2022 (8) TMI 522 - AT - Income Tax

Appellant wins deduction challenge for PF & ESIC contributions. Tribunal directs AO to allow deductions & verify TDS credit.

The appellant succeeded in challenging the disallowance of employee's contribution to PF and ESIC under section 36(1)(va) as the Tribunal ruled that ... Delay in payment of Employee's contribution to PF and ESIC u/s 36(1) (va) - scope of amendment to section 43B - HELD THAT:- We are of the considered opinion that the issue relating to delayed deposit of EPF / ESI has already been dealt with by various Hon’ble High Courts including the jurisdictional Hon’ble Bombay High Court in CIT vs Ghatge Patil Transport Ltd [2014 (10) TMI 402 - BOMBAY HIGH COURT] wherein it was held that the decision of the Hon’ble Apex Court in CIT vs Alom Extrusions Ltd [2009 (11) TMI 27 - SUPREME COURT] that the amendment to section 43B of I.T. Act was applicable to both employer’s as well as employees’ contribution. Furthermore, the amendment brought out in the Finance Act, 2021 was only prospective and not retrospective thereby was applicable only to assessment year 2021-22 onwards and to subsequent years. The same has been reiterated by the decision of various Benches of the Tribunal. Thus we are of the considered opinion that the contribution towards EPF / ESI paid after the specified due date under the relevant Acts, but nevertheless paid before the due date of filing of the return of income under section 139(1) of the Act, is allowable. The Assessing Officer is directed to allow the deduction as claimed. Ground 1 of the assessee succeeds. Not giving credit to TDS - HELD THAT:- From the copies of accounts furnished by the assessee, it transpires that the receipts from which the TDS was effected was considered for the impugned assessment year while computing the total income. The assessee has offered the corresponding income to tax for the impugned assessment year and the claim of TDS pertinent to the same was made in the return of income. Assessee submitted that inspite of the direction from the Ld.CIT(A), the same has not been considered by the Assessing Officer till date. We therefore, direct the learned Assessing Officer to verify the availability of such credit in Form 26AS of the assessee for the impugned year and allow the same as per the provisions of Rule 37BA. Issues involved:1. Disallowance of employee's contribution to PF and ESIC under section 36(1)(va).2. Non-credit of TDS as claimed by the appellant.Analysis:Issue 1: Disallowance of employee's contribution to PF and ESIC under section 36(1)(va):The appellant contested the disallowance of Rs. 9,93,864 on account of delay in payment of Employee's contribution to PF and ESIC under section 36(1)(va). The appellant argued that the contributions were made before the due date for filing the return of income under section 139(1) of the Income-tax Act, relying on various judicial precedents. The Department, however, contended that the contributions should have been made before the due date specified under the relevant Acts. The Tribunal referred to the decision of the Hon'ble Bombay High Court and the Supreme Court, holding that the amendment to section 43B of the Income Tax Act applied to both employer's and employees' contributions. The Tribunal also noted that the Finance Act, 2021 amendment was prospective, applicable from assessment year 2021-22 onwards. Citing a previous case, the Tribunal ruled that the contributions paid after the specified due date but before the due date of filing the return of income are allowable deductions. Consequently, the Tribunal directed the Assessing Officer to allow the deduction as claimed, and the appellant succeeded on this ground.Issue 2: Non-credit of TDS:Regarding the non-credit of TDS amounting to Rs. 2,58,124 as claimed by the appellant, discrepancies were noted between the TDS claim in the return and Form 26AS data during the processing of the return. The CIT(A) directed the Assessing Officer to verify the credit availability in Form 26AS and allow it as per rule 37BA. The appellant's representative highlighted that despite the CIT(A)'s direction, the credit had not been considered by the Assessing Officer. Consequently, the Tribunal directed the Assessing Officer to verify the credit availability in Form 26AS for the relevant year and allow the credit as per Rule 37BA.In conclusion, both appeals of the assessee were treated as allowed for statistical purposes, based on the decisions made for the issues discussed above.