Tribunal directs AO to allow deductions for employees' ESI & PF contributions before filing return

The Tribunal allowed the appeal of the assessee, directing the AO to allow the deduction for employees' contribution shares towards ESI and PF before the due date of filing the return. The Tribunal also directed the AO to delete the addition of additional income for verification and disallowance of interest on TDS. The issue of business loss and unabsorbed depreciation was restored to the AO for examination.

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Issues:
1. Disallowance of PF & ESI contribution
2. Set aside issue of additional income for verification
3. Disallowance of interest on TDS
4. Business loss and unabsorbed depreciation

Disallowance of PF & ESI contribution:
The appeal concerns the disallowance of PF & ESI contribution by the Ld. CIT(A) in the amount of Rs. 51,73,980. The assessee argued that the remittances were made before filing the return of income u/s 139(1) of the Act, thus no disallowance was warranted. The Ld. AR contended that the Finance Act 2021 amendment is prospective, not retrospective, citing the decision in Lumino Industries Ltd. vs. ACIT. The Tribunal held that the amendment is prospective, effective from AY 2021-22 onwards. Relying on judicial precedents and legislative intent, the Tribunal allowed the appeal, directing the AO to allow the deduction for employees' contribution shares towards ESI, PF before the due date of filing the return u/s 139(1) of the Act.

Set aside issue of additional income for verification:
The Ld. CIT(A) set aside the issue of additional income of Rs. 89,269 to the AO for verification. The Tribunal found the difference negligible compared to the total turnover of the assessee. Considering the explanation provided by the assessee for the discrepancy between books of account and Form 26AS, the Tribunal directed the AO to delete the addition.

Disallowance of interest on TDS:
The issue pertains to the disallowance of Rs. 12,420 as interest on TDS by the Ld. CIT(A). The AO disallowed it on the grounds of not being allowable u/s 37 of the Act. The Tribunal held that interest on delayed TDS payments is a business expense incurred wholly and exclusively for business purposes. Consequently, the Tribunal directed the AO to delete the disallowance.

Business loss and unabsorbed depreciation:
The Ld. CIT(A) did not decide on the issue of business loss and unabsorbed depreciation claimed by the assessee. The Tribunal noted that the assessee is entitled to claim set off under section 74 of the Act. However, considering it a factual issue, the Tribunal restored the matter to the AO for examination and allowed the ground for statistical purposes.

In conclusion, the Tribunal allowed the appeal of the assessee for statistical purposes, addressing each issue comprehensively and providing detailed reasoning for its decisions.

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