Employees' PF and ESIC contribution adjustment under section 143(1) held unsustainable; Finance Act 2021 amendment treated as prospective.

An adjustment under section 143(1) disallowing employees' contribution to PF, ESIC and similar funds was treated as impermissible where the claim was supported by then-prevailing judicial views allowing payment up to the return-filing due date. The later Explanation inserted by the Finance Act, 2021 was treated as prospective for the assessment year under discussion, so it did not govern that year. On that basis, the disallowance under section 36(1)(va) was not sustained and the prima facie adjustment was held unsustainable.

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Issues: Whether adjustment under section 143(1) disallowing employees' contribution to PF/ESIC could be made, and whether the amendment introduced by the Finance Act, 2021 applied retrospectively to the assessment year in question.

Analysis: The disputed disallowance related to employees' contribution to PF, ESIC and similar funds. The record showed that, before the amendment, there were judicial decisions supporting allowance where payment was made up to the due date of filing the return. In that context, the issue could not be treated as a permissible prima facie adjustment under section 143(1). The later explanation introduced by the Finance Act, 2021 was treated as not retrospective for the assessment year under consideration.

Conclusion: The adjustment under section 143(1) was not sustainable, and the disallowance under section 36(1)(va) was not upheld for the relevant assessment year.

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