NARENDER AGARWAL,M/S JR FORGINGS 39/A/1,IDA BALANAGAR HYDERABAD 500037,TELANGANA INDIA vs. ITO WARD-11(3), HYDERABAD

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ITA 38/HYD/2022Status: DisposedITAT Hyderabad31 May 2022AY 2019-205 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 if employees' contribution to PF and ESI is paid before the due date of filing the return, no disallowance can be made under Section 36(1)(va) read with Section 2(24)(x). The amendments by the Finance Act, 2021, were held to be prospective.

What were the facts?

The assessee filed its return of income, and the CPC made an adjustment of Rs. 1,42,980/- for delayed payment of employees' contribution to PF and ESI. The assessee contended that these payments were made before the due date of filing the return.

What were the issues?

Whether disallowance under Section 36(1)(va) is permissible for delayed payment of employees' PF and ESI contributions if paid before the return filing due date, and the retrospective applicability of Finance Act, 2021 amendments.

Which sections of the Income-tax Act were involved?

Section 36(1)(va),Section 2(24)(x),Section 43B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad

Before: Shri Rama Kanta Panda & Shri Laliet Kumar

For Appellant: Shri Krishnan
For Respondent: Shri T.Sunil Goutam
Hearing: 19.05.2022Pronounced: 31.05.2022

Assessment Year: 2019-20 Narender Agarwal Vs. ITO, Ward-11(3) Prop M/s. JR Forgings Hyderabad 39/A/1, IDA Balanagar Hyderabad-500 037 PAN : AAMPA4460G (Appellant) (Respondent) Assessee by: Shri Krishnan Revenue by: Shri T.Sunil Goutam Date of hearing: 19.05.2022 Date of pronouncement: 31.05.2022 O R D E R Per Shri Rama Kanta Panda, A.M. This appeal filed by the assessee is directed against the order dated 26.11.2021 of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi for the AY 2019-20.

2.

There is a delay of 25 days in filing of this appeal by the assessee for which assessee has filed a condonation petition along with the affidavit explaining the reasons for such delay. After considering the contents of the condonation application filed along with the affidavit, the delay in filing of this appeal by the assessee is condoned and the appeal is admitted for adjudication.

3.

Although a number of grounds have been raised by the assessee, however these relate to the order of ld.CIT(A), NFAC in sustaining the adjustment of Rs. 1,42,980/-by the CPC, Bangalore on account of delayed payment of employees’ contribution to PF and ESI.

4.

Facts of the case, in brief are, that the assessee filed its return of income declaring total income of Rs. 1,88,89,420/-. The return was processed u/s. 143(1) by CPC, Bangalore determining the total income at Rs. 1,90,32,400/- wherein adjustment of Rs. 1,42,980/- was made to the returned income on account of delayed payment of EF and ESIC by treating the same as deemed income u/s. 36(1)(va) r.w.s. 2(24)(x) of the I.T.Act.

4.1. Before the ld.CIT(A), the assessee submitted that such payments were made before the due date of filing of the return and therefore, no adjustment should have been made. The assessee relied on various decisions to this proposition. However, the ld.CIT(A) was not satisfied with the arguments advanced by the assessee and sustained the addition of Rs. 1,42,980/- made by the AO, CPC for not depositing the employees’ contribution to PF and ESIC by invoking the provision of section 36(1)(va) r.w.s. 2(24)(x) of the Act.

5.

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

5.1 The ld.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 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 ld.CIT(A) should be deleted.

6.

The ld.DR on the other hand heavily relied on the order of the ld.CIT(A). 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 ld.CIT(A) was fully justified in upholding the addition made by the AO on account of delayed payment of PF and ESIC amounting to Rs. 1,42,980/-

7.

We have heard the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case made addition of Rs. 1,42,980/- on account of delayed deposit of employees’ contribution to PF and ESIC on the ground that the same were deposited beyond the due date prescribed in the said Act. We find the ld.CIT(A) rejected the contention of the assessee that such payments though made after

Acts, however these payments were made before the due date of filing of the return. He accordingly, upheld the action of the AO. We find the co-ordinate benches of the Tribunal are now consistently taking the view that no disallowances u/s. 36(1)(va) r.w.s. 2(24)(x) can be made on account of delayed payment of PF and ESIC, if such payments are made before the due date of filing of the return. It has further been held in these decisions that the amendment to section 43B as well as section 36(1)(va) r.w.s. 2(24)(x) by the Finance Act, 2021 are prospective and not retrospective in nature. Since, the assessee in instant case has admittedly paid the employees’ contribution to PF and ESIC before the due date of filing of the return, therefore, we set aside the order of the ld.CIT(A) and direct the AO to delete the addition. The grounds raised by the assessee are accordingly allowed.

8.

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

Order pronounced in the Open Court on 31st May, 2022.

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