2022 (5) TMI 1698 - AT - Income Tax

Employees' PF deposits made after welfare-law due date but before s.139(1) return deadline-no disallowance for AY 2018-19.

The dominant issue was whether employees' PF contributions deposited after the due date under the relevant welfare law but before the due date for filing ... Deposits of the employees contribution of provident fund before the due date u/s. 139(1) - scope of amendment was brought in Finance Act, 2021 w.e.f 01.04.2021 - HELD THAT:- We find that the amendment was brought in Finance Act, 2021 w.e.f 01.04.2021. The law was not framed/amended in the relevant Assessment year and any legal proposition which cast additional burden/liability on the assessee cannot be implemented retrospectively. We are of the reasoned view that the amendment to section 36(1)(va) of the Act will not be applicable to AY 2018-19. The assessee has deposited the employees contribution of provident fund before the due date u/s.139(1) of the Act. Accordingly, we set-aside the order of the CIT(A) and direct the assessing officer to delete the disallowance and allow the grounds of appeal in favour of the assessee. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether employees' contributions to statutory welfare funds (PF/ESI) deposited after the due dates under the respective welfare statutes but before the due date for filing the return under section 139(1) are allowable as deduction for the relevant assessment year. (ii) Whether the amendments introduced by the Finance Act, 2021 to section 36(1)(va) and section 43B operate retrospectively so as to govern the relevant assessment year, or only prospectively from 01.04.2021. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Allowability of deduction where employees' contribution is deposited before due date of return under section 139(1) but beyond due date under the respective welfare statute Legal framework (as addressed by the Tribunal): The Tribunal considered the allowability of deduction in the context of section 36(1)(va) and section 43B, specifically examining the situation where employee contributions were not deposited within the time prescribed under the relevant welfare law but were deposited before the due date for filing the return under section 139(1). Interpretation and reasoning: The Tribunal recorded as undisputed fact that the assessee did not deposit employees' contributions within the timelines prescribed under the relevant welfare law, but did deposit the amounts before filing the return under section 139(1). The Tribunal treated compliance with payment before the section 139(1) due date as sufficient for allowability for the year under consideration, following the approach reflected in the judicial precedents discussed in the order and applying that reasoning to the assessee's facts. Conclusion: Employees' contribution to PF/ESI deposited before the due date for filing the return under section 139(1) was held allowable as deduction for the relevant assessment year, notwithstanding delay under the respective welfare statute. Issue (ii): Prospective vs retrospective application of Finance Act, 2021 amendments to section 36(1)(va) and section 43B Legal framework (as addressed by the Tribunal): The Tribunal examined whether the Finance Act, 2021 changes to section 36(1)(va) and section 43B (effective from 01.04.2021) could be applied to the assessment year in question. Interpretation and reasoning: The Tribunal found that the relevant 'provisions/explanation' were introduced by the Finance Act, 2021 and are effective from 01.04.2021. It reasoned that the law applicable in the relevant assessment year had not been amended in that year, and that a legal change casting an additional burden/liability on the assessee cannot be implemented retrospectively in the absence of such applicability for the year under appeal. On this basis, it rejected the revenue's contention that the amendment should be treated as retrospective for the relevant year. Conclusion: The Finance Act, 2021 amendments to section 36(1)(va) and section 43B were held not applicable to the relevant assessment year and to operate prospectively from 01.04.2021; therefore, they could not be used to sustain the disallowance for the year under consideration. Result directed by the Tribunal (material to final decision): The order under appeal was set aside on this issue, and the assessing authority was directed to delete the disallowance and allow the deduction, as the employees' contribution had been deposited before the due date under section 139(1) and the Finance Act, 2021 amendment was held inapplicable to the assessment year involved.