2022 (4) TMI 898 - AT - Income Tax

Tribunal allows appeal due to Covid-19 delay, disallows PF & ESI contribution retroactivity

The Tribunal allowed the appeal, condoning the delay in filing due to the Covid-19 pandemic. Regarding the disallowance of the employee's contribution to ... Addition u/s 36(1)(va) - delayed payment of employees contribution towards PF & ESI - contribution of PF and ESI deposited belatedly but before due date of filing of return of income U/s 139(1) - whether the amendment brought to Section 36(1)(va) as well as 43B of the Act is applicable retrospective or from assessment year 2021-22 as it is specifically stated in the memorandum of Finance Bill, 2021? - HELD THAT:- As per Tribunal in the case of M/s Kogta Financial (India) Ltd. [2022 (1) TMI 250 - ITAT JAIPUR] this issue was decided in favour of the assessee by holding that amendment in Section 36(1)(va) as well as Section 43B of the Act by way of inserting the explanation vide Finance Bill, 2021 are applicable only from A.Y. 2021-22 and subsequent assessment years and therefore, the said amendment is not applicable to the assessment year under consideration. This issue is decided in favour of the assessee and consequently, the disallowance made on account of employees contribution towards PF & ESIC deposited before due date of filing of return of income U/s 139(1) is deleted. - Decided in favour of assessee. Issues Involved:1. Delay in filing the appeal.2. Disallowance of employee’s contribution to PF and ESI under Section 36(1)(va) of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Delay in Filing the Appeal:The appeal by the assessee was delayed by 84 days. The assessee’s representative (AR) attributed this delay to the Covid-19 Pandemic, requesting the delay be condoned. The Revenue’s representative (DR) objected but left the decision to the court's discretion. After considering the submissions, the Tribunal found sufficient cause due to the pandemic and condoned the delay.2. Disallowance of Employee’s Contribution to PF and ESI:The primary issue was the disallowance of Rs. 2,90,435/- under Section 36(1)(va) for delayed payment of employees' contributions to PF and ESI, which were deposited before the due date of filing the return under Section 139(1) of the Income Tax Act.- Assessee's Argument:The assessee contended that as per binding precedents, if the payment is made before the due date of filing the return under Section 139(1), no disallowance should be made under Section 43B. The assessee cited the consistent stance of the Hon'ble Rajasthan High Court and other High Courts supporting this view.- CIT(A)/NFAC's Stand:The CIT(A)/NFAC confirmed the disallowance, relying on the amendment to Section 36(1)(va) and Section 43B by the Finance Act, 2021, which was considered retrospective.- Tribunal's Analysis:The Tribunal noted that prior to the amendment by the Finance Act, 2021, the issue was settled in favor of the assessee by various High Courts, including the Jurisdictional High Court. The Tribunal referenced the memorandum of the Finance Bill, 2021, which specified that the amendments would take effect from April 1, 2021, and apply to assessment year 2021-22 and subsequent years. Therefore, the amendment was not retrospective.The Tribunal cited several decisions, including:- M/s Kogta Financial (India) Ltd. Vs CPC: Confirmed that the amendment is prospective.- Chatru Mal Garg Vs ACIT: Reinforced that the amendment applies from assessment year 2021-22.- Essae Teraoka Pvt. Ltd. Case: Highlighted that provisions imposing liabilities cannot be applied retrospectively unless explicitly stated by the legislature.Conclusion:The Tribunal concluded that the amendment to Section 36(1)(va) and Section 43B by the Finance Act, 2021, does not apply retrospectively to the assessment year under consideration (2019-20). Consequently, the disallowance of Rs. 2,90,435/- was deleted, and the appeal of the assessee was allowed.Order:The appeal of the assessee was allowed, and the disallowance of Rs. 2,90,435/- was deleted. The order was pronounced in the open court on April 6, 2022.