Employer entitled to PF/ESI deduction if paid before income tax return deadline

The Tribunal allowed the appeal, holding that no disallowance could be made for PF/ESI paid within the due date of filing the return of income, despite being beyond the Act's specified date. The decision was based on precedents and the Finance Act 2021's explanation, concluding that the employer is entitled to deduction if contributions are made before the return filing deadline under section 139(1) of the Income-tax Act.

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Issues:
Disallowance of employees' share of ESIC and PF under section 43B r.w.s. 36(1)(va) of the Income-tax Act for the assessment year 2018-19.

Analysis:

Issue 1: Disallowance of employees' share of ESIC and PF under section 43B r.w.s. 36(1)(va)
The appeal was against the disallowance of Rs. 1,25,50,590 towards belated remittance of employees' share of ESIC and PF by the revenue authorities. The assessee, engaged in works contract business, filed the return of income before the due date but the payments were considered belated by the authorities. The AR argued that the payments were made before the due date of filing the return of income u/s. 139(1) and should be allowable u/s. 43B of the Act. The Tribunal referred to a similar case where it was held that if the contribution is made before the due date for filing the return of income under section 139(1) of the IT Act, the employer is entitled to deduction. The Tribunal also cited judgments supporting the view that the deduction for payment of tax is permissible if the statutory liability of payment of provident fund or other contribution funds is paid before the due date applicable when submitting returns of income. The AR further highlighted the deletion of the second proviso to section 43B by the Finance Act 2003, supporting the case of the assessee. The Tribunal agreed with the arguments presented by the AR and allowed the appeal based on the precedent set by previous judgments.

Conclusion:
The Tribunal allowed the appeal, stating that no disallowance could be made by the AO in respect of PF/ESI paid within the due date of filing the return of income, even if it was beyond the date mentioned in the respective Act. The Tribunal relied on various judgments and the explanation provided in the Finance Act 2021 to support its decision.

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