2022 (4) TMI 331 - AT - Income Tax

ITAT allows appeal, disallowance under Section 36(1)(va) unjustified. Finance Act 2021 amendment not retrospective.

Asian Industries Versus The ITO, Ward Solan

The ITAT allowed the appellant's appeal, concluding that the disallowance under Section 36(1)(va) of the Income Tax Act was unjustified as the ... Late payments towards EPF and ESI under section 36(1)(va) - Payment before furnishing the return of income under section 139(1) - HELD THAT:- It is not in dispute that the assessee deposited the contribution of PF & ESI belatedly in terms of section 36(1)(va) of the Act. However, the said deposits were made prior to filing of return of income u/s. 139(1) of the Act. It is noticed that an identical issue having similar facts has already been adjudicated in RAJA RAM [2021 (11) TMI 370 - ITAT CHANDIGARH] wherein addition on account of deposits of employees contribution of ESI & PF prior to filing of the return of income u/s. 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee. Issues Involved:1. Legality of the order passed under Section 250 of the Income Tax Act, 1961.2. Applicability of the amendment made by Finance Bill 2021 to Section 36(1)(va) of the Income Tax Act for Assessment Year (AY) 2020-21.3. Disallowance of Rs. 356,390 on account of late payments towards EPF and ESI under Section 36(1)(va) of the Income Tax Act, 1961.Summary of Judgment:1. Legality of the Order Passed Under Section 250 of the Income Tax Act, 1961:The appellant challenged the order dated 22.11.2021 passed by the CIT(A), NFAC, Delhi, under Section 250 of the Income Tax Act, 1961, claiming it was opposed to law, facts, and circumstances of the case. The appellant argued that the CIT(A) confirmed the disallowance made under Section 36(1)(va) vide intimation under Section 143(1) dated 29.02.2020, without considering the latest amendment made by the Finance Bill 2021.2. Applicability of the Amendment Made by Finance Bill 2021 to Section 36(1)(va) of the Income Tax Act for AY 2020-21:The appellant contended that the amendment to Section 36(1)(va) made by the Finance Bill 2021, effective from 01.04.2021 (AY 2021-22), was not applicable to AY 2020-21. The appellant's submission that the amendment should not be applied retrospectively was ignored by the CIT(A).3. Disallowance of Rs. 356,390 on Account of Late Payments Towards EPF and ESI Under Section 36(1)(va) of the Income Tax Act, 1961:The primary grievance of the appellant was the disallowance of Rs. 356,390 made by the Assessing Officer (A.O.) due to late payments towards EPF and ESI under Section 36(1)(va) of the Income Tax Act, 1961. The appellant argued that the contributions were deposited before the filing of the return of income under Section 139(1) of the Act. The CIT(A) sustained this disallowance.The appellant cited the ITAT Chandigarh Bench's common order dated 20/10/2021 in ITA Nos. 191 & 192/Chd/2021 for AYs 2017-18 & 2018-19, which dealt with similar issues. The ITAT, in the case of Raja Ram Vs. ITO, Yamunanagar, had held that the disallowance under Section 36(1)(va) was not justified if the contributions were deposited before the due date of filing the return under Section 139(1).The ITAT also referred to various other cases, including the ITAT Jodhpur Bench's order dated 28.09.2021 in ITA Nos. 71 & 72/Jodh/2021, which supported the appellant's contention. The Tribunal consistently held that if the contributions towards PF & ESI are deposited before the due date of filing the return of income under Section 139(1), the disallowance under Section 36(1)(va) is not warranted.The Tribunal further noted that the amendment made by the Finance Act, 2021, to Section 36(1)(va) was prospective and applicable from 01.04.2021, and thus, not applicable to AY 2020-21.Conclusion:The ITAT concluded that the disallowance made by the A.O. and sustained by the CIT(A) was not justified, as the contributions were deposited before the due date of filing the return of income under Section 139(1). The Tribunal allowed the appeal of the assessee and deleted the disallowance of Rs. 356,390.Final Order:The appeal of the assessee was allowed, and the disallowance of Rs. 356,390 was deleted. The decision was pronounced in the open Court on 08/03/2022.