SUTRA SYSTEMS (I) P LTD,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CPC,, BENGALURU

This appeal by the assessee against the order dated 04-08-2021 passed by the National Faceless Appeal Centre (NFAC), Delhi for assessment year 2017-18.

The only issue is to be decided is as to whether the CIT(A) justified in confirming the disallowance made u/s 36(1)(va) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟).

The Assessing Officer (AO), CPC, Bangalore found the assessee has not paid employees‟ contribution towards EPF and ESI within due date as prescribed. The assessee explained that the said employees‟ contribution was remitted before the due date of filing of return of income. We note that the CIT(A) recorded the said statement vide para 3 of impugned order, but however, confirmed the disallowance taking into account the amendment being declaratory in nature and has retrospective effect. We note that Explanation (1) was inserted to clause (va) of sub-section (1) of section 36 of the Act w.e.f. 01.04.2021, wherein the definition of due date is defined making it clear that the assessee is required as an employer to credit employees‟ contribution to the employees account in the relevant fund under any Act, Rule, Order or Notification issued therein or under any Standing order, Award, Contract of service or otherwise. Admittedly, the assessment year under consideration is 2017-18 and in our opinion, the said amendment by way of Explanation inserted by the Finance Act, 2021 is not applicable. Therefore, the disallowance as confirmed by the CIT(A) is not justified. Thus, it is set aside by holding that the assessee is entitled to get deduction. Thus, the grounds raised by the assessee are allowed.

In the result, appeal of assessee is allowed.