ITAT rules in favor of assessee on ESI/PF deposit disallowance, citing Finance Act amendment.

The ITAT allowed the appeal, holding that the disallowance of ESI/PF deposit made before the due date of filing the return was unjustified. The ITAT emphasized the prospective application of the amendment introduced by the Finance Act, 2021, and directed the deletion of the disallowance. The decision was based on legal principles and relevant court decisions, concluding in favor of the assessee.

---

---

Issues:
Disallowance of ESI/PF deposit before due date of filing return of income.
Quantum of disallowance dispute.
Amendment applicability and retrospective effect.

Analysis:
1. The appeal was against the disallowance of ESI/PF deposit despite being made before the due date of filing the return of income. The assessee argued that since the payments were made before the due date, no disallowance should be imposed under section 36(1)(va) of the Income Tax Act. The assessee cited relevant court decisions to support their claim.
2. The Ld. AR emphasized that the payments were made before the due date of filing the return of income, which should prevent any disallowance. The Ld. CIT(A) relied on the amendment introduced by the Finance Act, 2021, inserting Explanation-5 to section 36(1)(va). However, it was argued that this amendment should be prospective and not retrospective, as clarified by various Tribunal decisions.
3. The Ld. DR contended that the amendment clarified that employees' contributions must be paid within the specified due dates to qualify for deduction under section 36(1)(va). The Ld. CIT(A) upheld the disallowance, citing the amendment's clarity on the matter.
4. The ITAT considered the divergent views of different High Courts and noted that the jurisdiction over the Assessing officer lies with the Punjab & Haryana High Court. The ITAT emphasized that the amendment by the Finance Act, 2021 should apply prospectively from assessment year 2021-22, not retrospectively. Hence, the disallowance of the ESI/PF deposit made before the due date of filing the return was directed to be deleted.
5. Ultimately, the ITAT allowed the appeal of the assessee, concluding that the disallowance of the ESI/PF deposit before the due date of filing the return was not justified. The ITAT's decision was based on the legal position, relevant court decisions, and the prospective application of the amendment introduced by the Finance Act, 2021.

This detailed analysis covers the issues raised in the judgment, including the arguments presented, legal interpretations, and the final decision rendered by the ITAT.

---