Gaurav International vs Circle-49(1) Delhi ITAT Decision for AY 2018-19

Case Number: ITA 837/DEL/2022

Appellant: Gaurav International, Delhi

Respondent: Circle-49(1), Delhi

Assessment Year: 2018-19

Order Pronounced on: 19th May 2022

Result: Allowed

Background

The appeal case of Gaurav International against Circle-49(1), Delhi pertains to the assessment year 2018-19. The appellant raised issues against the order passed by the appellate authority regarding disallowances related to employees’ contributions towards provident funds (PF) and employee’s state insurance (ESI) due to delays in deposits as per the respective acts. The Income Tax Appellate Tribunal (ITAT), Delhi, clubbed together multiple appeals on this common issue for the sake of brevity and convenience, delivering a consolidated order.

Issues Raised

The main grievance was the denial of deduction claims on account of late deposits of PF/ESI/EPF contributions, albeit before filing the return of income. The legal basis for the dispute involves interpretation of sections related to the Income Tax Act, 1961, specifically sections concerning timely deposits of employees’ contributions towards PF and ESI funds.

Arguments Presented

The appellant argued that although there were delays in depositing PF/ESI contributions, all dues were cleared before filing the return of income. Citing various judicial rulings, it was contended that such contributions, if deposited before filing the return of income, should not disallow the deductions. On the other hand, the respondent supported the order of lower authorities, also referencing recent legislative amendments to argue their stance.

Decision

The ITAT Delhi bench, after reviewing the submissions and applicable legal precedents, decided in favor of Gaurav International. It was highlighted that the essential intent of legislation is to ensure contributions are actually made, rather than penalize for belated payments, provided they are completed before filing the return of income. The tribunal also clarified that the amendments brought by the Finance Act, 2021, would not apply to the assessment year under consideration due to their prospective application.

Conclusion

The appeals of Gaurav International and other assessees with similar grievances were allowed, recognizing the deposit of employee contributions towards Provident Fund and Employee State Insurance Scheme before the due date of filing of return of income as compliant for deductions. This judgment lays emphasis on the actual completion of contributions rather than penalizing employers for procedural delays, as long as compliance is achieved before statutory deadlines.

Gaurav International vs Circle-49(1) Delhi ITAT Decision for AY 2018-19