Tribunal allows EPF/ESIC contribution claim, citing precedents. Assessing Officer directed to delete disallowance.

The Tribunal allowed the assessee's claim for disallowance of Rs. 18,12,622 towards employees' contribution to EPF/ESIC. It held that the contributions were deposited before the due date of filing the return of income, citing precedents that supported the view that such payments cannot be disallowed under relevant sections of the Income Tax Act. The Tribunal emphasized the prospective nature of the amendment and directed the Assessing Officer to delete the disallowance, ruling in favor of the assessee.

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Issues:
Disallowance of employment contribution towards EPF/ESIC under section 36(1)(va) of the Income Tax Act.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeal)- I, Raipur for the assessment year 2012-13. The assessee contended that the disallowance of Rs. 18,12,622 towards employment contribution was unjustified and unwarranted. The assessee argued that the contribution was deposited before the due date of filing the return of income, citing various judicial decisions in support of their claim.

During the hearing, the counsel for the revenue argued that the explanation added to Section 36(1)(va) by the Finance Act, 2021 should be considered, making the claim of the assessee not allowable. However, the assessee argued that the clarification would apply from the assessment year 2021-22 onwards and not to the impugned assessment year. The amendment aimed to clarify that the provision of section 43B does not apply to determine the "due date" under this clause.

The Tribunal noted that the employees' contributions to EPF and ESIC were deposited before the due date of filing the return of income. The Tribunal relied on various decisions of High Courts and Tribunal benches, holding that if the contributions are paid before the due date of filing the return of income, they cannot be disallowed under Section 43B or Section 36(1)(va) of the IT Act. The Tribunal emphasized that the amendment was prospective and not retrospective, and when there are two views on the issue, the one favorable to the assessee should be adopted.

Based on the findings and discussions, the Tribunal allowed the claim of the assessee for Rs. 18,12,622 towards employees' contribution towards EPF/ESIC and directed the Assessing Officer to delete the disallowance. The appeal of the assessee was allowed, and the order was pronounced in open court on 27th May 2022.

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