This article discusses the appeal filed by Ajay Enterprises Pvt. Ltd. against the order of the Commissioner of Income Tax (Appeals) concerning the assessment year 2019-20, where a disallowance of employee contributions to ESI and PF was contested.
The case, ITA No. 1563/DEL/2021, addresses the contention of Ajay Enterprises Pvt. Ltd. against the disallowance of Rs. 1,37,994 made by the Assessing Officer under section 36(1)(va) of the Income Tax Act, related to the deposit of employees’ contributions to PF and ESI beyond the due date prescribed in the relevant Acts, but before the due date of filing the return of income under section 139(1).
The tribunal examined both the assessee’s and the Revenue’s arguments. The central issue was the interpretation of Sections 36(1)(va) and 43B of the Income Tax Act, especially considering the amendments introduced by the Finance Act, 2021. Despite the Revenue’s arguments that these amendments were clarificatory and hence retroactive, the Tribunal found that the amendments were to be applied prospectively from AY 2021-22 onwards. The Tribunal’s decision was backed by various precedents and the intention of the legislature as interpreted in previous judgments.
The Tribunal’s decision to allow the appeal and delete the disallowance marked a significant understanding of legislative changes and their applicational bounds. This case serves as a crucial reference for similar disputes regarding the timing of employee contributions to statutory funds.
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