PF and ESI as per Section 36(1)(va) of the Income Tax Act

Last updated: 05 September 2021

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The Income Tax Appellate Tribunal (ITAT) Hyderabad has ruled that delayed deposits of employee contributions to Provident Fund (PF) and Employees' State Insurance (ESI) are not to be disallowed if paid before the filing of the income tax return. This decision follows amendments introduced by the Finance Act 2021, which clarified that Section 43B of the Income Tax Act does not apply to such delayed payments of employee contributions.

Court :
ITAT Hyderabad

Brief :
This is assessee’s appeal for the A.Y 2018-19 against the order, dated 26.04.2019 passed by the National Faceless Appeal Centre (NFAC), New Delhi in respect of the appeal filed by the assessee before the CIT (A) Tirupati.

Citation :
ITA No.292/Hyd/2021

IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad SMC Bench, Hyderabad
(Through Video Conferencing)
Before Smt. P. Madhavi Devi, Judicial Member
ITA No.292/Hyd/2021
Assessment Year: 2018-19

Shri Thatiparthi Mohan
Reddy, Chittoor
PAN:ACCPR5574Q

(Appellant)

Income Tax Officer
Ward 1(3)
Tirupati

(Respondent)

Assessee by: Smt. C.S.Sree Lekha
Revenue by: Sri Waseem-ur-Rehman,DR
Date of hearing: 02/08/2021
Date of pronouncement: 30/08/2021

ORDER

This is assessee’s appeal for the A.Y 2018-19 against the order, dated 26.04.2019 passed by the National Faceless Appeal Centre (NFAC), New Delhi in respect of the appeal filed by the assessee before the CIT (A) Tirupati.

2. The only issue in this appeal is the disallowance u/s 36(1)(va) of the Act of delayed deposit to PF & ESI Contribution. I find that that the A.Y before the Tribunal is 2019-20 and under the Finance Act of 2021, Explanation 5 to section 43B of the Act has been introduced and also Explanation 2 to clause (va) of section 36(1) has been introduced to the effect that the provisions of section 43B shall be deemed to never have been applied to employee’s contribution to PF & ESI paid beyond the due date under the relevant Act.

3. Respectfully following the same, I hold that since the assessee has deposited the Employees Contribution to the PF and ESI before filing the return of income, the same is not to be disallowed. Assessee’s appeal is accordingly allowed.

4. In the result, assessee’s appeal is allowed.
Order pronounced in the Open Court on 30th August, 2021.

Please find attached the enclosed file for the full judgement

FAQ :

The appeal concerned the disallowance of delayed deposits to PF and ESI contributions under Section 36(1)(va) of the Income Tax Act for the Assessment Year 2018-19.

Section 36(1)(va) deals with the deductibility of employee contributions to PF and ESI, specifying conditions for disallowance if not deposited within the due date.

The ITAT Hyderabad ruled that if the employee's contribution to PF and ESI is deposited before filing the return of income, it should not be disallowed.

The Finance Act 2021 introduced Explanation 5 to Section 43B and Explanation 2 to Section 36(1)(va), clarifying that Section 43B is deemed never to have applied to employee contributions to PF & ESI paid after the due date but before the return filing.

The ruling was made for the Assessment Year 2018-19.

Attached File : 1442821_4329_1630308022_ita_no_292_of_2021thatiparthi_mohan_reddy_chittoor_.pdf

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Judgement posted by

Poojitha Raam Vinay

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I simplify complex income tax, TDS, banking, and investment updates into practical insights for taxpayers, salaried professionals, pensioners, and senior citizens. I regularly write on ITR filing, tax compliance, savings schemes, and the latest financial rule changes in India.

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