Deduction of the employees’ contribution of PF and ESI as per section 43B of the Income Tax Act

This Income Tax Appellate Tribunal case concerns the disallowance of a deduction for late remittance of employees' PF and ESI contributions. The assessee argued that payments made before the due date for filing the income tax return should be allowed as a deduction. The Tribunal, referencing previous rulings, found that the amended provisions of Section 43B and 36(1)(va) were not applicable to the assessment year in question. Therefore, the employees' contributions paid before the due date of filing the return were allowed as a deduction, and the disallowance was deleted.

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “B”, BANGALORE

Before Shri Chandra Poojari, AM & Shri George George K, JM

ITA No.507/Bang/2021 : Asst.Year 2019-2020

M/s.Viroka Technology Pvt.Ltd.

No.34, 2nd Floor, 31A Cross, 7th Block, Jayanagar Bangalore – 560 082.

PAN : AADCV8399K.

v.

The Addl.Commissioner of Income-tax, CPC, Bengaluru.

 Appellant by : Sri.R.E.Balasubramanyam,

CA Respondent by : Sri.Chetan R.,

Addl.CIT-DR

Date of Hearing : 01.12.2021

Date of Pronouncement : 01.12.2021

O R D E R

This appeal at the instance of the assessee is directed against CIT(A)’s order dated 27.07.2021. The relevant assessment year is 2019-2020.

2. Brief facts of the case are as follows: For the assessment year 2019-2020, the return of income was filed on 28.09.2019, declaring income of Rs.71,09,807. The assessee was served with an intimation u/s 143(1) of the I.T.Act by assessing a sum of Rs.73,66,606. The reason for the difference between the returned income and the assessed income u/s 143(1) of the I.T.Act was on account of disallowance of sum of Rs.1,29,994 being late remittance of employees’ contribution to PF and ESI under the respective Acts.

3. Aggrieved, assessee has filed this appeal before the Tribunal. The learned AR relied on the ITAT’s Order in the case of M/s. Shakuntala Agarbathi Company Vs. DICT in ITA No.385/Bang/2021 (order dated 21.10.2021).

4. The CIT(A) had relied on the judgment of the Hon’ble Apex Court in the case of CIT Vs. Gold Coin Health Food Pvt. Ltd., (supra) to content that the amendment to section 36[1][va] and 43B of the Act is clarificatory. The judgment of the Hon'ble Apex Court in the case of CIT v. Gold Coin Health Food Pct. Ltd. (supra) is distinguishable. The Hon'ble Apex Court was considering the question of whether penalty can be imposed u/s.271(1)(c) of the Act for concealment of income where returned losses were reduced in assessment and there was no tax payable by the assessee. Earlier, the Hon'ble Apex Court in the case of Virtual Soft Systems in 289 ITR 83 [SC] had taken the view that no penalty could be levied on mere reduction in loss as there would be no tax payable by the assessee, which was a sine-quo-non for imposition of penalty. Amendments were made by the Finance Act, 2002, to Section 271(1)(iii) of the Act by incorporating the expression "if any" and also in Explanation 4 setting out the meaning of the phrase "amount of tax sought to be evaded". The Hon'ble Apex Court in the case of CIT Vs. Gold Coin Health Food [P] Ltd., [2008] 304 ITR 308 [SC]

5. Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision of the Hon’ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees’ contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee and the disallowance made by the Assessing Officer is deleted.

6. In the result, the appeal filed by the assessee is allowed. Order pronounced on this 01st day of December, 2021.

Please find attached the enclosed file for the full judgement.