2022 (2) TMI 761 - AT - Income Tax

Tribunal overturns tax additions, citing double disallowances, emphasizes return filing date over payment due date.

M/s. Enphase Solar Energy Private Limited Versus The Assistant Director of Income Tax, Central Processing Centre, Bengaluru.

The Tribunal allowed the appeal of the assessee, deleting the additions made under Sections 43B, 40, and 36(1)(va) of the Income Tax Act, finding that the ... Belated remittance of EPF Contributions - Amount paid before the due date for filing the return of income u/s 139(1) - HELD THAT:- Hon’ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd. [2014 (3) TMI 386 - KARNATAKA HIGH COURT] has taken the view that employee’s contribution under section 36(1)(va) of the Act would also be covered u/s 43B of the Act and therefore if the share of the employee’s share of contribution is made on or before due date for furnishing the return of income u/s 139(1), then the assessee would be entitled to claim deduction. In this case there is no dispute that the assessee made payment of the Employees share of PF/ESI on or before the due date for filing return of income for AY 2017-18 u/s.139(1). Whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also? - On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act, deserves to be deleted. Issues Involved:1. Disallowance under Section 43B of the Income Tax Act.2. Disallowance under Section 40 of the Income Tax Act.3. Disallowance under Section 36(1)(va) of the Income Tax Act.Issue-wise Detailed Analysis:1. Disallowance under Section 43B of the Income Tax Act:The assessee, a Private Limited company, filed a return declaring a total income of Rs. 8,20,52,190. The Assessing Officer (AO) made an addition of Rs. 1,20,58,223 under Section 43B, which the assessee contended was already disallowed under Section 40 in the computation of income. The assessee argued that this amounted to a double disallowance. The Tribunal found that the assessee had indeed disallowed the provision for leave encashment of Rs. 1,20,58,223 in its computation of total income. The Tribunal concluded that the addition made by the AO under Section 43B resulted in a double addition and should be deleted.2. Disallowance under Section 40 of the Income Tax Act:The AO also made an addition of Rs. 1,30,500 under Section 40, which the assessee claimed was already disallowed in the computation of total income. The Tribunal verified that the assessee had disallowed this amount under Section 40 in its computation. Consequently, the Tribunal determined that the addition made by the AO under Section 40 also resulted in a double addition and should be deleted.3. Disallowance under Section 36(1)(va) of the Income Tax Act:The AO disallowed Rs. 18,90,162 due to the delayed deposit of employees' contributions to the Provident Fund beyond the due date specified under the Provident Fund Act. The assessee argued that the 'due date' should be considered as the due date for filing the return of income under Section 139(1) of the Act, not the due date for payment. The Tribunal referred to the decision of the Karnataka High Court in the case of Sabari Enterprises, which held that the deduction is permissible if the payment is made before the due date for filing the return of income under Section 139(1). The Tribunal also noted that the amendment to Section 36(1)(va) and Section 43B by the Finance Act, 2021, is applicable prospectively from 01.04.2021, and not retrospectively. Therefore, the Tribunal concluded that the disallowance under Section 36(1)(va) should be deleted.Conclusion:The Tribunal allowed the appeal of the assessee, deleting the additions made under Sections 43B, 40, and 36(1)(va) of the Income Tax Act. The judgment was pronounced in the open court.