| The Tax Publishers2022 TaxPub(DT) 0004 (Chen-Trib) : (2022) 193 ITD 0460 INCOME TAX ACT, 1961
Section 36(1)(va) read with Section 43B
Payment of employees' contributions in regard to PF and ESI, if made before due date of filing of return of income under section 139(1), the same is allowable as deduction as per provisions of section 2(24)(x) read with section 36(1)(va) and section 43B. Further, amendment brought in the statute by Finance Act, 2021 to provisions of section 36(1)(va) read with section 43B by inserting Explanation 2 and Explanation 5, respectively is prospective and will apply from assessment year 2021-22 and subsequent assessment years.
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Business deduction under section 36(1)(va) - Employees' contributions to PF and ESI - Deposited before due date of filing of return of income under section 139(1) - Applicability of amended provisions of section 36(1)(va) read with section 43B
CPC processed return of income of assessee-company under section 143(1) by disallowing a sum by invoking provisions of section 36(1)(va) read with section 43B for not depositing employees' contributions to PF and ESI within time specified under the respective Acts. On appeal, the assessee submitted before CIT(A) that the employees' contributions to PF and ESI were paid before the due date of filing of return of income, thus, no disallowance was called for on that count. However, the CIT(A) upheld the said disallowance by holding the applicability of amended provisions of section 36(1)(va) read with section 43B as retrospective. Held: In view of decisions of various High Courts on the issue and even Jurisdictional High Court in the case of CIT v. M/s. Industrial Security & Intelligence India Pvt. Ltd [TCA No.585/2015, dt. 24-7-2015], payment of employees' contributions in regard to PF and ESI, if made before due date of filing of return of income under section 139(1), the same is allowable as deduction as per provisions of section 2(24)(x) read with section 36(1)(va) read with section 43B. Further, amendment brought in the statute by Finance Act, 2021 to provisions of section 36(1)(va) read with section 43B by inserting Explanation 2 and Explanation 5 respectively, is prospective and not retrospective. Hence, the amended provisions of section 36(1)(va) read with section 43B are not applicable for assessment years under consideration, i.e., 2018-19 and 2019-20 but will apply from assessment year 2021-22 and subsequent assessment years.
Followed:CIT v. M/s. Industrial Security & Intelligence India Pvt. Ltd [TCA No.585/2015, dt. 24-7-2015]
REFERRED : CIT (Central) -I, New Delhi v. Vatika Township Private Limited (2014) 367 ITR 466 (SC) : 2014 TaxPub(DT) 3934 (SC) and CIT v. AIMIL Limited, Nirmala Swami, Spearhead Digital Studio, M/s. Net 4 India Ltd., Modipon Ltd., & M/s. Ekta Agro Industries Ltd., (2009) 321 ITR 508 (Del) : 2010 TaxPub(DT) 1231 (Del-HC)
FAVOUR : In assessee's favour
A.Y. : 2018-19 & 2019-20
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