Sattva Media and Consulting Pvt. Ltd Vs DCIT (ITAT Bangalore)
Introduction: Sattva Media and Consulting Pvt. Ltd. contested a tax dispute against DCIT (ITAT Bangalore) concerning the disallowance of employees’ contribution to provident fund and ESI. The order, dated 23.12.2021, prompted the appeal by Sattva Media.
Detailed Analysis: The crux of the matter lies in the disallowance of Rs. 94,49,275 concerning the employees’ contribution to PF and ESI. The dispute arose from the contention that the payment wasn’t remitted within the specified due dates under respective Acts.
Sattva Media argued that, as per the judgment in Essae Taroka (P.) Ltd. and Spectrum Consultants India (P.) Ltd., the amendment to section 36(1)(va) and 43B of the I.T. Act wouldn’t be applicable for the assessment year 2019-20. This argument was supported by cases like M/s.The Continental Restaurant & Café Co. and Shri Gopalkrishna Aswini Kumar.
The CIT(A), however, dismissed Sattva Media’s appeal, relying on the Gujarat High Court’s decision and emphasizing the need for timely remittance of employees’ contribution to ESI and PF.
Conclusion: The Tribunal, in line with previous decisions, held that the amendment to section 36(1)(va) and 43B of the I.T. Act, introduced by Finance Act, 2021, is not retrospective. Therefore, Sattva Media is entitled to deduction since the payment was made before the due date of filing the return under section 139(1) of the I.T. Act. The appeal by Sattva Media stands allowed.
For businesses facing similar issues, this decision sets a precedent, emphasizing the importance of the due date of filing returns in determining the eligibility for deductions related to employees’ contributions to provident fund and ESI.
In view of the judicial pronouncements in case of Essae Taroka (P.) Ltd. reported in (2014) 266 CTR 246 and Spectrum Consultants India (P.) Ltd. reported in (2013) 266 CTR 94, ITAT hold that the amendment to section 36(1)(va) and 43B of the I.T. Act will not have application for the relevant assessment year, namely assessment year 2019-20. Accordingly, we direct the A.O. to grant deduction in respect of employees’ contribution to PF and ESI since the assessee has made the payment before the due date of filing of return u/s 139(1) of the I.T.Act.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
Present appeal by the assessee has been filed by assessee against the order dated 23.12.2021 u/s. 250 passed by the National Faceless Appeal Centre (NFAC), Delhi relating to Assessment Year 2019-20 on following grounds of appeal:
“The grounds mentioned herein below are independent and without prejudice to the other grounds preferred by the Appellant.
1. General Ground
1.1 The order passed by the CIT(A), NFAC is bad in law and liable to be quashed.
2. Grounds relating to disallowance of employee contribution to provident fund
2.1. The learned CIT(A), NFAC, Delhi erred in confirming the disallowance of employee contribution to provident fund amounting to Rs. 94,49,275 in computing the business income of the appellant under Chapter IVD of the Income tax Act, 1961.
2.2. The learned CIT(A), NFAC, Delhi erred in not appreciating that the employee contribution to provident fund amounting to Rs. 94,49,275 was paid within the due date as per section 139(1) of the Act.
2.3. The learned CIT(A), NFAC, Delhi erred in not appreciating that employee contribution to provident fund cannot be disallowed as it was paid within the due date as per section 139(1) of the Act.
2.4. On facts and circumstances of the case and law applicable, addition of Rs. 94,49,275 to business income should be deleted.
3. Prayer
3.1. In view of the above and other grounds to be adduced at the time of hearing, the appellant prays that the order passed by the learned CIT(A) be quashed or in the alternative, the aforesaid grounds and relief prayed for thereunder be allowed. The appellant prays accordingly.”
2. The brief facts of the case are as follows:
The assessee is a company. For the assessment year 2019-20 return of income was filed on 25.10.2019 declaring total income of Rs. 1,40,05,879/-. The return was processed u/s 143(1) of the I.T.Act. In the intimation issued u/s 143(1) of the I.T.Act, the CPC disallowed the employees’ contribution to PF and ESI to the tune of Rs. 94,49,275/-. The reason for making the disallowance was that the assessee did not remit the employees’ contribution to PF and ESI within the due date specified under the respective Acts.
3. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), it was submitted that the assessee remitted the employees contribution to PF and ESI before the due date of filing of the return u/s 139(1) of the I.T.Act and in view of the judgment of the Hon’ble jurisdictional High Court Pr.CIT vs. Hind Filter Ltd. in ITA No. 662 of 2015. The assessee is entitled to deduction of the same. The Ld.CIT(A), however, dismissed the appeal of the assessee by relying on decision of Hon’ble Gujarat High Court in case of Gujarat Road Transport Corporation reported in (2014) 41 taxmann.com 100. The CIT(A) noticed the difference between the employees’ contribution and the employer’s contribution and held insofar as the employees’ contribution to ESI and PF, the same need to be remitted within the due date as mentioned in the respective Acts. The CIT(A) also relied on the amendment brought about to section 36(1)(va) and 43B of the I.T.Act.
4. Aggrieved, the assessee has filed this appeal before the Tribunal.
4.1 The Ld.AR submitted that an identical issue is decided in favour of the assessee by the coordinate Bench of this Tribunal in following cases:
