Case Law Details
Crescent Roadways Private Limited Vs Dy.CIT (ITAT Hyderabad)
The recent ruling by the Income Tax Appellate Tribunal (ITAT) Hyderabad in Crescent Roadways Private Limited v. Dy. CIT sheds light on the contentious issue of income tax additions for delays in remitting employees’ contributions to provident fund (PF) and Employee State Insurance (ESI). This article delves into the details of the case and analyzes the implications of the ITAT’s decision.
Detailed Analysis
Case Background: Crescent Roadways Private Limited (“the Assessee”) appealed against the Commissioner of Income Tax (Appeals) Hyderabad’s order regarding income tax additions for delays in remitting employees’ contributions to PF and ESI for the assessment year 2015-16.
Substantive Grounds: The Assessee challenged the addition of Rs. 2,83,203 representing the delay in remittance of employees’ contributions towards PF and Rs. 44,129 representing the delay in remittance of employees’ contributions towards ESI.
ITAT’s Decision
1. Legal Framework: The ITAT noted legislative amendments in Sections 36(1)(va) and 43B of the Income Tax Act, 1961, introduced by the Finance Act, 2021, regarding PF and ESI contributions.
2. Prospective Application: The ITAT observed that the amendments applied prospectively from April 1, 2021, as clarified by the CBDT.
3. Sustainability of Disallowance: Considering the prospective application of the amendments, the ITAT held that the impugned disallowance for delays in remitting PF and ESI contributions was not sustainable.
Conclusion
The ITAT’s decision in favor of Crescent Roadways Private Limited signifies a nuanced understanding of the legislative framework governing PF and ESI contributions. By recognizing the prospective application of the amendments introduced by the Finance Act, 2021, the ITAT ensures procedural fairness and clarity in tax assessments. This ruling sets a precedent for similar cases and underscores the importance of adhering to legislative timelines while addressing income tax matters. Crescent Roadways Pvt. Ltd.’s successful appeal highlights the significance of staying abreast of evolving tax laws and leveraging legal avenues to uphold taxpayers’ rights.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This assessee’s appeal for A.Y. 2015-16 arises against the Commissioner of Income Tax (Appeals) “[CIT(A)]”- 1, Hyderabad’s order dated 11.06.2018 passed in case no. 0109/2018-19 in proceedings u/s 143(3) of the Income Tax Act, 1961 [in short ‘the Act’].
Heard both the parties. Case file perused.
The Assessee has raised the following substantive grounds in its appeal.
“2. The ld.CIT(A) erred in confirming the addition of Rs.2,83,203/- made by the Assessing Officer representing delay in remittance of employees contribution towards provident fund.
3. The ld.CIT(A) erred in confirming the addition of Rs. 44,129/- made by the Assessing Officer representing delay in remittance of employees contribution towards ESI.”
2. Coming to the sole substantive issue of ESI/PF disallowance of Rs. 3,27,332/-, the assessee’s and Revenue’s plea that the same has been paid before the due date of filing sec. 139(1) return and after the due date prescribed in the corresponding statutes; respectively. We notice in this factual backdrop that the legislature has not only incorporated necessary amendment in Sections 36(1)(va) as well as 43B vide Finance Act, 2021 to this effect but also the CBDT has issued Memorandum of Explanation that the same applies w.e.f. 1.4.2021 only. It is further not an issue that the foregoing legislative amendments have proposed employers’ contribution/ disallowance u/s 43B as against employee’s contribution u/s 36 (va) of the Act; respectively. However, keeping in mind the fact that the same has been clarified to be applicable only with prospective effect from 1.4.2021, we hold that the impugned disallowance is not sustainable in view of all these latest developments.
The impugned ESI/PF disallowance is deleted therefore.
This assessee’s appeal is allowed in above terms.
Order pronounced in Open Court on 01st /07/2021.
