2022 (4) TMI 486 - AT - Income Tax

Appeal allowed for pre-2021 tax deductions!

Chapa Enterprise Versus Assistant Commissioner of Income-tax, circle-6 (2), Kolkata

The Tribunal allowed the appeal, holding that the Amendment brought by the Finance Act 2021 was prospective and did not apply to assessment years before ... Disallowance made in respect of PF & ESI in respect employee’s contribution u/s. 36(1)(va) r.w.s. 2(24)(x) - HELD THAT:- As assessee has remitted the PF & ESI dues before the date of filing of return of income u/s. 139(1) of the Act and the same was deposited , which fact is discernable from a perusal of the Tax Audit Report (TAR) and on a perusal of the same it is seen that the assessee has deposited employees’ contribution before the due date of filing of the return. See LUMINO INDUSTRIES LTD. [2021 (11) TMI 926 - ITAT KOLKATA] Therefore allow the appeal of the assessee and direct the A.O. to delete the addition and hold that the Amendment brought in Finance Act 2021 w.e.f. 01.04.2021 by inserting an Explanation to section 36(1)(va) and section 43B of the Act is prospective in nature and would apply from AY 2021-22 onwards and, therefore, the amendment is not applicable to this assessment years (Assessment Year 2019-20) under consideration. - Appeal of assessee allowed. Issues:- Disallowance of PF & ESI in respect of employee's contribution under section 36(1)(va) r.w.s. 2(24)(x) of the Income-tax Act, 1961.Detailed Analysis:1. The appeal pertains to the disallowance of PF & ESI in respect of employee's contribution under section 36(1)(va) r.w.s. 2(24)(x) of the Income-tax Act, 1961. The appellant contested the action of the Ld. CIT(A) in confirming the disallowance, arguing that the remittance was made before filing the return of income u/s 139 of the Act. The appellant relied on the Amendment brought by Finance Act 2021 w.e.f. 01.04.2021, which inserted an Explanation to section 36(1)(va) and section 43B. The appellant asserted that the Amendment is prospective and cannot disturb binding judicial precedents in favor of the assessee. The Tribunal referenced the case of Lumino Industries Ltd. vs. ACIT, where a similar view was taken, holding the amendment as prospective from AY 2021-22 onwards.2. The Tribunal examined the legislative intent behind the Amendment brought in by the Finance Act 2021. Citing the Supreme Court's guidance in M/s Snowtex Investment Ltd., the Tribunal analyzed the Notes on Clauses appended to the Finance Bill to ascertain whether the Amendment should be retrospective or prospective. The Tribunal concluded that the legislative intent was clear from the Notes on Clauses and relevant clauses of the Finance Bill, indicating that the Amendment would apply from 1st April, 2021, onwards, affecting Assessment Year 2021-22 and subsequent years. Therefore, the Tribunal held that the Amendment was prospective and the Ld. CIT(A) erred in holding otherwise.3. The appellant demonstrated that the PF & ESI dues were remitted before the due date of filing the return of income u/s. 139(1) of the Act, as evidenced by the Tax Audit Report. Relying on the judicial precedent and the timing of the remittance, the Tribunal allowed the appeal of the assessee, directing the AO to delete the addition. The Tribunal emphasized that the Amendment brought in by the Finance Act 2021 was prospective and would not apply to the assessment years before AY 2021-22.4. Consequently, the Tribunal allowed the appeal of the assessee, setting aside the impugned order of the Ld. CIT(A) and directing the AO to permit the deduction in respect of employees' contribution shares towards ESI, PF, made before the due date of filing the return u/s 139(1) of the Act. The decision favored the assessee, and the appeal was allowed in their favor.5. The final order was pronounced in the open court on 31st March 2022, in favor of the appellant, thereby concluding the matter concerning the disallowance of PF & ESI in respect of employee's contribution under the specified sections of the Income-tax Act, 1961.