HARAKCHAND DEOJI SHAH,KOREGAON vs. ASSISTANT COMMISSIONER OF INCOME-TAX (CIR), SATARA

Briefly stated, the facts of the case are that the return of the assessee was processed and an adjustment was proposed on account of late deposit of ESIC/PF. The Centralized Processing Centre, vide communication dated 19-01-2019 issued u/s.143(1)(a) of the Act, made an adjustment of Rs.4,08,380/- on account of late deposit of employees’ share of ESIC/PF. The assessee contended before the ld. CIT(A) that the delayed amount was deposited before the filing of the return of income u/s.139(1) of the Act. The assessee relied on certain decisions in support of its contention. The ld. CIT(A), after admitting that the employees’ contribution of ESIC/PF was late deposited by the assessee but before the stipulated time u/s.139(1) of the Act, sustained the addition.

After considering the rival submissions and perusing the relevant material on record, it is seen that the issue under consideration is no more res integra in view of the judgment of the Hon’ble Bombay High Court in CIT Vs. Ghatge Patil Transports Ltd. (2014) 368 ITR 749 (Bom.) in which it has been held that deduction for payment of employees’ contribution cannot be disallowed in case the contribution of employees’ share in the Welfare Funds got credited on or before the due date.

At this juncture, it is relevant to mention that the Finance Act, 2021 has inserted Explanation 2 below section 36(1)(va) providing that the provisions of section 43B shall not apply for the purpose of determining the due date under this clause w.e.f. 01.04.2021. The effect of this amendment is that if the amount of employees’ contribution towards EPF, ESIC, etc is delayed by an employer beyond the due date under the respective Acts, the disallowance will be called for notwithstanding the fact that it was deposited before the due date u/s 139 of the Act. The Memorandum explaining the provisions of the Finance Bill, 2021, provides that this amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to assessment year 2021-2022 and subsequent assessment years. Since the assessment year under consideration, namely, 2017- 18 is anterior to the amendment carried out with effect from A.Y. 2021-22, I hold that the position of law as set out by various Hon’ble High Courts including Ghatge Patil Transports Ltd. (supra) squarely applies to the facts and circumstances of the instant case thereby not warranting any disallowance as the amount in question was admittedly deposited before due date u/s 139(1) of the Act. The addition is therefore, directed to be deleted.

Both the sides are in agreement that the facts and circumstances of this appeal are mutatis mutandis similar to those of the A.Y. 2018-

For this year also, the assessee late deposited the employees’ share of contribution of ESIC/EPF amounting to Rs.3,81,992/-. The same was paid before the due date u/s.139(1) of the Act. Both the lower authorities have made and confirmed the disallowance u/s.36(1)(va) of the Act. Since the facts and circumstances for the instant year are admittedly similar to those for the A.Y. 2018-19, following the view taken hereinabove, I order to delete the disallowance.

In the result, both the appeals are allowed. Order pronounced in the Open Court on 29th March, 2022.