2022 (2) TMI 28

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.... filed return of income for AY 2018-19 on 26.11.2018 reporting taxable income of Rs. 7,35,690/-. The return was processed under section 143(1) of the Income Tax Act 1961, by the Centralized Processing Centre (CPC) of Income Tax Department and an intimation dated 16.10.2019 was issued wherein CPC made an addition of Rs. 5,35,064/- on account of disallowance of ESI/PF. Against the said order dated 16.10.2019, assessee filed an application under section 154 of the Act. The AO passed an order under section 154 of the Act dated 05.05.2020 confirming the addition made in the order dated 16.10.2019 under section 143(1) of the Act. As far as appeal for Assessment Year 2019-20 is concerned, similar addition of Rs. 4,49,902/- was made to the total in....

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....ause (24) of section 2 applies." According to the CIT(A), by virtue of newly inserted Explanation 2 to clause (va) of sub-section (1) of the said section, the provisions of section 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the "due date" under the said clause. The CIT(A) also held that Section 43B of the Income-tax Act relates to allowing certain deductions only on actual payments. Clause (b) of the said section provides that any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees shall be allowed (irrespective of the previous year in which the liability to pay....

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....mployee's contribution, any failure to pay within the prescribed due date under the respective PF Act or Scheme will result in negating employer's claim for deduction permanently forever u/s.36(1)(va). On the other hand, delay in payment of employer's contribution is visited with deferment of deduction on payment basis u/s.43B and is therefore not lost totally. This legal distinction between employees' contribution and employer's contribution under the Act was duly recognised by the Courts also. The CIT(A) in this regard referred to the following judicial pronouncement wherein the aforesaid distinction has been accepted viz., CIT v. Gujarat State Road Transport Corpn. [2014] 41 taxmann.com 100/ 366 ITR 170/223 Taxman 398....

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....en the assessee would be entitled to claim deduction. Therefore, the issue is covered by the decision of the Hon'ble Karnataka High Court. In this case there is no dispute that the assessee made payment of the Employees share of PF/ESI on or before the due date for filing return of income for AY 2017-18 u/s.139(1) of the Act. The next aspect to be considered is whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also. On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These ....