2022 (6) TMI 575 - AT - Income Tax

Tribunal rules amendment to Section 36(1)(va) is prospective, directs deletion of disallowance.

Assort Staffing Services Pvt. Ltd. Versus ACIT Income-tax Department, CPC, Bengaluru

The tribunal allowed the appeal, holding that the amendment to Section 36(1)(va) by the Finance Act, 2021, is prospective and not retrospective. As the ... Delay in deposit of employees contribution to Provident Fund and ESIC u/s. 2(24)(x) r.w.s. 36(1)(va) - sum paid before the due date of filing the return of income u/s. 139(1) - Scope of amendment - HELD THAT:- As relying on M/S BI WORLDWIDE INDIA PVT. LTD [2022 (1) TMI 417 - ITAT BANGALORE] and SATISH KUMAR SINHA VERSUS INCOME TAX OFFICER, WARD 4 (1) HYDERABAD [2021 (9) TMI 174 - ITAT HYDERABAD] we find that the amendment was brought in Finance Act, 2021 w.e.f 01.04.2021. The law was not framed/amended in the relevant Assessment year and any legal proposition which cast additional burden/liability on the assessee cannot be implemented retrospectively. We considering the overall facts, circumstances, judicial decisions, are of the reasoned view that the amendment to section 36(1)(va) of the Act will not be applicable to Assessment Year 2019-2020. The assessee has deposited the employees contribution of provident fund before the due date u/s. 139(1) of the Act. Accordingly, we set-aside the order of the Ld.CIT(A) and direct the assessing officer to delete the disallowance and allow the grounds of appeal in favour of the assessee. Issues Involved:1. Confirming the addition of Rs. 45,80,864 on account of delay in deposit of employees' contribution to Provident Fund and ESIC under Section 2(24)(x) read with Section 36(1)(va) of the Income Tax Act, 1961.2. Applicability of the amendment to Section 43B and Section 36(1)(va) of the Income Tax Act by the Finance Act, 2021, whether it is prospective or retrospective.Issue-wise Detailed Analysis:1. Confirming the Addition of Rs. 45,80,864:The assessee contested the confirmation of an addition amounting to Rs. 45,80,864 due to the delay in depositing employees' contributions to the Provident Fund and ESIC. The assessee argued that these contributions were deposited before the due date of filing the return of income under Section 139(1) of the Income Tax Act, 1961, which should make them eligible for deduction. The Learned Commissioner of Income-tax (Appeals) had confirmed the addition, but the assessee contended that the delay should not result in disallowance since the payments were made before the statutory deadline for filing returns.2. Applicability of the Amendment to Section 43B and Section 36(1)(va):The assessee argued that the amendments introduced by the Finance Act, 2021, to Sections 36(1)(va) and 43B are prospective, effective from 01.04.2021, and not retrospective. The Department's representative supported the view that the amendments should be applied retrospectively. However, the tribunal noted that the provisions/explanation introduced in the Finance Act, 2021, are effective from 01.04.2021, and thus, should be considered prospective.Judicial Precedents and Tribunal's Observations:- The tribunal referred to various judicial precedents, including the case of M/s. BI Worldwide India Pvt Ltd. v. DCIT, where it was held that the amendment to Section 36(1)(va) and 43B by the Finance Act, 2021, is prospective and not retrospective. The tribunal in this case allowed the appeal, noting that the assessee had deposited the contributions before the due date for filing the return of income under Section 139(1).- The tribunal also cited the case of Shri Satish Kumar Sinha v. ITO, where it was held that no disallowance could be made if the employees' contributions to PF and ESI were deposited before the due date of filing the return of income.- The tribunal noted that the amendment brought by the Finance Act, 2021, alters the position of law adversely to the assessee and cannot be held to be retrospective in nature. The tribunal emphasized that any legal proposition imposing additional burden or liability on the assessee cannot be implemented retrospectively.Conclusion:The tribunal concluded that the amendment to Section 36(1)(va) of the Income Tax Act, introduced by the Finance Act, 2021, is not applicable to the Assessment Year 2019-2020. Since the assessee had deposited the employees' contributions to the provident fund before the due date under Section 139(1) of the Act, the tribunal set aside the order of the Learned Commissioner of Income-tax (Appeals) and directed the assessing officer to delete the disallowance. The appeal filed by the assessee was allowed.Order Pronouncement:The order was pronounced in the open court on 23rd May, 2022.