“The Income Tax Appellate Tribunal (ITAT), Mumbai bench, held that the amendment to section 36(1)(va) of the Income Tax Act, 1961, would not be applicable to assessment year 2017-2018. Therefore, the bench allowed a deduction in respect of employees’ contribution to the Provident Fund (PF).
During the assessment proceedings, the Assessing Officer (AO) disallowed the deduction claimed by the assessee, Giri Bahadur, in respect of employee contribution to the Provident Fund because of a delay in contribution within the time allowed under the prescribed Act.
Aggrieved by the order, the assessee filed an appeal before the CIT(A), who dismissed the appeal of the assessee. Thereafter, the assessee filed an appeal against the DRP order before the tribunal.
During the appeal proceedings, Shivani Shah, Counsel for the assessee, submitted that the payment of employees’ contribution fee had been made before the due date for filing the return of income under Section 139(1) of the Income Tax Act. Furthermore, it was argued that the amendment to section 36(1)(va) and 43B of the Income Tax Act by Finance Act, 2021, is only prospective in nature, i.e., with effect from 01.04.2021 and not retrospective.
Anil Gupta, Counsel for Revenue, argued that the amendment to section 36(1)(va) of the Income Tax Act is retroactively applicable. Hence, the revenue supported the decision of the lower authorities.
It was observed that the tribunal amendment was brought in the Finance Act, 2021, with effect from 01.04.2021. The law was not framed/amended in the relevant assessment year, and any legal proposition that casts additional burden/liability on the assessee cannot be implemented retrospectively.
After considering the rival submissions and overall facts and circumstances, the two-member bench of S. Rifaur Rahman (Accountant Member) and Vikas Awasthy (Judicial Member) held that the amendment to section 36(1)(va) of the Act would not be applicable to Assessment Year 2017-18. Therefore, the bench allowed the appeal.
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