Tribunal allows appeals, deletes disallowance for late payment of ESI/PF contributions. Finance Act amendments not retrospective.

The Tribunal allowed the appeals, directing the deletion of the disallowance of Rs. 2,70,396/- for late payment of employee contributions to ESI and PF. It held that recent amendments to Sections 36(1)(va) and 43B by the Finance Act, 2021, could not be applied retrospectively to the assessment year 2018-19. The issue of charging interest under Sections 234B and 234C was considered consequential and did not require further adjudication.

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Issues Involved:
1. Confirmation of disallowance of Rs. 2,70,396/- for late payment of employee's contribution to ESI and PF.
2. Applicability of recent amendments to Section 36(1)(va) and Section 43B by the Finance Act, 2021.
3. Charging of interest under Sections 234B and 234C.

Detailed Analysis:

Issue 1: Confirmation of Disallowance of Rs. 2,70,396/- for Late Payment of Employee's Contribution to ESI and PF
The primary issue in the appeals was the confirmation of disallowance of Rs. 2,70,396/- made by the Assessing Officer (A.O.) under Section 36(1)(va) of the Income Tax Act, 1961, due to late payments towards Employee Provident Fund (EPF) and Employee State Insurance (ESI). The payments were made after the due dates specified in the respective Acts but before the due date for filing the return of income under Section 139(1).

The appellant argued that the contributions were deposited before the due date for filing the return of income and cited precedents from the Rajasthan High Court, including CIT vs. Rajasthan State Beverages Corporation Ltd. and CIT vs. State Bank of Bikaner and Jaipur, which held that such contributions should not be disallowed if deposited before the return filing due date. The Tribunal agreed with the appellant, referencing similar decisions from other jurisdictions, and directed the deletion of the disallowance.

Issue 2: Applicability of Recent Amendments to Section 36(1)(va) and Section 43B by the Finance Act, 2021
The Revenue argued that the recent amendments to Sections 36(1)(va) and 43B by the Finance Act, 2021, which clarified that employee contributions to specified funds must be deposited within the due dates specified in the respective Acts, should apply retrospectively. However, the Tribunal noted that the explanatory memorandum to the Finance Act, 2021, explicitly stated that these amendments would take effect from April 1, 2021, and apply to assessment years 2021-22 and onwards. Since the assessment year in question was 2018-19, the Tribunal held that the amendments could not be applied retrospectively.

Issue 3: Charging of Interest under Sections 234B and 234C
The appellants also contested the charging of interest under Sections 234B and 234C, arguing that interest should be charged on the returned income, not the assessed income. The Tribunal found this ground to be consequential, as the primary disallowance had been deleted. Therefore, no further adjudication on this issue was necessary.

Conclusion:
The Tribunal allowed the appeals, directing the deletion of the disallowance of Rs. 2,70,396/- for late payment of employee contributions to ESI and PF, and held that the recent amendments to Sections 36(1)(va) and 43B by the Finance Act, 2021, could not be applied retrospectively to the assessment year 2018-19. Consequently, the issue of charging interest under Sections 234B and 234C was deemed consequential and did not require further adjudication.

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