The Tax Publishers2022 TaxPub(DT) 4586 (Ind-Trib) : (2022) 195 ITD 0555

INCOME TAX ACT, 1961

Section 36(1)(va) Section 43B

Employees' contributions to PF and ESI paid after due date under PF and ESI laws but within the time allowed under section 43B, i.e., upto the due date under section 139(1) for filing of return of income is allowable as deduction in computing taxable income of business. Further, it is specifically mentioned by legislature that amendment made to sections 36(1)(va) and 43B through Finance Act, 2021 is effective from 1-4-2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years.

Business deduction under section 36(1)(va) - Employees' contributions to PF and ESI - Paid upto due date under section 139(1) for filing of return of income -

AO made disallowance on account of delayed payment of employees' contributions to PF and ESI, which was upheld by CIT(A). Assessee-company contended that the employees' contributions to PF and ESI were deposited to respective funds within the time permitted under section 43B, i.e., upto due date under section 139(1) for filing return of income and thus no disallowance was attracted. However, Revenue contended that amendment to sections 36(1)(va) and 43B though inserted from 1-4-2021, was clarificatory in nature, therefore, would apply retrospectively and hence, the AO was justified in disallowing the employees' contributions to PF and ESI not paid upto the due dates under the PF and ESI laws. Held: Employees' contributions to PF and ESI paid after due date under PF and ESI laws but within the time allowed under section 43B, i.e., upto the due date under section 139(1) for filing of return of income is allowable as deduction in computing taxable income of business. Further, it is specifically mentioned by legislature that amendment made to sections 36(1)(va) and 43B through Finance Act, 2021 is effective from 1-4-2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years. Therefore, AO was not justified in disallowing the claim of the assessee.

REFERRED : Akbar Mohammad v. ACIT [IT Appeal Nos. 108 & 109 (Jodh.) of 2021, dated 31-1-2012] : 2022 TaxPub(DT) 1228 (Jod-Trib), Zile Singh v. State of Haryana (2004) 8 SCC 1, CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) : 1973 TaxPub(DT) 421 (SC), Harendra Nath Biswas v. Dy. CIT [ITA No. 186 (Kol.) of 2021, dated 16-7-2021] : 2021 TaxPub(DT) 3954 (Kol-Trib), Salzgitter Hydraulics (P.) Ltd. v. ITO (2021) 189 ITD 676 (Hyd-Trib)) : 2021 TaxPub(DT) 3662 (Hyd-Trib), Virendra Kumar Tiwari v. CIT(A) [ITA No. 175 (Ind.) of 2021, dated 30-3-2022], Prestige Fabricators (P.) Ltd. v. Asstt. CIT [ITA No. 184 (Ind.) of 2021, dated 30-3-2022] and Kamal Kumar Jain v. Dy. CIT [ITA No. 223 (Ind.) of 2021, dated 30-3-2022].

FAVOUR : In assessee's favour.

A.Y. : 2017-18

INCOME TAX ACT, 1961

Section 199 Rule 37BA

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