Employee PF/ESI contributions paid after statutory due dates allowed as deduction under section 43B

ITAT Indore allowed deduction for employee PF/ESI contributions paid after statutory due dates but within time limit prescribed under section 43B (up to return filing due date under section 139(1)). Despite divergent HC views on the issue and absence of jurisdictional MP HC precedent, tribunal applied Supreme Court principle from Vegetable Products Ltd favoring assessee-friendly interpretation when two reasonable constructions exist. Tribunal noted Finance Act 2021 amendments were prospective from April 1, 2021. AO and CIT(A) disallowance under section 36(1)(va) was deleted, deciding in favor of assessee.

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Issues Involved:
Multiple appeals against orders passed by the Commissioner of Income-Tax (Appeal) regarding disallowance of delayed payment of employees' contributions to Provident Fund/ Employees State Insurance (PF/ESI).

Detailed Analysis:

Background:
The appeals were filed by different parties against the orders passed by the Commissioner of Income-Tax (Appeal) confirming the disallowance of delayed payment of employees' contributions to PF/ESI made by the Assessing Officer (AO). The issue was common to all appeals, and they were heard together.

Delay in Filing Appeals:
The registry noted delays in filing two appeals but considered them due to the Covid-19 Pandemic, following the Supreme Court's order granting an extension of the limitation period. The appeals were allowed to proceed without delay.

Controversy:
The main issue revolved around the disallowance under section 36(1)(va) of the Income-tax Act related to delayed payment of employees' contributions to PF/ESI.

Arguments by Appellant:
The appellant argued that the disallowance was unjustified as contributions were deposited within the time allowed under section 43B of the Act. They cited various High Court decisions and a specific ITAT judgment supporting their position.

Arguments by Respondent:
The respondent contended that disallowance was warranted, citing High Court decisions and recent amendments to the Act. They highlighted that amendments clarified disallowance even if payments were made within the section 43B timeframe.

Judgment Analysis:
The Tribunal considered divergent High Court views on the issue but favored decisions supporting the appellant, citing the principle of construing tax provisions in favor of the assessee when possible. It noted that recent amendments were effective from April 1, 2021, and not applicable to prior assessment years.

Conclusion:
The Tribunal ruled in favor of the appellants, stating that contributions paid within the section 43B timeframe were deductible. It held that the disallowance made by the AO and confirmed by the CIT(A) was unjustified, deleting the disallowance and allowing all the appeals.

Disposition:
All appeals by the assessees were allowed, and the disallowances made by the AO were deleted. The order was pronounced on April 8, 2022.

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