Amendments to Sections 43B and 36(1)(va) of the Income Tax Act cannot have Retrospective Effect since It Imposes Liability on Assessee: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the amendments to sections 43B and 36(1)(va) of the Income Tax Act, 1961 cannot have retrospective effect since the provisions impose a liability on the assessee.

While concluding the assessment proceedigs against Anup Service Station, the CPC disallowed Rs.3,71,000/- and Rs. 3,07,475/- u/s. 36(1)(va) of the Income Tax Act on account of delay in depositing the employees’ contribution to ESI and PF for the A.Yrs.2018-19 and 2019-20 respectively.

The disallowances were later confirmed by the CIT(A), National Faceless Appeal Centre, Delhi vide impugned orders on the premise that since the assessee did not deposit the employees’ contribution to PF and ESI before the due date, the assessee is not entitled to claim deduction u/s. 36(1)(va) of the Act. Aggrieved by these orders, the assessee is in these appeals before the Tribunal.

A coram of Shri R.K. Panda, Accountant Member and Shri K. Narasimha Chary, Judicial Member referred a catena of Tribunal decisions wherein it was held that if the assessee has deposited the employees’ share of contribution to PF & ESI before the due date of filing of return under section 139(1) of the Act, then no disallowance u/s. 36(1)(va) can be made.

“It has further been held that the amendment to the provisions of section 43B and 36(1)(va) of the Act by the Finance Act, 2021 has to be construed as prospective and applicable for the period after 01.04.2021. It is held that this provision imposes a liability on the assessee and therefore, cannot be construed as applicable with retrospective effect since the legislature has not specifically said so. Since the assessee in the instant case has admittedly deposited the employee’s contribution to PF & ESI before the due date of filing of return of income, therefore, we are of the considered opinion that the ld. CIT(A) is not justified in sustaining the disallowance made by the CPC. We, therefore, direct the Assessing Officer to delete the disallowances in the hands of the assessee,” the Tribunal said.

Sh. Suresh K. Gupta, CA appeared for the assessee.

To Read the full text of the Order CLICK HERE

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