DY. COMMISSIONER OF INCOME TAX, CIRCLE-2(1), HYDERABAD vs. KAPSTON FACILITIES MANAGEMENT LIMITED, HYDERABAD

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ITA 1710/HYD/2019Status: DisposedITAT Hyderabad27 August 2021AY 2017-183 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the disallowance was not sustainable. It noted that legislative amendments and CBDT clarifications regarding Sections 36(va) and 43B were applicable prospectively from 1.4.2021, and the impugned disallowance pertained to an earlier period.

What were the facts?

The Revenue appealed against the CIT(A)'s order allowing delayed remittance of employees' contribution to PF/ES as deductible. The assessee claimed it was paid before the return filing due date, while the Revenue argued for disallowance under Section 36(1)(va).

What were the issues?

Whether delayed remittance of employees' contribution to PF/ES is allowable as a deduction under Section 43B when Section 36(1)(va) provides for disallowance. The applicability of recent legislative amendments and CBDT clarifications to the assessment year in question.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD ‘B’ BENCH : Hyderabad

Before: Shri S.S. GODARA & Shri L.P. SAHU

Hearing: 15/07/2021Pronounced: 27/08/2021

Date of Hearing : 15/07/2021 Date of Pronouncement : 27/08/2021 O R D E R PER S.S. GODARA, J.M.

This Revenue’s appeal for A.Y. 2014-15 arises against the Commissioner of Income Tax (Appeals) “[CIT(A)]”-2, Hyderabad’s order dated 25/06/2019 passed in case no. 10017/2019-20 in proceedings u/s 143(1) of the Income Tax Act, 1961 [in short ‘the Act’].

Heard both the parties. Case file perused. The Revenue has raised the following substantive grounds in its appeal. "The ld.CIT(A) erred in holding that the delayed remittance of employees contribution towards PF/ES is allowable u/s 43B in spite of specific provisions of the Income Tax Act u/s 36(1)(va) providing for disallowance of the same"

DCIT, Circle 2(1) vs. Kapston Facilities Management Ltd.,Hyd.

The Ld. CIT(A) erred in allowing relief relying on the decision of Hon'ble Supreme Court in the case of Pr.CIT vs. Rajasthan State Beverages Corporation Limited ignoring the fact that the Apex Court has not discussed the issue with reference to the provisions of Section 36(1)(va)

[ Total Tax Effect : Rs. 1,01,72,187/- ] "Any other grounds that be urged at the time of hearing."

2.

Coming to the sole substantive issue of ESI/PF disallowance of Rs. 3,07,66,069/- the assessee’s and revenue’s plea that the same has been paid before the due date of filing 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 the 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 foregoing legislative amendments have proposed employer’s contribution; disallowance u/s 43B as against employee’s contribution 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.

This revenue’s ground is rejected therefore and CIT(A)’s order is upheld. This revenue’s appeal is dismissed in above terms. Order pronounced in Open Court on 27/08/2021. Sd/- Sd/- (L.P. SAHU) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 27th August,2021 *gmv DCIT, Circle 2(1) vs. Kapston Facilities Management Ltd.,Hyd.

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