Amendment by FA 2021 disallowing employee’s contribution to ESI/PF is applicable prospectively: ITAT

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  • Last Updated on 23 July, 2021

Employees Contribution to ESI

Case Details: Salzgitter Hydraulics (P.) Ltd. v. ITO - [2021] 128 192 (Hyderabad - Trib.)

Judiciary and Counsel Details

    • S.S. Godara, Judicial Member
    • P. Vinod for the Appellant.
    • N. Srikanth for the Respondent.

Facts of the Case

The instant appeal is filed by the assessee against the order of the Commissioner of Income-tax (Appeals) [CIT(A)]. Assessee-company had contended that CIT(A) erred in sustaining the addition on account of employees contribution to PF & ESI without considering that they were paid before the due date of filing the return of income (ITR).
The Hyderabad Tribunal held that sole substantive issue of ESI/PF disallowance of Rs. 1,09,343/- and Rs. 3,52,622/ made by Assessing Officer (AO) in hands of the assessee. Assessee’s stand was that the same had been paid before the due date of filing of return under section 139(1) and thus same was to be allowed as deduction. Whereas AO’s stand was that employees sum paid after the due date prescribed in the corresponding statutes shall not be allowed as deduction.


It should be noted that the legislature has incorporated necessary amendments in Sections 36(va), as well as 43B, vide Finance Act, 2021. Thus, after the amendment, the deduction of employee’s contributions to ESI/PF is allowed only if the same is paid within the due date prescribed in corresponding statutes.

The memorandum explaining the Finance Bill, 2021 has stated that the given amendments are effective from 01-04-2021. Thus, it can be concluded that amendments are clarificatory and are applicable only with prospective effect from 1-4-2021.

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