INCOME TAX ACT, 1961

Sections 36(1)(va) & 43B

Business deduction under section 36(1)(va) - Employees' contributions to PF and ESI - Deposited before 'due date' of filing of return of income -

AO made disallowance under section 36(1)(va) qua delayed deposit of employees' contributions towards PF and ESI by assessee. On appeal, CIT(A) upheld such disallowance. Assessee submitted that the employees' contributions towards PF and ESI had been deposited by prior to 'due date' of filing of return of income, therefore, no disallowance of the same was called for. On the other hand, Revenue submitted that pursuant to insertion of 'Explanation 5' to section 43B and 'Explanation 2' to section 36(1)(va), the legislature made it abundantly clear that the delayed deposit of the employees' contributions towards welfare funds by the assessee would not be saved by extended time period contemplated under section 43B(b). Held: Amendments made available on the statue vide Finance Act, 2021 i.e., 'Explanation 5' to section 43B and 'Explanation 2' to section 36(1)(va) are applicable with effective from 1-4-2021, i.e. from assessment year 2021-22 onwards. Therefore, the same would not have any bearing on the case of assessee as the assessment year under consideration being 2015-16. Further, as employees' contributions to PF and ESI was deposited by the assessee before 'due date' of filing of return of income; the same could not have been disallowed by AO being saved by provisions of section 43B. Hence, disallowance made under section 36(1)(va) qua delayed deposit of employees' contributions towards PF and ESI was accordingly, deleted.

Followed:Ind Synergy Ltd. v. Dy. CIT [ITA No.312/RPR/2016 dt. 10-3-2022]: 2022 TaxPub(DT) 2264 (Rai-Trib)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2015-16

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