The Raipur bench of the Income Tax Appellate Tribunal ( ITAT ) has held that amendment on Section 36(1)(va) of the Income Tax Act has a prospective effect and quashes the order confirming disallowances of Rs. 18,12,622/- out of employment contribution towards EPF/ESIC.
The assessee is a company engaged in the business of manufacturing & selling sponge iron, ingots, billets and generation of power. The assessee company filed a return electronically on 28.09.2012 declaring total income at Rs. Nil and the assessment proceedings were completed u/s. 143(3) of the Act by order dated 31.03.2015 after making disallowance.
The appellant submitted that the assessee-company deposited the employee’s contribution of PF/ESI though with a delay of a few days from the due dates mentioned in the Acts and deposited the amount before the due date of filing of return of income The assessee had collected employees’ contribution to ESI and PF from its employees and deposited before the due date of filing of return of income u/s 139(1) of the Act.
In contra, revenue contended that the explanation added to Section 36(1)(va) of the Act by the Finance Act, 2021 is clarificatory in nature. The assessee contended that the clarification will take effect from 1st April 2021 and will apply from the assessment year 2021-22 and subsequent assessment years and not to the impugned assessment year.
It was observed that the assessee actually deposited the entire amount and adduced evidence regarding such deposit on or before the return of income under sub-section (1) of Section 139 of the IT Act. Further observed that the PF and/or EPF, CPF, GPF, etc paid after the due date under the respective Act but before the filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(1)(va) of the IT Act.
The Coram consisting of Shri Ravish Sood, JM and Shri Rathod Kamlesh Jayantbhai, AM held that the amendment is prospective and not retrospective and allowed the claim of the assessee for Rs. 18,12,622/- being the employee’s contribution towards EPF/ESIC and direct the AO to delete the disallowance. The appeal filed by the assessee was allowed. The assessee was represented by Sh. Bikram Jain and the revenue was represented by Shri G.N Singh.
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