2022 (6) TMI 732 - AT - Income Tax

Tribunal allows deductions for delayed PF/ESI contributions under Finance Act 2021.

The appeals involved the disallowance of employees' contribution to PF/ESI due to delayed payment. The Tribunal ruled in favor of the assessee, citing ... Delayed payment of employees contribution to PF / ESI invoking the provisions of section 2(24(x) read with section 36(1)(va) - Payment has been made beyond the stipulated date but before the date of filing of the return - HELD THAT:- We find that with regard to the grievance of the assessee against the action of the ld. CIT(A) in confirming the additions made by the CPC relating to employees’ contribution towards PF & ESI, there is no dispute between the parties regarding the date of deposit of PF & ESI, which clearly is beyond the prescribed date of deposit as applicable under the relevant section of the I.T. Act. Further, there is no dispute between the parties that the deposits were made before the filing of return of income for the relevant assessment year. The Hon'ble Allahabad High Court, in the case of ‘Sagun Foundry (P.) Ltd. [2016 (12) TMI 1479 - ALLAHABAD HIGH COURT] has dealt with a similar issue and after taking into account the judgment of the Hon'ble Supreme Court in the case of ‘CIT vs. Alom Extrusion Ltd.’ (2009 (11) TMI 27 - SUPREME COURT] has decided the issue in favour of the assessee. Issues Involved:1. Disallowance of employees' contribution to PF/ESI due to delayed payment.2. Whether the deduction is allowable if the payment is made before the filing of the return.3. Consideration of judgments by higher courts on the issue.4. Impact of the amendment by the Finance Act, 2021 on the issue.Issue-Wise Detailed Analysis:1. Disallowance of Employees' Contribution to PF/ESI Due to Delayed Payment:The primary issue in the appeals was the disallowance of Rs.3,22,274/- for Assessment Year 2018-19 and Rs.1,94,670/- for Assessment Year 2019-20 on account of delayed payment of employees' contribution to PF/ESI. The CPC, Bangalore disallowed these amounts, observing that the contributions were deposited after the due date but before the due date of filing the return.2. Whether the Deduction is Allowable if the Payment is Made Before the Filing of the Return:The assessee argued that the contributions were made before the filing of the return and should be allowed as deductions. The assessee cited the judgment of the Hon'ble Jurisdictional High Court in the case of 'Sagun Foundry (P.) Ltd. vs. CIT', which relied on the Supreme Court's decision in 'CIT vs. Alom Extrusions Ltd.' to support their claim. The Tribunal noted that there was no dispute regarding the dates of deposit, which were beyond the prescribed date but before the filing of the return.3. Consideration of Judgments by Higher Courts on the Issue:The Tribunal extensively discussed the judgment of the Hon'ble Allahabad High Court in 'Sagun Foundry (P.) Ltd. vs. CIT', which dealt with similar issues. The High Court had examined various judgments from different High Courts and the Supreme Court and decided in favor of the assessee, stating that the deduction is allowable if the contributions are deposited before the filing of the return. The Tribunal also referred to similar decisions by the Lucknow Bench in 'Tirubala International Pvt. Ltd. vs. DCIT' and 'Axis Motors Pvt. Ltd. vs. DCIT'.4. Impact of the Amendment by the Finance Act, 2021 on the Issue:The ld. D.R. argued that the amendment brought by the Finance Act, 2021, which clarified that the provisions of section 43B do not apply to employees' contributions, should be considered. However, the Tribunal found that the amendment is applicable prospectively from 1.4.2021 and not retrospectively. The Allahabad Bench of the Tribunal, in the case of 'JCIT, Circle-2, Allahabad vs. Bharat Pumps and Compressors Ltd.', had also held that the amendment applies only from April 2021.Conclusion:The Tribunal concluded that the issue is covered in favor of the assessee by the judgment of the Hon'ble Jurisdictional High Court in 'Sagun Foundry (P.) Ltd. vs. CIT'. The Tribunal held that the disallowance made by the CPC and sustained by the CIT(A) should be deleted, as the contributions were deposited before the filing of the return. Consequently, the appeals of the assessee were allowed.Order Pronounced:The order was pronounced in the open Court on 30/05/2022, allowing both appeals of the assessee.