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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
This appeal is filed by the assessee against the order passed by the National faceless appeal Centre Delhi for assessment year 2018 – 19 on 18/4/2022 wherein the appeal filed by the assessee against the order u/s 143 (1) dated 16/3/2019 issued by the Deputy Commissioner of income tax, central processing Centre, Bangalore (the learned AO ) wherein the learned AO disallowed late payment of employees provident fund and employees State insurance scheme of ₹ 357,500.
Assessee raised following grounds of appeal: -
2. The Honorable CIT(A) erred in passing the order against principles of natural justice as no opportunity of proper hearing was given to the appellant neither by the Honorable CIT(A) nor by the learned assessing officer.
3. The Honorable CIT(A) erred in not allowing the employer's contribution od Rs 3,57,500 the basis of amendment to section 36(1)(VA) and explanation to section 43(B)(b) presuming the same to be retrospective though it was clearly stated in the Act it is effective from A.Y 1.4.21 and further without giving any opportunity to the Appellant of being heard in this issue.
4. The Appellant prays that the amount of ₹ 3,57,500 be allowed based on the facts of the case and various decision relied upon by the Appellant before the Honorable CIT(A).”
3. The only grievance pertains to the AO’s action in making the addition of ₹ 357,500 on account of disallowance of late payment of provident fund and employees scheme insurance u/s 36 (1) (va) which are not paid before the due date prescribed Under the respective act. i. For AYs prior to 2021-22 also, due date u/s 36(1)(VA),not u/s 43B, applies for deductibility of employees' contributions to PF,ESI etc. ii. Section 43B(b) does not cover employees' contributions to PF, ESI etc. deducted by employer from salaries of employees. iii. The words "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 the employees" in section 43B (b) cover only employers' contributions to these funds to be borne and paid by employer out of his income, and not employees' contributions to these funds deducted by employer out of employees' income/salary. The former are sums which are liabilities of the employer to be borne by him out of his own income. The latter are sums deducted from others' income and held in trust by him and deemed to be his income under section 2(24)(x) unless deposited with concerned authorities on or before the due date as defined in Explanation (now Explanation 1) below section 36(1)(va) i.e. due dates under the relevant employee welfare legislation like PF Act, ESI Act etc. iv. The non-obstante clause in section 43B cannot be interpreted as overriding section 36(1)(va) and cannot be interpreted to mean that employer will get deduction in respect of employees' contributions deducted from their salaries and deposited by employer after the due date u/s 36(1)(va) but on or before the due date u/s 43B ie due date of filing ITR. v. The non-obstante clause in section 43B does not override section 36(1)(va) as both provisions operate in different fields. Section 43B(b) applies to employer's contributions while section 36(1)(va) applies to employees' contributions Therefore, even prior to insertion of Explanation 2 in section 36(1)(va) and Explanation 5 in Section 43B by the Finance Act,2021 w.e.f. 1-4-2021,section 43B will Order pronounced in the open court on 31.10.2022.