Tribunal Deletes Addition for Delayed EPF Contributions in Tax Appeal

The Tribunal allowed the appeal, directing the deletion of the addition made for delayed EPF contributions, as they were paid before the return filing due date. The Tribunal relied on the non-retrospective applicability of the Finance Act, 2021 amendment and aligned with previous Rajasthan High Court decisions and tribunal rulings. The addition of Rs. 8,43,654 was deleted in favor of the assessee.

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Issues Involved:
1. Confirmation of addition in respect of employees' contribution towards EPF pertaining to assessment year 2019-20.
2. Applicability of Section 36(1)(va) and Section 43B of the Income Tax Act, 1961.
3. Retrospective applicability of the amendment introduced by the Finance Act, 2021.

Issue-wise Detailed Analysis:

1. Confirmation of Addition in Respect of Employees' Contribution Towards EPF:
The assessee filed its return of income declaring a total income of Rs. 49,72,054 for the assessment year 2019-20. The Assessing Officer added Rs. 8,43,654 due to the delayed payment of EPF. The assessee's rectification application was rejected, and the CIT(A) confirmed the disallowance based on the failure to pay the employee’s contribution within the prescribed due dates as per Section 36(1)(va). The assessee appealed against this order.

2. Applicability of Section 36(1)(va) and Section 43B of the Income Tax Act, 1961:
During the hearing, the assessee argued that the EPF contributions were deposited before the due date of filing the return under Section 139(1), citing various tribunal decisions and High Court rulings supporting this view. The Revenue countered that the contributions were not made within the prescribed due dates under Section 36(1)(va), justifying the disallowance under Section 143(1)(a)(iv) as a prima facie adjustment. The Revenue also cited the Finance Act, 2021 amendment to Section 36(1)(va) to support their position.

3. Retrospective Applicability of the Amendment Introduced by the Finance Act, 2021:
The Tribunal noted that the employees’ contributions were deposited before the due date for filing the return under Section 139(1). It referred to the Rajasthan High Court's consistent rulings that contributions paid before the filing deadline could not be disallowed under Section 43B read with Section 36(1)(va). The Tribunal emphasized that the Finance Act, 2021 amendment clearly stated its applicability from 1st April 2021, and thus could not be applied retrospectively to the assessment year 2019-20.

Conclusion:
The Tribunal concluded that the addition made by the CPC for delayed EPF contributions, which were paid before the return filing due date, should be deleted. The Tribunal directed the deletion of the Rs. 8,43,654 addition, aligning with the binding decisions of the Rajasthan High Court and consistent tribunal rulings.

Order:
The appeal of the assessee was allowed, and the order was pronounced in the open Court on 04/04/2022.

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