SUNITA SURESH JADHAV,PUNE vs. INCOME-TAX OFFICER, WARD 14(2), PUNE

I find the Hon’ble Supreme Court in Cognizance for Extension of Limitation, In re 438 ITR 296 (SC) read with judgment in Cognizance for Extension of Limitation, In re 432 ITR 206 (SC) dated 08-03-2021 and 421 ITR 314 has taken suo motu cognizance of the situation arising out of the challenge faced by the country on account of COVID-19 Virus and resultant difficulties that could be faced by the litigants across the country and extended the time limit for filing of the appeals. I, therefore condone the delay in filing the appeal and admit the same for disposal on merits.

The only issue raised in this appeal is against the confirmation of disallowance of Rs.14,90,362/- made by the Assessing Officer (AO) u/s.36(1)(va) read with section 43B of the Income-tax Act, 1961 (hereinafter also called ‘the Act’).

Briefly stated, the facts of the case are that the assessee late deposited the amount of Employees Provident Fund (EPF) and Employee State Insurance Contribution (ESIC) by certain days as has been tabulated on page 2 of the assessment order. Considering the fact that there was a delay in the payment of employees’ contribution to EPF & ESIC etc., the AO disallowed Rs.14,90,362/- by invoking the provisions of section 36(1)(va) r.w.s.2(24)(x) of the Act. The ld. CIT(A) sustained the addition, against which the assessee has come in appeal before the Tribunal.

I have heard both the sides and gone through the relevant material on record. It is an admitted position that the assessee did deduct employees’ share of EPF and ESIC but paid the same after the due date under the respective legislations but before the time for filing of the return u/s 139(1) of the Act. This issue is no more res integra in view of several judgments allowing deduction u/s 36(1)(va) of employees’ share of contribution deposited after due date under the respective Acts but before the date prescribed u/s 139 of the Act. The Hon’ble Himachal Pradesh High Court in CIT vs. Nipso Polyfabriks Ltd. (2013) 350 ITR 327 (HP) has held that there exists no difference between employees’ or employer’s contribution and both are to be allowed as deduction if deposited 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 the one in CIT vs. Nipso Polyfabriks 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.