The Income Tax Appellate Tribunal Delhi Bench ‘G’ adjudicated on ITA No. 2303/DEL/2022 concerning Ashirbad Housekeeping Services Pvt Ltd for the assessment year 2018-19. This case reviews the decision rendered by the National Faceless Appeal Centre (NFAC) on the late deposit of employees’ contributions to Provident Fund (PF) and Employee State Insurance (ESI).
Ashirbad Housekeeping Services Pvt Ltd, located in New Delhi, filed an appeal against the NFAC’s order dated 31.08.2022, which imposed an addition of Rs. 93,36,436 under Section 36(1)(va) of the Income Tax Act. The appeal was reviewed by the Tribunal members Sh. C. M. Garg and Dr. B. R. R. Kumar on July 7, 2023.
The appellant argued that the imposed addition was unjust as the employee contributions were deposited before the due date of filing the return, hence should not be construed as income. Furthermore, the appellant contended that the relevant judgments of various High Courts, supporting that such late deposits if made before the due date of filing returns, should not lead to additions, were ignored by the lower authorities.
The pivotal turn in the case came with the reference to a Supreme Court ruling which emphasized that employers must deposit employees’ contributions to EPF/ESI within the due dates specified by the respective acts for them to be deductible under the Income Tax Act. This ruling clarified that such contributions if not deposited within these due dates, are considered income and thus not deductible.
The Tribunal, adhering to the Supreme Court’s directive, dismissed the appeal, stating that the contributions made beyond the statutory due dates cannot be treated as deductible expenses. This decision marks a significant affirmation of strict compliance with statutory due dates for depositing employees’ contributions.
This case serves as a critical reminder to all employers about the importance of timely compliance with statutory provisions regarding employee contributions to welfare schemes. The decision underscores the judiciary’s stance on strict adherence to the legal frameworks governing employee benefits.
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