2022 (4) TMI 487 - AT - Income Tax

Tribunal overturns disallowance of delayed PF & ESI contributions, citing Calcutta High Court precedent

Effluent & Water Treatment Engineers Pvt. Ltd. Versus DCIT, Circle-11 (1), Kolkata

The Tribunal allowed both appeals of the assessee, setting aside the lower authorities' decisions regarding delayed PF & ESI contributions. Relying on ... Delayed payment of PF & ESI - deposits before filing of Return of Income - HELD THAT:- We find that the issue is covered in favour of the assessee as the assessment year involved is AY 2017-18 and the Explanation-5 inserted by Finance Act, 2021 to section 43B w.e.f. 01.04.2021 is not applicable to the assessment year under consideration. See HARENDRA NATH BISWAS VERSUS DCIT, CIRCLE-29 KOLKATA [2021 (7) TMI 942 - ITAT KOLKATA] wherein held that we do not accept the Ld. CIT(A)’s stand denying the claim of assessee since assessee delayed the employees contribution of EPF & ESI fund and as per the binding decision of the Hon’ble High Court in Vijayshree Ltd [2011 (9) TMI 30 - CALCUTTA HIGH COURT]u/s 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds and we allow the appeal of the assessee. Issues:Appeals against orders of National Faceless Appeal Centre under IT Act - Delayed payment of PF & ESI contributions - Allowability of deductions - Applicability of Explanation-5 to section 43B - Precedent set by Calcutta High Court.Analysis:The appeals were filed against orders of the National Faceless Appeal Centre under the Income Tax Act regarding the delayed payment of Provident Fund (PF) and Employee State Insurance (ESI) contributions. The appellant contended that the lower authorities' orders were arbitrary and invalid. The key issue revolved around the disallowance of delayed PF & ESI payments totaling Rs. 5,56,992. The appellant argued that the entire outstanding amount was deposited before the due date of filing the return under section 139 of the Act. The appellant also cited precedents from the jurisdictional Calcutta High Court to support their case.The Tribunal found in favor of the assessee, noting that the assessment year in question was 2017-18, and the Explanation-5 to section 43B inserted by the Finance Act, 2021, was not applicable. Referring to a previous decision involving similar issues, the Tribunal highlighted that the law laid down by the jurisdictional Calcutta High Court should apply. The Tribunal emphasized that since Explanation-5 was not made retrospective, the decision of the High Court was binding. Consequently, the Tribunal set aside the lower authorities' decision and allowed the assessee's appeal, ordering the deletion of the impugned addition.The Tribunal rejected the CIT(A)'s stance and upheld the claim of the assessee based on the binding decision of the Calcutta High Court in a previous case. The Tribunal emphasized that the assessee's delay in depositing the employees' contributions to PF & ESI funds did not warrant disallowance, as the contributions were made before filing the return of income. Therefore, the Tribunal allowed the appeal of the assessee, setting aside the CIT(A)'s order and deleting the impugned addition made by the lower authorities.In conclusion, both appeals of the assessee were allowed by the Tribunal, following the precedent set by the Calcutta High Court and determining the issue of delayed PF & ESI contributions in favor of the assessee.