Employees' provident fund and ESI contributions paid before return-filing due date could not be disallowed for the year in question.

Employees' contribution to provident fund and ESI deposited before the due date for filing the return could not be disallowed for assessment year 2019-20. The issue was considered under section 36(1)(va) read with section 43B of the Income-tax Act, and the Finance Act, 2021 amendment was treated as prospective from assessment year 2021-22. Since the employee contributions were remitted within the return-filing due date for the year in question, the disallowance was held unsustainable and the addition was deleted.

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Issues: Whether the employees' contribution to provident fund and ESI, remitted to the Government treasury before the due date for filing the return of income, could be disallowed for the assessment year 2019-20.

Analysis: The issue was examined in the light of the statutory scheme under section 36(1)(va) and section 43B of the Income-tax Act, 1961, as well as the amendment introduced by the Finance Act, 2021. The amendment was noted to operate from 1 April 2021 and to apply prospectively from assessment year 2021-22 onwards. For the year under consideration, the decisive fact was that the employee's contribution had been deposited within the due date prescribed for filing the return of income.

Conclusion: The disallowance was not sustainable and the addition was directed to be deleted, in favour of the assessee.

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