This article explores the Income Tax Appellate Tribunal’s ruling on ITA No. 1153/DEL/2021, where Jyoti Apparels, New Delhi, contested disallowances related to the delayed deposit of Employees’ Provident Fund (PF) and Employees’ State Insurance (ESI) contributions for the assessment year 2018-19.
Jyoti Apparels appealed against the order dated August 30, 2021, issued by the National Faceless Appeal Centre (NFAC), which disallowed deductions for delayed PF and ESI contributions. The primary issue was the applicability of amendments made by the Finance Act 2021 and their retrospective enforcement concerning Section 36(1)(va) of the Income Tax Act, 1961.
The appellant contended that the contributions, though delayed, were made before the filing of the income tax return, and thus should not be disallowed. They relied on precedent judgments that supported the allowance of such contributions if made before the tax return filing deadline. Conversely, the ITD argued for the applicability of the Finance Act 2021 amendments, suggesting a stricter interpretation that disallows such contributions if not made by the statutory due date.
The Tribunal, comprising Judicial Member Shri Kul Bharat and Accountant Member Shri Pradip Kumar Kedia, held that the amendments introduced by the Finance Act 2021 are prospective and do not apply to the assessment year in question. They cited multiple precedents, including the Delhi High Court’s ruling in PCIT vs. Pro Interactive Service (India) Pvt. Ltd., which emphasized that delayed payments of PF and ESI can be claimed as deductions if deposited before the return filing deadline under Section 139(1) of the Act.
The Tribunal ultimately set aside the NFAC’s disallowance, allowing the appeal of Jyoti Apparels and reinforcing the principle that legislative changes are prospective unless explicitly stated otherwise.
This case underscores the importance of understanding the nuances of tax law amendments and their effective dates. It also highlights the Tribunal’s role in interpreting these laws to ensure fair treatment of taxpayers. The decision is a significant relief for businesses grappling with the complexities of compliance with statutory dues and provides clarity on the treatment of delayed PF and ESI payments.
Order pronounced in the open court on May 17, 2022, providing a conclusive stance on the retrospective application of tax law amendments, safeguarding taxpayers against unforeseen fiscal liabilities.
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