ITA No. 1101/DEL/2021 revolves around the dispute concerning the disallowance of deduction for delayed payment of employees’ contribution to Provident Fund (PF) and Employees State Insurance (ESI) by Dinesh Kumar for the assessment year 2018-19. The case was filed on 2021-09-13, and the final tribunal order was pronounced on 2022-05-18.
Dinesh Kumar, the appellant, is an individual taxpayer who filed his return of income for the assessment year 2018-19. During the processing of this return, the Centralised Processing Centre (CPC) disallowed a deduction amounting to Rs. 21,56,580/- representing delayed payment of employees’ contribution to PF and ESI. The CPC’s basis for disallowance was that these payments were not made within the due date provided under the relevant Acts and Rules governing such payments.
The primary issue in this case is the disallowance of the deduction claimed by the appellant for the delayed payment of employees’ contributions to PF and ESI. The appellant contended that these contributions were made before the due date for filing the return of income under section 139(1) of the Income Tax Act, 1961, and therefore, should be allowed as a deduction.
The appellant’s counsel argued that the amendment to section 36(1)(va) and section 43B made by the Finance Act 2021, which specifies that the due date for payment of employees’ contributions to PF and ESI must be within the due date provided under the relevant Acts and Rules, should apply prospectively from assessment year 2021-22 and subsequent years. Therefore, these amendments should not be applicable to the assessment year 2018-19.
The Income Tax Appellate Tribunal (ITAT) considered the rival submissions and the material on record. The Tribunal noted that, according to the settled legal principle, delayed payment of contributions to PF and ESI, including employees’ contributions, is allowable as a deduction under section 43B read with section 36(1)(va) of the Act if it is paid before the due date for filing the return of income prescribed under section 139(1) of the Act.
Based on these findings, the Tribunal concluded that the appellant’s claim of deduction of Rs. 21,56,580/- should be allowed. The disallowance made by the CPC was deleted, and the appeal filed by Dinesh Kumar was allowed.
The decision in ITA No. 1101/DEL/2021 provides clarity on the applicability of amendments to section 36(1)(va) and section 43B of the Income Tax Act, emphasizing that these amendments apply prospectively from assessment year 2021-22 and should not affect prior assessment years. This ruling reinforces the principle that legislative amendments should not be applied retrospectively unless explicitly stated.
Disallowance of Deduction on Delayed Payment: Dinesh Kumar vs ITD, CPC – ITA 1101/DEL/2021
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