Tribunal grants deduction for employee contributions to PF and ESI made before return filing deadline

The Tribunal allowed the appeal by the assessee, directing the Assessing Officer to grant deduction for employee contributions towards PF and ESI made before the due date of filing the return for Assessment Year 2018-19. The Tribunal held that the amendment to section 36(1)(va) was not retrospective, citing previous decisions and High Court judgments supporting deductions for timely payments. The Tribunal emphasized the need for timely remittance of contributions as per Acts and amendments, overturning the CIT(A)'s dismissal of the appeal.

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Issues:
1. Disallowance of employee's contribution towards ESIC and EPF made beyond due dates.
2. Non-following of High Court judgments regarding employee contributions.
3. Applicability of amendment to section 36(1)(va) for Assessment Year 2018-19.

Issue 1: Disallowance of employee's contribution towards ESIC and EPF made beyond due dates:
The assessee, engaged in manpower supply, filed an appeal against disallowance of employees' contribution to PF and ESI by CPC. The CIT(A) dismissed the appeal, citing the need for timely remittance of employees' contribution as per the Acts and amendments to section 36(1)(va) and 43B of the IT Act. The Tribunal referred to similar cases where deductions were allowed if payments were made before the due date of filing the return u/s 139(1) of the IT Act. It held that the amendment to section 36(1)(va) is not retrospective for AY 2018-19, directing the AO to grant deduction for the contributions made before the due date of filing the return.

Issue 2: Non-following of High Court judgments regarding employee contributions:
The assessee argued that employee contributions to PF and ESI were remitted before the due date of filing the return u/s 139(1) of the IT Act, relying on the judgment of the jurisdictional High Court. The Tribunal agreed with the assessee, citing previous decisions and High Court judgments that supported the deduction of employee contributions if paid before the due date of filing the return. The Tribunal held that the amendment to section 36(1)(va) is prospective and directed the AO to grant the deduction for the relevant assessment year.

Issue 3: Applicability of amendment to section 36(1)(va) for Assessment Year 2018-19:
The Tribunal analyzed the retrospective nature of the amendment to section 36(1)(va) and 43B of the IT Act by the Finance Act, 2021. It referred to various tribunal orders and the Supreme Court judgment to conclude that the amendment is not retrospective and does not apply to AY 2018-19. The Tribunal directed the AO to allow the deduction for employees' contribution to PF and ESI, as the payments were made before the due date of filing the return u/s 139(1) of the IT Act. The appeal by the assessee was allowed based on these findings.

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