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Issues involved: Disallowance of belated payments towards Provident Fund and ESI u/s 139(1) of the Income-tax Act for assessment year 2001-02.
Summary: The appeal was against the order of the CIT (Appeals)-II, Hyderabad, regarding the disallowance of belated payments made towards Provident Fund and ESI. The main contention was whether the payments made before the due date for filing the return u/s 139(1) could be allowed as deduction under the Income-tax Act. The assessee argued that the first proviso to section 43B, as interpreted by the Supreme Court, allowed such deductions and that the amendment by Finance Act, 2003, should apply retrospectively. On the other hand, the departmental representative relied on the jurisdictional High Court's judgment upholding the constitutional validity of the second proviso to section 43B, stating that the amendment was prospective. After considering the arguments, the Tribunal analyzed the provisions of section 43B and the relevant case laws. It noted conflicting views on the retrospective nature of the amendment and referred to a Special Bench decision which held that the amendment was curative and retrospective in nature. A Division Bench of the Tribunal also considered similar issues and found that the judgment of the jurisdictional High Court was limited to the constitutional validity of the provisos. The Tribunal concluded that the amendment introduced by the Finance Act, 2003, should be applied retrospectively based on the Supreme Court's interpretation of the first proviso to section 43B. Therefore, the Tribunal set aside the lower authorities' orders and allowed the deductions for the payments made towards Provident Fund and ESI before the due date for filing the return u/s 139(1) of the Income-tax Act for the assessment year 2001-02.
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