Income Tax Appellate Tribunal

Sree Krishna Automotives (P) Ltd. vs Deputy Commissioner of Income Tax

MANU/IH/0165/2022

14.07.2022

Direct Taxation

No disallowance under Section 36(1)(va) of IT Act can be made on account of delayed payment of PF and ESIC, if such payments are made before the due date of filing of the return

The assessee is a private limited company engaged in the business of automobile dealership business. It filed its return of income. The return was processed. The learned CIT (A) NFAC deleted the addition of Rs.68,790 on account of payment of gratuity and Rs.59,343 towards profit on sale of assets. However, he sustained the addition of Rs.30,53,317 on account of payment towards employees' contribution to PF and ESI on the ground that the assessee failed to make the payments of employees' contribution to PF and ESI before the statutory due date and the Finance Act of 2021 had amended the provisions of Section 36(1)(va) and Section 43B of Income Tax Act, 1961 (IT Act) which are clarificatory in nature.

The assessee referring to various decisions submitted that the co-ordinate benches of the Tribunal are taking the consistent view that, where the employees' contribution to PF and ESIC are paid before the due date of filing of the return but after the statutory dates prescribed under the respective Act, no disallowance under Section 36(1)(va) of IT Act can be made.

The AO in the instant case made addition of Rs.30,53,317 on account of delayed deposit of employees' contribution to PF and ESIC on the ground that the same were deposited beyond the due date prescribed in the said Act. The co-ordinate benches of the Tribunal are now consistently taking the view that, no disallowance under Section 36(1)(va) read with Section 2(24)(x) of IT Act can be made on account of delayed payment of PF and ESIC, if such payments are made before the due date of filing of the return. It has further been held that the amendment to Section 43B as well as Section 36(1)(va) read with Section 2(24)(x) of IT Act by the Finance Act, 2021 are prospective and not retrospective in nature. Since, the assessee in instant case has admittedly paid the employees' contribution to PF and ESIC before the due date of filing of the return, therefore, the order of the CIT (A)/NFAC is set aside and the AO is directed to delete the addition. Appeal allowed.

Tags : Assessment Addition Legality

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