Amendment in Finance Act, 2021 restricting Employees’ Contribution to ESI and PF after Due Date is Prospective: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Bangalore bench has held that the amendment in the Finance Act, 2021 restricting employees’ contribution to ESI and PF after the due date is prospective in nature.

During the assessment proceedings, the Assessing Officer reassessed the total income at Rs.7,17,33,181 after disallowing a sum of Rs.27,85,688 being late remittance of employees’ contribution to PF and ESI under the respective Acts.

The ITAT bench comprises of Shri George George K, JM & Ms.Padmavathy S, AM has found that the jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT¸ had held that the assessee would be entitled to the deduction of employees’ contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) of the I.T.Act. It was further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory.

“Therefore, the amended provisions of section 43B, as well as 36(1)(va) of the I.T.Act, are not applicable for the assessment years under consideration. By following the binding decision of the Hon’ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees’ contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee, and the disallowance made by the Assessing Officer is deleted,” the Tribunal said.

To Read the full text of the Order CLICK HERE

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