Employees' PF and ESI contribution allowed when paid before return due date; Finance Act 2021 amendment held prospective.

Employees' contribution to PF and ESI deposited after the welfare-law due dates but before the due date for filing the return was held allowable for the relevant assessment year, because binding precedent treated such payment as compliant before the Finance Act, 2021 amendments. The Tribunal noted that the amendments to sections 36(1)(va) and 43B were stated to operate from 1 April 2021 and apply from assessment year 2021-22 onwards, so they were prospective and could not be applied to the year under appeal. The disallowance was deleted.

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Issues: Whether employees' contribution to PF and ESI, deposited after the due dates under the respective welfare laws but before the due date for filing the return under section 139(1), could be disallowed under section 36(1)(va) read with section 43B, and whether the Finance Act, 2021 amendments applied retrospectively.

Analysis: The dispute related to allowability of employees' contribution collected by the employer and deposited before the due date of filing the return, though after the due dates under the PF/ESI enactments. The Tribunal noted that prior to the Finance Act, 2021 amendment, the issue stood covered by binding precedents holding that such payment could not be disallowed if deposited before the return filing due date. It further noted that the memorandum to the Finance Act, 2021 stated that the amendments to section 36(1)(va) and section 43B would take effect from 1 April 2021 and apply to assessment year 2021-22 onwards, and therefore the amendment was prospective. Following its coordinate bench decisions and the jurisdictional High Court line of authority, the Tribunal held that the amended provisions could not be applied to the assessment year under appeal.

Conclusion: The disallowance of employees' contribution towards PF and ESI was deleted and the issue was decided in favour of the assessee.

Ratio Decidendi: Employees' contribution to welfare funds deposited before the due date for filing the return is allowable for the relevant assessment year, and the Finance Act, 2021 amendments to sections 36(1)(va) and 43B apply prospectively from assessment year 2021-22.

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