2022 (6) TMI 1052 - Income Tax

Head Note / Extract:
Disallowance of late payment of employee contribution to Provident Fund (PF) - payment after the due date as mentioned in relevant statute but before due date of filing return of income - assessee’s claim disallowed in proceedings under section 143(1) - HELD THAT:- The assessee in response to the notice issued under section 143(1)(a) had intimated the CPC, Bangalore that the issue is squarely covered in favour of the assessee by the decision of Hon’ble Apex Court in the case of CIT Vs. Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT] and the decision in the case of CIT Vs. Ghatge Patil Transport [2014 (10) TMI 402 - BOMBAY HIGH COURT]. Despite that CPC disallowed assessee’s claim under section 36(1)(va) of the Act. In First Appellate Proceedings, the CIT(A) upheld the order of CPC by placing reliance on the decision of non-jurisdictional High Court and referring to the provisions of section 36(1)(va) as amended by the Finance Act, 2021. It is relevant to mention here that the CIT(A) in the impugned order has mentioned the fact that there are judgments in favour of the assessee and the Revenue. Though, the issue has been settled by the Hon’ble Apex Court, still some of the High Courts have taken a contrary view, this make the issue debatable. It is a well settled legal position that no disallowance can be made under section 143(1) of the Act, where the issue is debatable. Thus assessee would be eligible for claiming deduction in respect of delayed payment (as per respective Act) of PF of employees contribution, if paid before due date of filing return of income. Therefore,, the reason given by CIT(A) to disallow the claim of assessee is unsustainable. In so far as applicability of Explanation (2) to section 36(1)(va) inserted by the Finance Act, 2021, the same is effect from 01.04.2021. The Memorandum Explaining the provisions in Finance Bill, 2021 has in an unambiguous manner has expressed that the amendment will take effect from 01.04.2021 and will apply to the AY 2021-22 and subsequent AYs. Thus, in light of above, we hold that the CIT(A) has erred in applying amended provisions of section 36(1)(va) to disallow assessee’s claim of deduction of PF. - Decided in favour of assessee.