36(1)(va) of the Income Tax Act, 1961 due to late payments towards EPF and ESI.

Detailed Analysis:

1. Disallowance under Section 36(1)(va) of the Income Tax Act, 1961:
- The primary issue in both appeals is the disallowance of Rs. 69,602/- made by the Assessing Officer (AO) due to late payments towards Employee Provident Fund (EPF) and Employee State Insurance (ESI) under section 36(1)(va) of the Income Tax Act, 1961. The payments, although delayed, were made before the due date of filing the return of income under section 139(1) of the Act.

- The assessee contended that this issue is covered by the ITAT Jodhpur Bench's common order dated 27/09/2021 in ITA No. 59/Jodh/2021 and ITA No. 60/Jodh/2021, which dealt with similar facts and circumstances. In these cases, it was held that the disallowance of contributions made before the due date of filing the return of income is not justified.

- The Revenue, represented by the Ld. DR, supported the orders of the authorities below, emphasizing the observations made by the CIT(A).

- Upon review, it was noted that the identical issue had been adjudicated by various Benches of the ITAT, including the ITAT Kolkata in the case of Harendra Nath Biswas vs. DCIT (ITA No. 186/Kol/2021) and ITAT Hyderabad in the case of Salzgitter Hydraulics Private Ltd. vs. ITO (ITA No. 644/Hyd./2020). These cases concluded that contributions made before the due date of filing the return of income should not be disallowed, even if made after the due date prescribed in the respective statutes.

- The Tribunal also referred to several High Court judgments, including the Hon’ble Calcutta High Court in Vijayshree Ltd. and the Hon’ble Rajasthan High Court in CIT vs. State Bank of Bikaner & Jaipur, which supported the view that contributions paid before the due date of filing the return of income are allowable deductions.

- The Tribunal observed that the Finance Act, 2021, introduced amendments effective from 01.04.2021, which clarified that the amendments are prospective and not retrospective. This means that the disallowance under section 36(1)(va) cannot be applied to assessment years prior to the amendment.

- Consequently, the Tribunal held that the disallowance made by the AO and sustained by the CIT(A) for the assessment years under consideration was not justified. The Tribunal directed the deletion of the disallowance, thereby allowing the appeals of the assessee.

Conclusion:
- The Tribunal concluded that the disallowance of Rs. 69,602/- under section 36(1)(va) was not sustainable since the contributions were made before the due date of filing the return of income, following the binding precedents and legislative amendments. The appeals were allowed in favor of the assessee.

Order Pronounced:
- The appeals of the assessee were allowed, with the order pronounced on 29/11/2021.

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