2022 (7) TMI 624 - AT - Income Tax

Tribunal rules in favor of appellant in tax dispute on employee contributions timing .

Dilip Pathak Versus ACIT, Circle-2, Guwahati

The Tribunal ruled in favor of the appellant in a tax dispute involving the interpretation of provisions of s. 43B of the Income Tax Act, 1961. The ... Delayed contribution of employees’ share towards ESI and PF set up for the welfare of the employee u/s 36(1)(va) read with section 2(24)(x) - as per assessee payments were made within the due dates of filing of return u/s 139 - HELD THAT:- As it is find that there was a delay in depositing employee’s as well as employer’s contribution to the Employee’s Provident Fund/ESI fund - the amount was deposited before the due date of the filing of the return. The instant issue is squarely covered by the decision in the case of CIT, Kolkata vs. M/s Vijay Shree Limited [2011 (9) TMI 30 - CALCUTTA HIGH COURT] which has been further followed by the Coordinate Calcutta Bench of this Tribunal in the case of Harendra Nath Biswas [2021 (7) TMI 942 - ITAT KOLKATA] - The ld. DR fairly submitted there is no contrary to the case law cited above. We find that the issue is covered in favour of the assessee as the assessment year involved is AY 2018-19 and the Explanation-5 inserted by Finance Act, 2021 to section 43B w.e.f. 01.04.2021 is not applicable to the assessment year under consideration. Assessee appeal allowed. Issues:1. Interpretation of provisions of s. 43B of the Income Tax Act, 1961.2. Disallowance of employees' share towards ESI and PF under section 36(1)(va) read with section 2(24)(x) of the Income Tax Act, 1961.3. Applicability of Explanation-5 inserted by Finance Act, 2021 to section 43B.4. Delay in depositing employee contributions to EPF and ESI funds.Analysis:Issue 1: Interpretation of provisions of s. 43BThe appellant challenged the order of the National Faceless Appeal Centre under section 250 of the Income Tax Act, arguing that the disallowance of Rs. 48,20,810 was arbitrary and unreasonable. The core issue was the interpretation of s. 43B concerning the disallowance. The appellant contended that the payments were made within the due dates of filing the return under section 139 of the Act. The Tribunal found that there was a delay in depositing contributions to the EPF and ESI funds but noted that the amounts were deposited before the due date of filing the return. The Tribunal relied on precedents from the Calcutta High Court and the Tribunal itself to support the appellant's position.Issue 2: Disallowance of employees' share towards ESI and PFThe Tribunal examined the disallowance of the employees' share towards ESI and PF under section 36(1)(va) read with section 2(24)(x) of the Income Tax Act. The appellant argued that the payments were made within the due dates of filing the return, while the Department relied on the decision of the CIT(A). The Tribunal found in favor of the assessee, citing the non-applicability of Explanation-5 inserted by the Finance Act, 2021, to the assessment year in question. The Tribunal referenced the decision of the Calcutta High Court and held that the appellant's claim was justified based on the law laid down by the High Court.Issue 3: Applicability of Explanation-5The Tribunal addressed the applicability of Explanation-5 inserted by the Finance Act, 2021, to section 43B. It noted that the Explanation was not applicable to the assessment year under consideration, which was AY 2018-19. The Tribunal emphasized that the law laid down by the Calcutta High Court would apply, as the Explanation was not made retrospectively. By following the High Court's decision and relevant legal provisions, the Tribunal ruled in favor of the assessee and set aside the CIT(A)'s order.Issue 4: Delay in depositing employee contributions to EPF and ESI fundsThe Tribunal considered the delay in depositing employee contributions to EPF and ESI funds. It highlighted that the appellant had deposited the contributions before the due date of filing the return, which was a crucial factor in determining the outcome of the appeal. By relying on legal precedents and the specific provisions of the Income Tax Act, the Tribunal concluded that the appellant's actions were in compliance with the law, leading to the allowance of the appeal and the deletion of the impugned addition made by the lower authorities.