2022 (7) TMI 1080 - AT - Income Tax

Tribunal allows deduction for employees' ESI and PF contributions paid before tax return due date

RPC Agro Industries Versus Income Tax Officer, Ward-36 (1) Kolkata

The Tribunal ruled in favor of the assessee, allowing the appeal and deleting the disallowance of employees' contribution amounts to ESI and PF accounts. ... Delayed payment of employees' contribution to ESI & PF account - impact of amendment brought into section 36(1) as well as 43B by Finance Act, 2021 - HELD THAT:- As Relying on SHRACHI BURDWAN DEVELOPERS (P) LIMITE [2022 (3) TMI 961 - ITAT KOLKATA] if employees' contribution received by an assessee and paid to ESI and PF accounts before the due date of filing of the return, then the assessee will be eligible to claim the deduction of such amounts. With the assistance of ld. representatives, we have specifically gone through the record and find that payments have been made within the due dates of filing of the return. With the above observation, these appeals of the assessee are treated as allowed. The disallowances stand deleted - Decided in favour of assessee. Issues:Confirmation of addition under section 36(1)(va) for failure to make timely payment of employees' contribution to ESI & PF account.Analysis:The appeal concerns the confirmation of an addition of Rs. 1,84,165 by the ld. Commissioner of Income Tax (Appeals) for the assessment year 2018-19. The primary issue revolves around the erroneous confirmation of the addition under section 36(1)(va) due to the assessee's alleged failure to make timely payments towards employees' contribution to ESI & PF accounts as per the prescribed due date under the relevant acts.The assessee's counsel argued that the matter is settled by the judgments of the Hon'ble Jurisdictional High Court in various cases, emphasizing the allowance of deduction if the employees' contribution is made before the due date of filing the return of income under section 139(1) of the Act. Reference was made to the amendment introduced by the Finance Act, 2021, which clarified the applicability of Section 43B concerning belated payments of employees' contribution.The ITAT, Kolkata, in a previous order, analyzed the impact of the Finance Act, 2021 amendment on section 36(1)(va) and 43B. It was concluded that if the employees' contribution is received and paid to ESI and PF accounts before the due date of filing the return, the assessee is entitled to claim the deduction. This interpretation was applied to the current appeals, leading to the deletion of the disallowances and allowing the appeals of the assessee.In alignment with the earlier decision of the Coordinate Bench, the present appeal was allowed, and the disallowance was deleted. The Tribunal upheld the assessee's claim for deduction concerning employees' contribution shares towards ESI and PF, as the payments were made within the due dates of filing the return, thereby ruling in favor of the assessee.Therefore, the Tribunal pronounced the order in favor of the assessee on July 7th, 2022, based on the precedents and interpretations of the legislative amendments, ultimately allowing the appeal and deleting the disallowance of the employees' contribution amounts.