MAHESH AGENCIES,HYDERABAD vs. INCOME TAX OFFICER, WARD-7(2), HYDERABAD

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ITA 522/HYD/2020Status: DisposedITAT Hyderabad27 October 2021AY 2018-194 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance was not sustainable. It noted that legislative amendments and CBDT clarifications regarding such payments were prospective, applying only from April 1, 2021.

What were the facts?

The assessee made payments for ESI/PF after the financial year-end but before the due date for filing the return of income. The Assessing Officer disallowed these payments. The assessee appealed this disallowance.

What were the issues?

Whether disallowance of ESI/PF payments made after the financial year-end but before the return filing due date is justified, considering the prospective nature of recent legislative changes.

Which sections of the Income-tax Act were involved?

Section 36,Section 43B,Section 139(1)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(5)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, HYDERABAD ‘A’ BENCH, HYDERABAD.

For Appellant: Shri K.C. Devdas

O R D E R Per Shri S.S. Godara, J.M. : This assessee’s appeal for A.Y. 2018-19 arises against the Commissioner of Income Tax (Appeals)-3, Hyderabad’s order dated 31.07.2020 passed in case no.

10159/2019-20/B2/CIT(A)-3 in proceedings u/s 143(1) of the Income Tax Act, 1961 [in short ‘the Act’].

Heard both the parties. Case file perused.

2.

The assessee has raised the following substantive grounds in its appeal.

“3. The ld.CIT(A) ought to have observed that the Assessing Officer erred in disallowing Rs.5,86,493 by invoking the provisions of section 36 of the Income Tax Act as the payment was made after completion of the financial year.

4. The ld.CIT(A) ought to have noted that the payment of the said amount was made within the due date allowed for filing of Return of Income and therefore there is no scope for making disallowance of the said amount and hence the said addition is liable to be deleted.”

3.

Coming to the sole substantive issue of ESI/PF disallowance of Rs.5,86,493, the assessee’s and revenue’s stand is that the same has been paid before the due date of filing sec. 139(1) return and after the due date prescribed in the corresponding statutes; respectively. We notice in this factual backdrop that the legislature has not only incorporated necessary amendments in Sections 36(va) as well as 43B vide Finance Act, 2021 to this effect but also CBDT has issued Memorandum of Explanation that the same applies w.e.f. 1.4.2021 only. It is further not an issue that the forergoing legislative amendments have proposed employers contributions; disallowances u/s 43B as against employee u/s 36 (va) of the Act; respectively. However, keeping in mind the fact that the same has been clarified to be applicable only with prospective effect from 1.4.2021, We hold that the impugned disallowance is not sustainable in view of all these latest developments even if the Revenue’s case is supported by the following case laws.

(i) CIT vs. Merchem Ltd, [2015] 378 ITR 443(Ker) (ii) CIT vs. Gujarat State Road Transport Corporation (2014) 366 ITR 170 (Guj.) (iii) CIT vs. South India Corporation Ltd. (2000) 242 ITR 114 (Ker) (iv) CIT vs. GTN Textiles Ltd. (2004) 269 ITR 282 (Ker) (v) CIT vs. Jairam & Sons [2004] 269 ITR 285 (Ker)

4.

The impugned ESI/PF disallowance is directed to be deleted therefore.

5.

This assessee’s appeal is allowed.

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