Assessment Year: 2019-20
Case Number: ITA No. 1407/DEL/2021
Date of Order: 2021-11-17
Flying Fabrication, a business based in New Delhi, faced legal scrutiny over the timing of its employee Provident Fund (PF) and Employee State Insurance (ESI) contributions for the fiscal year 2019-20.
The appellant challenged the order passed by the National Faceless Appeal Centre, which confirmed the disallowance made by the Deputy Commissioner of Income Tax (DCIT), CPC, Bengaluru regarding delayed PF/ESI deposits. The core issue revolved around whether these contributions, delayed per statutory timelines but completed before the tax return filing deadline, should result in disallowances under Section 36(1)(va) of the Income Tax Act.
Flying Fabrication argued that despite the delays, contributions were completed before the deadline for tax filing, citing precedents that supported such cases being exempt from penalties if settled before filing returns. The defense sharply criticized the retrospective application of the amended provisions of Section 36(1)(va) and Section 43B introduced by the Finance Act, 2021, which the appellant argued should not apply to the assessment year in question.
The tribunal sided with the appellant, referencing multiple judgments that supported the non-applicability of penalties if contributions were made before the tax filing deadline. The decision emphasized that the legislative changes of 2021, clarifying disallowance conditions for delayed PF/ESI deposits, were not applicable retrospectively to the concerned assessment year.
This case highlights the ongoing legal interpretations and the impact of legislative changes on tax compliance, particularly concerning employee contributions to welfare funds. It underscores the necessity for businesses to understand the nuances of tax laws and their amendments to manage compliance and avoid potential financial liabilities.
Flying Fabrication vs ADIT, Bengaluru: Legal Battle Over PF/ESI Contributions for AY 2019-20
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