The Mumbai Bench Income Tax Appellate Tribunal (ITAT) recently held that no addition could be made on belated deposits of Provident Fund and Employee State Insurance Corporation before the amendment in Sec 36(1) (va) of Income Tax Act, 1961.
The assessee Malgudi Foods Pvt Ltd., engaged in the business of Hospitality services & granting of franchise. The assessee’s books of accounts are audited under Section 44AB of the Income Tax Act and filed the return of income for the Assessment Year 2018-19.
While conducting the assessment, the Assessing Officer (AO) disallowed the employee contributions to the provident fund (PF) and Employees’ State Insurance Corporation (ESIC) on the grounds of delayed deposits under the respective Acts. Subsequently, the AO determined the total income and issued an order.
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], who confirmed the addition in respect of the belated deposits of PF and ESIC contributions and dismissed the appeal.
Since no representative appeared on behalf of the assessee during the proceedings, the contentions made in the written submissions were taken into consideration. It was argued that due to various reasons, the assessee was unable to deposit the employees’ contribution to the provident fund and ESI within the prescribed time as mandated by the respective Acts.
The assessee has deposited the amount before filing the return of income under Section 139(1) of the Income Tax Act.
Department representative T. Shankar while supporting the decision of the CIT(A) contented that explanation 2 to Sec 36(1)(va) of the Income Tax Act in finance Act 2021 was introduced and the amendment is applicable to the earlier years. Subsequently the amendment is retrospective applicability.
It was observed by the tribunal that amendment to section 36(1)(va) of the Income Tax Act would not be applicable to assessment year 2018-19. The assessee has deposited the employee’s contribution of Provident fund & ESIC before the due date of return of income under Section 139(1) of the Income Tax Act.
Therefore, the bench, consisting of M Balaganesh (Accountant Member) and Pavan Kumar Gadale (Judicial Member) deleted the disallowance on employee contribution of provident fund (PF) and ESIC.
As a result, the appeal filed by the assessee was allowed.
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