Laliet Kumar ORDER
R.K. Panda, Member (A)
1. This appeal filed by the assessee is directed against the order dated 1.10.2021 of the learned CIT (A)-NFAC, relating to A.Y. 2019-20.
2. Although a number of grounds have been raised by the assessee, however, these all relate to the order of the CIT(A)/NFAC in sustaining the addition of Rs. 30,53,317/- made by the Assessing Officer u/s. 36 of the I.T. Act on a/c of delayed payment of PF & ESI.
3. There is a delay of 147 days in filing of this appeal for which the assessee has filed a condonation application along with affidavit explaining the reasons for delay which is on account of the pandemic. After considering the contents of the condonation application and after hearing the learned DR, the delay in filing of this appeal is condoned and the appeal is admitted for adjudication.
4. Facts of the case, in brief, are that the assessee is a private limited company engaged in the business of automobile dealership business. It filed its return of income declaring total income of Rs. 14,99,78,293/-. The return was processed u/s. 143(1) by CPC Bengaluru and the CPC Bengaluru made the following additions:
| Disallowance of employees contribution to PF & ESI u/s. 36(1)(va) r.w.s. 2(24)(x) | Rs. 30,53,317 |
| Disallowance of payment of gratuity disallowed u/s. 43B | Rs. 68,790 |
| Disallowed an amount towards profit on sale assets | Rs. 59,343 |
5. The learned CIT (A) NFAC deleted the addition of Rs. 68,790/- on account of payment of gratuity and Rs. 59,343/- towards profit on sale of assets. However, he sustained the addition of Rs. 30,53,317/- on account of payment towards employees' contribution to PF & ESI on the ground that the assessee failed to make the payments of employees' contribution to PF & ESI before the statutory due date and the Finance Act of 2021 had amended the provisions of section 36(1)(va) and section 43B which are clarificatory in nature.
6. Aggrieved with such order of the CIT (A)/NFAC the assessee is in appeal before the Tribunal.
7. The learned Counsel for the assessee referring to various decisions submitted that the co-ordinate benches of the Tribunal are taking the consistent view that where the employees' contribution to PF and ESIC are paid before the due date of filing of the return but after the statutory dates prescribed under the respective Act, no disallowance u/s. 36(1)(va) r.w.s. 2(24)(x) can be made. He accordingly submitted that this being a covered matter in favour of the assessee, the order of the CIT(A) be set aside and the addition made by the AO and upheld by the CIT (A)/NFAC should be deleted.
8. The learned DR on the other hand heavily relied on the order of the CIT(A)/NFAC. He submitted that the Finance Act, 2021 has amended the provision of section 43B, as well as section 36(1)(va) by insertion of explanation to those sections. He drew the attention of the bench to the explanatory notes to the Finance Bill, 2021 and submitted that the legislature never intended that section 43B would apply to employees' contribution. He submitted that the language of explanation 5 to section 43B, explanation 2 to section 36(1)(va) and that of the Memorandum explaining the Finance Act, 2021 make it abundantly clear that employees' contribution is out of the ambit of section 43B. Relying on various decisions, he submitted that the CIT(A)/NFAC was fully justified in upholding the addition made by the AO on account of delayed payment of PF and ESIC amounting to Rs. 30,53,317/-.
9. We have heard the rival arguments made by both the sides, perused the orders of the AO and the CIT (A)/NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case made addition of Rs. 30,53,317/- on account of delayed deposit of employees' contribution to PF and ESIC on the ground that the same were deposited beyond the due date prescribed in the said Act. We find the CIT(A)/NFAC rejected the contention of the assessee that such payments though made after the stipulated dates prescribed in the said Acts, however these payments were made before the due date of filing of the return. He accordingly, upheld the action of the AO. We find the co-ordinate benches of the Tribunal are now consistently taking the view that no disallowance u/s. 36(1)(va) r.w.s. 2(24)(x) can be made on account of delayed payment of PF and ESIC, if such payments are made before the due date of filing of the return. It has further been held in these decisions that the amendment to section 43B as well as section 36(1)(va) r.w.s. 2(24)(x) by the Finance Act, 2021 are prospective and not retrospective in nature. Since, the assessee in instant case has admittedly paid the employees' contribution to PF and ESIC before the due date of filing of the return, therefore, we set aside the order of the CIT (A)/NFAC and direct the AO to delete the addition. The grounds raised by the assessee are accordingly allowed.
10. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the Open Court on 14th July, 2022.
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