Appellate Tribunal grants deduction for employees' PF and ESI contributions pre-due date.

The Appellate Tribunal ITAT Bangalore allowed the appeal in the case involving the disallowance of employees' contribution to PF and ESI. The Tribunal held that the payments made before the due date for filing the return entitled the assessee to deduction, emphasizing that the recent amendments to the Income Tax Act were not retrospective and did not apply to the relevant assessment year. Consequently, the Tribunal directed the Assessing Officer to grant deduction for the employees' contribution to PF and ESI.

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Issues Involved:
1. Disallowance of employees' contribution to PF and ESI.
2. Interpretation of amendments to section 36(1)(va) and 43B of the Income Tax Act.

Issue 1: Disallowance of employees' contribution to PF and ESI:
The appellant challenged the disallowance of employees' contribution to PF and ESI in the intimation under section 143(1) of the Income Tax Act. The appellant contended that the payments were made before the due date for filing the return of income under section 139(1) of the Act, relying on the judgment of the Hon'ble Karnataka High Court. The CIT(A) upheld the disallowance, citing a different judgment and the recent amendments to the Act. The Tribunal, after considering the arguments and precedents, allowed the appeal, emphasizing that the payment made before the due date of filing the return entitles the assessee to deduction, as per judicial decisions. The Tribunal also noted that the amendments brought about by the Finance Act, 2021, were not retrospective and thus did not apply to the relevant assessment year. Therefore, the Tribunal directed the Assessing Officer to grant deduction for the employees' contribution to PF and ESI.

Issue 2: Interpretation of amendments to section 36(1)(va) and 43B of the Income Tax Act:
The Tribunal analyzed the amendments to section 36(1)(va) and 43B of the Income Tax Act introduced by the Finance Act, 2021. It noted that the amendments were not clarificatory or retrospective in nature, as they altered the law adversely to the assessee. Citing relevant judicial pronouncements and precedents, the Tribunal concluded that the amendments did not apply to the assessment year 2019-2020. The Tribunal directed the Assessing Officer to grant deduction for the employees' contribution to PF and ESI, as the payment was made before the due date of filing the return under section 139(1) of the Act. The appeal was allowed based on these findings.

In summary, the judgment by the Appellate Tribunal ITAT Bangalore addressed the issues of disallowance of employees' contribution to PF and ESI and the interpretation of amendments to the Income Tax Act. The Tribunal allowed the appeal, granting deduction for the employees' contribution as the payment was made before the due date of filing the return. The Tribunal held that the amendments were not retrospective and did not apply to the relevant assessment year, thereby directing the Assessing Officer to provide the deduction.

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