2022 (7) TMI 1010 - AT - Income Tax

Tribunal rules delayed payments before return due date not disallowed under Section 36(1)(va)

The Tribunal set aside the CIT(A)'s order, directing the AO to vacate the disallowance of Rs.1,99,167 under Section 36(1)(va). The Tribunal held that the ... Delayed deposit of employee’s share of contribution of Provident fund - Addition u/s 36(1)(va) r.w.s. 43B - Scope of amendment - HELD THAT:- As the amendments made available on the statue vide the Finance Act, 2021 i.e “Explanation 5” to Section 43B and “Explanation 2” to Section 36(1)(va) are applicable w.e.f 01.04.2021, i.e, from A.Y 2021-22 onwards, therefore, the same would not have any bearing on the case of the assessee before us, i.e, for A.Y 2011-12. Accordingly,we, herein conclude, that as the employees contributions to PF and ESI was deposited by the assessee before the “due date” of filing of its return of income for the year under consideration, therefore, the same being saved by the provisions of Sec. 43B of the Act could not have been disallowed by the A.O As the facts and the issue involved in the aforesaid order of the Tribunal in the case of Ind Synergy Lyd. [2022 (4) TMI 36 - ITAT RAIPUR] remains the same as are there before us in the case of the present assessee, therefore, we respectfully follow the same. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) and direct the AO to vacate the disallowance made by him u/s.36(1)(va) of the Act qua the delayed deposit of the employees share of contribution of EPF/ESIC. - Decided in favour of assessee. Issues Involved:1. Whether the CIT(A) erred in passing the order without providing sufficient opportunity of being heard.2. Whether the CIT(A) correctly considered the retrospective effect of the amendment made by the Finance Act, 2021 in Section 43B.3. Whether the CIT(A) was correct in making an addition of Rs.1,99,167/- on account of delayed payment of employee contribution.Detailed Analysis:1. Opportunity of Being Heard:The assessee contended that the CIT(A) passed the order without giving sufficient opportunity to present their case. The Tribunal acknowledged the submission by the assessee's Authorized Representative (AR) that additional evidence, including challans evidencing deposit of PF/ESIC before the due date of filing the return, was not considered by the lower authorities because the order was summarily passed under Section 143(1) of the Income-tax Act. The Tribunal admitted this additional evidence and found substance in the claim that the assessee did not have an opportunity to present these documents earlier.2. Retrospective Effect of Amendment by Finance Act, 2021:The CIT(A) considered the retrospective applicability of the amendment made by the Finance Act, 2021, to Section 43B. The Tribunal, however, referred to various judicial pronouncements and concluded that the amendments introduced by the Finance Act, 2021, specifically 'Explanation 5' to Section 43B and 'Explanation 2' to Section 36(1)(va), are applicable prospectively from April 1, 2021, i.e., Assessment Year 2021-22 onwards. The Tribunal cited the order of the ITAT, Amritsar in the case of Vinko Auto Industries Ltd. Vs. DCIT, which supported the prospective applicability of these amendments.3. Addition of Rs.1,99,167/- for Delayed Payment of Employee Contribution:The Tribunal examined whether the addition of Rs.1,99,167/- for delayed payment of employee contribution to Provident Fund was justified. The Tribunal noted that although the payment was delayed beyond the stipulated time under the Provident Fund Act, 1952, it was made before the due date of filing the return of income. The Tribunal referred to several judicial pronouncements, including the judgment of the Hon'ble High Court of Bombay in CIT Vs. Hindustan Organic Chemicals Ltd, which upheld that such payments made before the due date of filing the return are allowable as deductions under Section 43B. The Tribunal concluded that both the employer's and employee's contributions to PF and ESI are covered under Section 43B, and since the payment was made before the due date of filing the return, no disallowance was warranted.Conclusion:The Tribunal set aside the order of the CIT(A) and directed the AO to vacate the disallowance of Rs.1,99,167/- made under Section 36(1)(va) of the Act. The Tribunal allowed the grounds of appeal in favor of the assessee, stating that the amendments by the Finance Act, 2021, are applicable prospectively and that the delayed payment made before the due date of filing the return should not be disallowed. The Tribunal's order applied mutatis mutandis to the other appeals with similar facts and issues, resulting in all the captioned appeals being allowed.