Tribunal allows appeal on EPF and ESI contributions, citing Delhi HC judgments. Finance Act 2021 amendments deemed prospective.

The Tribunal allowed the appeal, directing the deletion of the disallowed amount for delayed EPF and ESI contributions. It held that belated payments should not be considered as deemed income, citing Delhi High Court judgments. The Finance Act, 2021 amendments were deemed prospective, reversing the denial of deductions for AY 2017-18. The Tribunal limited prima facie disallowance under Section 143(1), emphasizing the admissibility of employee contribution deductions supported by precedent. The appeal was successful, affirming the deductions for PF and ESIC contributions.

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Issues:
Delay in filing appeal due to Covid-19 extension of limitation period. Disallowance of employee's contribution towards EPF and ESI. Interpretation of Section 36(1)(va) and Section 43B. Applicability of Finance Act, 2021 amendments. Scope of prima facie disallowance under Section 143(1).

Analysis:
1. The appeal was filed against the Commissioner of Income Tax (Appeals) order concerning the disallowance of Rs. 19,19,534 on account of delayed payment of employee's contribution towards EPF and ESI for AY 2019-20.

2. The delay in filing the appeal was condoned due to Covid-19, with the assessee challenging the disallowance based on compliance with payment obligations before the due date allowed under Section 139(1) of the Income Tax Act, citing relevant judicial pronouncements.

3. The Assessing Officer made the disallowance under Section 36(1)(va) read with Section 2(24)(x) of the Act, as the employee's contribution was deposited after the due date, invoking Explanation 5 to Section 43B.

4. The assessee contended that the payment towards EPF and ESI was made before the due date of filing the return of income, as supported by a judgment of the Hon'ble Delhi High Court in a similar case.

5. Following the binding precedents of the Hon'ble Delhi High Court, the Tribunal directed the Assessing Officer to allow the claim of the assessee and delete the addition, as belated payment of EPF and ESI contributions should not be treated as deemed income of the employer.

6. The Tribunal also held that the Finance Act, 2021 amendments were applicable prospectively from AY 2021-22 onwards, thereby setting aside the revenue's action in denying the deduction of contributions to ESIC and Provident Fund for AY 2017-18.

7. Additionally, the Tribunal emphasized that the prima facie disallowance under Section 143(1) is limited, and adjustments towards employee's contribution to PF/ESIC, backed by judicial precedent, cannot be conclusively held inadmissible based on the material on record.

8. Consequently, the appeal of the assessee was allowed, and the impugned addition was directed to be deleted, affirming the deductions claimed for employee's contributions to PF and ESIC.

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