In a major relief to the Indian Geotechnical Services, the Delhi Bench of Income Tax Appellate Tribunal (ITAT) deleted the deduction on Payment of employees contribution made before the due date of filing Income Tax Return.
The assessee, Indian Geotechnical Services raised the issue regarding the disallowance made by the AO in respect of delay for depositing the employees contribution to ESI and PF. The assessee has deposited the employees contribution to ESI and PF belatedly but before due date of filing the return of income u/s. 139(1) of the Act. The AO relied upon the CBDT Circular No.22/2015 as well as Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act and held that the contribution to PF and ESI is upto the due date provided in the respective statement is allowable deduction and not upto due date of filing of return. The Assessing Officer accordingly disallowed the sum of Rs.1,70,120/-.
The assessee has submitted that there are binding precedents on this issue wherein the High Court as well as the Supreme Court has held that the payment of employees contribution regarding PF and ESI before the due date of filing of return of income under section 139(1) is an allowable claim as per the provision of Section 43B of the Income Tax Act.
On the other hand, the department has submitted that there are decisions in favour of the Revenue wherein the High Courts have held that the amendment by Finance Act, 2015 in Section 43B is restricted only in respect of employer’s contribution to PF and ESI and if the same is paid on or before the due date of filing of income under section 139(1), the same is allowable under section 43B of the Income Tax Act. However, the said amendment would not be applicable for the belated payment of employee’s contribution to PF and ESI.
The coram of Accountant Member R.K. Panda and Judicial Member Vijay Pal Rao noted that the amendment is brought in the statute to provide certainty about the applicability of Section 43B in respect of belated payment of employee’s contribution. The memorandum of Finance Bill, 2021 whereby this amendment was proposed and the relevant clause to the said memorandum clearly intended the amendment shall take effect from 1st April, 2021 and will accordingly apply to the Assessment Year 2021-22 and subsequent year.
“The amended provisions of Section 43B as well as 36(1)(va) are not applicable for the assessment year under consideration. By following the binding decision of Hon’ble Jurisdictional High Court, the employee’s contribution paid by the assessee before the due date of filing of return of income under section 139(1) 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.
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