2021 (10) TMI 952 - ITAT BANGALORE

Disallowance of Employees share of ESI/PF paid belatedly as per the due dates laid down in the law - whether contribution is made on or before due date for furnishing the return of income u/s 139(1) ? - Scope of amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021 - HELD THAT:- The Hon'ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd [2014 (3) TMI 386 - KARNATAKA HIGH COURT] has taken the view that employee's contribution u/s 36(1)(va) of the Act would also be covered u/s 43B of the Act and therefore if the share of the employee's share of contribution is made on or before due date for furnishing the return of income u/s 139(1) of the Act, then the assessee would be entitled to claim deduction. Therefore, the issue is covered by the decision of the Hon'ble Karnataka High Court.

Whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also. On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021.

These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so - aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act in both the Assessment Years deserves to be deleted. - Decided in favour of assessee.