Disallowance can’t be made on Payment to PF and ESI before due date u/s 139(1): ITAT [Read Order]

The Amritsar bench of Income Tax Appellate Tribunal (ITAT) consisting of Dr. M L Meena, AM, and Shri Anikesh Banerjee, JM has held that disallowance can’t be made on payment to PF and ESI before the due date u/s 139(1) of the Income Tax Act,1961.

The Assessing Officer (AO) disallowed the amount being the contribution of employees’ share towards Provident Fund, ESI, PF, or any other fund set up for the welfare of the employee u/s 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961 when the payments were made within the due dates of filing of return u/s 139(1) of the Act. The AO disallowed the deduction amount to Rs. 1,58,45,576/- during assessing the return U/s 143(3) of the Act in respect of employees’ contribution towards provident fund. The assessee contended that the amendment takes effect from 1st April 2021 which is subsequent.

The AO stated that the assessee paid the amount before the filing of Income-tax Return U/s 139(1) of the Act, not within the stipulated dates under PF & ESI Acts.  The respondent relied on the order of CIT(A) and stated that the employee’s contribution to PF/ESI can be allowed only if the same has been deposited within the due date prescribed under the respective Act and not before the due date of filing of return of income. Further contended that the amendment of Finance Act, 2021, has been clarified that Section 43B does not apply to Section 36(1)(va) of the Act.

Based on the principle laid down by various precedents the Tribunal held that no disallowance can be made that the payment to the employee's contribution to PF and ESI paid by the assessee before the due date of filing of return of income u/s. 139(1) before the amendment brought in the statute w.e.f. 1-4-2021. The Tribunal deleted the disallowance confirmed by the revenue and allowed the appeals filed by the assesses. 

Sh. R. K. Gupta & Sh. Rajat Mehra appeared on behalf of the appellants and Sh. S. M. Surendranath appeared on behalf of the respondent.

To Read the full text of the Order CLICK HERE

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