The Income Tax Appellate Tribunal (ITAT), New Delhi Bench directs to delete disallowance of employees’ contribution to EPF and ESI as contribution was made before due date for filing return of income.
While processing the return under Section 143(1) of the Act the Centralized Processing Centre (CPC) Bangalore disallowed the employees’ contribution to ESI and PF and the CIT (Appeals) also sustained the disallowance relying on various case laws referred to in the order of the CIT (Appeals). Aggrieved the assessee, M/s. Hebe Infrastructure Pvt Ltd is in appeal before the Tribunal.
The Departmental Representative, Abheshek Kumar submitted that the amendment brought in by the Finance Act, 2021 in Sections 36(1) (va) and 43B of the Act by way of inserting Explanation 2 and Explanation 5 respectively are clarificatory in nature and, therefore, have retrospective applicability. The DR strongly supported the orders of the ld. CIT (Appeals) in sustaining the disallowance made under Section 36(1) (va) of the Act in respect of employees’ contribution made to ESI and PF.
The Counsel appearing for the assessee, Ruchesh Sinha submitted that the amendments are prospective and are applicable for Assessment Years 2021-22. The Counsel for the assessee submitted that the contributions to PF and ESI were remitted to Govt. account before due dates for filing return of income by the assessee and, therefore, the issue is squarely covered by the decision of the jurisdictional High Court in the case of CIT Vs. AIMIL Ltd.
The Bench consisting of Challa Nagendra Prasad, Judicial Member and Pradip Kumar Kedia, Accountant Member observed that “We observe that recently this Tribunal in a batch of appeals in the cases of Raj Kumar Vs. ITO CPC Bangaluru and other appeals and by considering various decisions rendered by various High Courts and the Tribunals held that the amendment brought in by Finance Act, 2021 is effective from 1.04.2021 and no disallowance is called for, on belated payment of employees’ contribution to ESI and PF in case the assessee deposited the said contribution before due date for filing of return of income under Income Tax Act.”
“We direct the Assessing Officer/CPC to delete the disallowance of employees’ contribution to EPF and ESI in this case as the contribution was remitted before the due date for filing of return of income.” The Tribunal added.
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