In the Income Tax Appellate Tribunal Delhi Bench, Delhi, before Judicial Member Shri Challa Nagendra Prasad and Accountant Member Shri Pradip Kumar Kedia, the appeal filed by Satya Parkash, of Kamboj Colony, Near J. K. Jain Shamli, Uttar Pradesh, against ITO, Ward-3(1)(5), Shamli for the assessment year 2018-19 was allowed.
The matter pertains to the dispute on disallowance made under Section 36(1)(va) of the Income Tax Act, 1961 concerning employees’ contribution to ESI and PF deposited after the due date under the relevant Acts but before the due date for filing the return of income under Section 139(1) of the Act.
The assessees, Satya Parkash, along with 59 other appeals, contested the orders of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, which sustained the disallowance. Despite the issuance of notices, no appearances were made on behalf of the assessees nor were adjournments sought. The tribunal proceeded to decide the appeals based on the submissions of the Departmental Representative and in some cases, upon hearing assessees’ counsels.
It was contended by the Departmental Representative that the amendments made by the Finance Act, 2021, to Sections 36(1)(va) and 43B of the Act by inserting Explanations were clarificatory in nature and therefore had retrospective applicability. Nonetheless, the tribunal observed that these amendments are effective from April 1, 2021, and consequently applicable from the assessment year 2021-22 onwards, not affecting the current appeals.
Significantly, the tribunal noted the judgment of the jurisdictional High Court in the case of CIT vs. AIMIL Ltd. 321 ITR 508, which allowed the claim of the assessees for the contributions made to employee’s welfare funds like PF and ESI, provided these were deposited before the filing date of income tax returns. Further reliance was placed on the Supreme Court decision in the case of M.M. Aqua Technologies Ltd. vs. CIT, which clarified the conditions for the applicability of retrospective amendments concerning tax laws.
The tribunal, considering the precedents and the legislative amendments, directed the Assessing Officer/CPC to delete the disallowance of employees’ contribution to EPF and ESI in all cases where the contributions were made before the due date for filing of the return of income. Consequently, the appeals of the assessees were allowed.
The decision underscores the importance of the due date for contributions towards employees’ welfare funds and clarifies the applicability of the related income tax provisions, marking a significant clarification for both taxpayers and the administration.
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