SREE KRISHNA AUTOMOTIVES HYDERABAD PRIVATE LIMITED,HYDERABAD vs. DCIT, CIRCLE -3 (1), HYDERABAD

Although a number of grounds have been raised by the assessee, however, these all relate to the order of the CIT(A)/NFAC in sustaining the addition of Rs.30,53,317/- made by the Assessing Officer u/s 36 of the I.T. Act on a/c of delayed payment of PF & ESI.

There is a delay of 147 days in filing of this appeal for which the assessee has filed a condonation application along with Page 1 of 5

Facts of the case, in brief, are that the assessee is a private limited company engaged in the business of automobile dealership business. It filed its return of income declaring total income of Rs.14,99,78,293/-. The return was processed u/s 143(1) by CPC Bengaluru and the CPC Bengaluru made the following additions: Disallowance of employees contribution Rs.30,53,317 to PF & ESI u/s 36(1)(va) r.w.s. 2(24)(x) Disallowance of payment of gratuity disallowed u/s 43B Rs. 68,790 Disallowed an amount towards profit on Rs.59,343 sale assets

The learned CIT (A) NFAC deleted the addition of Rs.68,790/- on account of payment of gratuity and Rs.59,343/- towards profit on sale of assets. However, he sustained the addition of Rs.30,53,317/- on account of payment towards employees’ contribution to PF & ESI on the ground that the assessee failed to make the payments of employees’ contribution to PF & ESI before the statutory due date and the Finance Act of 2021 had amended the provisions of section 36(1)(va) and section 43B which are clarificatory in nature.

Aggrieved with such order of the CIT (A)/NFAC the assessee is in appeal before the Tribunal.

The learned Counsel for the assessee referring to various decisions submitted that the co-ordinate benches of the Tribunal are taking the consistent view that where the employees’ contribution to PF and ESIC are paid before the due date of filing of the return but after the statutory dates prescribed under the respective Act, no disallowance u/s. 36(1)(va) r.w.s. 2(24)(x) can be made. He accordingly submitted that this being a covered matter in favour of the assessee, the order of the CIT(A) be set aside and the addition made by the AO and upheld by the CIT (A)/NFAC should be deleted.

The learned DR on the other hand heavily relied on the order of the CIT(A)/NFAC. He submitted that the Finance Act, 2021 has amended the provision of section 43B, as well as section 36(1)(va) by insertion of explanation to those sections. He drew the attention of the bench to the explanatory notes to the Finance Bill, 2021 and submitted that the legislature never intended that section 43B would apply to employees’ contribution. He submitted that the language of explanation 5 to section 43B, explanation 2 to section 36(1)(va) and that of the Memorandum explaining the Finance Act, 2021 make it abundantly clear that employees’ contribution is out of the ambit of section 43B. Relying on various decisions, he submitted that the CIT(A)/NFAC was fully justified in upholding the addition made by the AO on account of delayed payment of PF and ESIC amounting to Rs.30,53,317

We have heard the rival arguments made by both the sides, perused the orders of the AO and the CIT (A)/NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. Page 3 of 5

In the result, the appeal filed by the assessee is allowed.