2022 (6) TMI 1305 - AT - Income Tax

Late deposit of the Employees share of EPF and ESI - disallowance in the intimation u/s.143(1) on the ground that the assessee late deposited the employees share of EPF and ESI etc. - difference between employees or employer s contribution - Scope of amendment - HELD THAT - 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 - As in CIT vs. Nipso Polyfabriks Ltd. 2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT 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. 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 ESI 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. Since the assessment year under consideration is 2019-20 which is anterior to the amendment carried out with effect from A.Y. 2021-22 we hold that the position of law as set out in CIT vs. Nipso Polyfabriks Ltd. (supra) squarely applies to the facts and circumstances of the instant case thereby not warranting any disallowance since 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. - Decided in favour of assessee.

Summary

Issues:
Confirmation of disallowance of late deposit of Employees' share of EPF and ESI under section 36(1)(va) of the Income-tax Act, 1961.

Analysis:
The Appellate Tribunal ITAT Pune heard an appeal against the order passed by the National Faceless Appeal Centre related to the assessment year 2019-20. The only issue raised was the confirmation of disallowance of Rs.1,44,897 made by the Assessing Officer under section 36(1)(va) of the Act due to late deposit of the Employees' share of EPF and ESI. The AO disallowed the amount in the intimation under section 143(1) of the Act, which was affirmed by the ld. CIT(A).

Upon considering the facts, it was noted that the assessee did deduct the employees' share of EPF and ESI but deposited it after the due date under the respective legislations but before the time stipulated for filing the return under section 139(1) of the Act for the relevant year. The Tribunal referred to various judgments, including the one by the Hon'ble Himachal Pradesh High Court, which held that both employees' and employer's contributions are allowed as deduction if deposited before the due date.

The Tribunal highlighted the amendment introduced by the Finance Act, 2021, which inserted Explanation 2 below section 36(1)(va), stating that the provisions of section 43B shall not apply for determining the due date under this clause from 1st April, 2021. As the assessment year in question was 2019-20, anterior to this amendment, the Tribunal held that the law as established by previous judgments, like the one in CIT vs. Nipso Polyfabriks Ltd., applies. Therefore, the disallowance was deemed unnecessary as the amount was deposited before the due date under section 139(1) of the Act, leading to the deletion of the addition.

Consequently, the Tribunal allowed the appeal, directing the deletion of the addition. The order was pronounced in the Open Court on 22nd June, 2022.