Tribunal rules in favor of assessee: Disallowances deleted for late contributions & gratuity provision.

The Tribunal ruled in favor of the assessee, directing the deletion of disallowances for late deposit of Employees Contribution to ESI and EPF, and provision for gratuity. The decision emphasized the prospective application of the Finance Act, 2021 amendment and the significance of provisions claimed or self-disallowed in the income tax return.

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Issues:
1. Disallowance of late deposit of Employees Contribution to ESI and EPF.
2. Disallowance of provision for gratuity.

Issue 1: Disallowance of late deposit of Employees Contribution to ESI and EPF:
The appeal was against the order of the Commissioner of Income Tax (Appeals) confirming the disallowance of Rs. 3,68,124 towards late deposit of employees' contribution to ESI & PF. The assessee argued that the contributions were deposited before the due date of filing the return of income under section 139(1) of the Income Tax Act, relying on various court decisions. The Tribunal noted that the issue was covered by decisions of High Courts and Tribunal Benches, stating that the amendment by the Finance Act, 2021 applied prospectively from assessment year 2021-22. As the assessment year in question was 2019-20, the amendment could not be applied. Consequently, the disallowance was directed to be deleted, allowing the first ground of the assessee's appeal.

Issue 2: Disallowance of provision for gratuity:
The second ground of appeal challenged the disallowance of Rs. 11,14,217 on account of provision for gratuity. The assessee had self-disallowed this provision while filing the return of income. The Tribunal observed that the provision for gratuity had not been claimed by the assessee in the return of income, making the disallowance by the CPC result in double taxation. Therefore, the Tribunal directed the deletion of the disallowance towards the provision for gratuity. Consequently, the second ground of appeal was allowed, and the appeal of the assessee was allowed in its entirety.

Conclusion:
The Tribunal ruled in favor of the assessee on both issues, directing the deletion of the disallowances related to the late deposit of Employees Contribution to ESI and EPF, as well as the provision for gratuity. The judgment highlighted the prospective application of the amendment brought by the Finance Act, 2021 and emphasized the importance of considering whether provisions were claimed or self-disallowed by the assessee while filing the return of income.

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