Appeal allowed: Section 43B not applicable for 2018-19; effective from 2021-22

The Tribunal allowed the appeal of the assessee, ruling that the amended provisions of Section 43B r.w.s. 36(1)(va) of the Act were not applicable for the assessment year 2018-19 but would apply from assessment year 2021-22 and subsequent years. The order was pronounced on 07th April, 2022.

---

---

Issues:
1. Disallowance of employee's contribution to PF & ESI by CIT(A) under section 36(1)(va) r.w.s. 43B of the Income Tax Act, 1961.
2. Applicability of the amended provisions introduced by the Finance Act, 2021, regarding the due date for payment of employees' contribution to PF & ESI.
3. Interpretation of the insertion of Explanation 2 to Section 36(1)(va) of the Act as retrospective or prospective.

Analysis:

Issue 1: Disallowance of employee's contribution to PF & ESI
The appeal was filed against the order of the CIT(A) disallowing the deduction claimed on account of Employees' contribution to PF & ESI. The CIT(A) invoked the amended provisions of section 36(1)(va) r.w.s. 43B of the Act, treating the applicability of the amended provisions as retrospective. The CIT(A) relied on the decision of Hon'ble Gujarat High Court and the Finance Bill 2021. The appellant contended that the amount was paid before the due date of filing the return u/s. 139(1) of the Act, thus should be allowable u/s. 43B of the Act.

Issue 2: Applicability of amended provisions
The Tribunal considered the amendment brought in by the Finance Act, 2021, to section 36(1)(va) of the Act, especially the insertion of Explanation 2. The Tribunal noted that the amendment aimed to provide certainty about the applicability of provisions of Section 43B of the Act despite belated payment of employees' contribution. The Tribunal analyzed the memorandum explaining the provisions to Finance Act, 2021, which clarified the effective date of the amendment as 01.04.2021, applicable from assessment year 2021-22 and subsequent years.

Issue 3: Interpretation of Explanation 2 as retrospective or prospective
The Tribunal examined whether the amendment introduced by the Finance Act, 2021, through Explanation 2 to Section 36(1)(va) of the Act was retrospective or prospective. The Tribunal emphasized that the amendment was intended to remove hardship for the assessee and not the Department. Referring to legal precedents, the Tribunal concluded that the amendment was prospective, effective from 01.04.2021, and would apply from assessment year 2021-22 onwards. Therefore, the Tribunal allowed the appeal of the assessee based on the prospective nature of the amended provisions.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the amended provisions of Section 43B r.w.s. 36(1)(va) of the Act were not applicable for the assessment year 2018-19 but would apply from assessment year 2021-22 and subsequent years. The Tribunal pronounced the order in open court on 07th April, 2022.

---