N.R. KUMARASWAMY,BANGALORE vs. ASSISTANT DIRECTOR OF INCOME TAX, CPC, BANGALORE

The assessee has filed this appeal challenging the order dated 23.12.2021 passed by Ld. CIT(A), National Faceless Appeal Centre, Delhi and it relates to the assessment year 2018-19.

The assessee filed return of income for AY 2018-19 on 31.10.2018 declaring total income of Rs.44,88,550/-. In an intimation issued u/s 143(1) of the Income-tax Act,1961 ['the Act' for short], the Centralized Processing Centre (CPC) added a sum of Rs.68,76,397/- under the head Profits & Gains from business

The assessee challenged the above said addition by filing appeal before Ld. CIT(A) contending that the disallowance should not be made, since the above said payments have been made prior to the due date prescribed u/s 139(1) of the Act. In this regard, the assessee relied on the decision rendered by jurisdictional Karnataka High Court in the case of M/s. Essae Teraoka Pvt. Ltd. Vs. Deputy Commissioner of Income-tax (Karnataka HC) in ITA No.480/2013. However, the Ld. CIT(A) rejected the contentions of the assessee by following the amendment brought in by the Finance Act, 2021 in sections 43B and 36(1)(va) of the Act and also following certain decisions rendered by Tribunals. Aggrieved, the assessee has filed this appeal before the tribunal.

The contention of the assessee was that it has remitted the employees contribution of PF & ESI before the due date prescribed u/s 139(1) of the Act, even though the contributions were paid in few instances beyond the due date prescribed in the respective Statutes. We also notice the above said fact from column 20(b) of the Tax audit report furnished along with the appeal memo and a perusal of the same would show that the assessee has remitted the payments before the due date prescribed u/s 139(1) of the Act for filing return of income for AY 2018-19.

The question whether the payments made beyond the due date prescribed under respective statutes, but before the due date prescribed u/s 139(1) of the Income tax Act was considered and decided in favour of the assessee by the Tribunal in the case of M/s. Shakuntala Agarbathi Company Vs. DICT in ITA No.385/Bang/2021

We heard both parties and perused the record. On identical facts, the Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company Vs. DCIT (supra) by following the dictum laid down by the Hon’ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra)¸ had held that the assessee would be entitled to deduction of employees’ contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) of the I.T.Act. It was further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory. The relevant finding of the ITAT in the case of M/s. Shakuntala Agarbathi Company Vs. DCIT (supra), reads as follows: “7. We have heard rival submissions and perused the material on record. Admittedly, the assessee has remitted the employees' contribution to ESI before the due date for filing of return u/s 139(1) of the I.T.Act. The Hon'ble jurisdictional High Court in the case of EssaeTeraoka (P.) Ltd. v. DCIT reported in 366 ITR 408 (Kar.) has categorically held that the assessee would be entitled to deduction of employees' contribution to ESI provided the payment was made prior to the due date of filing of return of income u/s 139(1) of the I.T.Act. The Hon'ble jurisdictional High Court differed with the judgment of the Hon'ble Gujarat High Court in the case of CIT v. Gujarat State Road Transport Corporation reported in 366 ITR 170 (Guj.). The Hon'ble High Court was considering following substantial question of law:- "Whether in law, the Tribunal was justified in affirming the finding of Assessing Officer in denying the appellant's claim of deductions of the employees contribution to PF/ESI alleging that the payment was not made by the appellant in accordance with the provisions u/s 36[1][va] of the I.T.Act?"

Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T. Act are not applicable for the assessment year under consideration. By following the binding decision of the Hon’ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees’ contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T. Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee and the disallowance made by the Assessing Officer is deleted.

The Ld D.R submitted that the Hon’ble Gujarat High Court has taken a contrary view on this issue in the case of CIT vs. Gujarat Road Transport Corpn. (2014)(41 taxmann.com 100) and the matter is pending before Hon’ble Supreme Court. Accordingly, he prayed that in the event of Hon’ble Apex Court taking a view in favour of the revenue on this issue confirming the view taken by Hon’ble Gujarat High Court, then the Revenue should be given liberty to seek

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 7th Mar, 2022.