S N CONSTRUCTIONS,PUNE vs. CPC, BENGALURU

The only issue raised in this appeal is against the confirmation of disallowance of late deposit of the employees’ share of EPF & ESI beyond the due date under the respective Acts but before the due date u/s 139(1) of the Act.

Briefly stated, the facts of the case are that the assessee late deposited a sum of Rs.1,51,284/-, being, contribution of the employees to EPF & ESI which has been tabulated at the penultimate page of the assessment order. The Assessing Officer (AO) made the disallowance, which came to be affirmed in the first appeal.

Having heard both the sides and gone through the relevant material on record, it is seen from the table drawn by the AO that even though the employees' share in the EPF & ESI contribution was deposited late but all such payments have been made before the due date u/s.139(1) of the Act. 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 of filing the return as per section 139(1) of the Act.

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.

In the result, the appeal is allowed. Order pronounced in the Open Court on 05th May, 2022.