Case Summary: ITA No. 892/DEL/2022 – Rajender Singh vs ITO, Gurgaon
The Income Tax Appellate Tribunal’s significant ruling in the case of Rajender Singh versus the Income Tax Officer (ITO), Gurgaon, marked a pivotal moment for assessments pertaining to the financial year 2018-19. This judgment revolves around the pivotal issue of employee contributions to the Employees’ State Insurance (ESI) and Provident Fund (PF), specifically, whether these contributions, if deposited after the due dates under the respective Acts but before the due date for filing the return of income, are allowable deductions.
Background
The appellant, Rajender Singh of Gurgaon, challenged the disallowances made by the ITO regarding employees’ contributions to ESI and PF. Despite the deposits being made after the respective statutory due dates, they were made before the due date for filing the income tax return. This scenario raised a significant question on the applicability of certain sections of the Income Tax Act, 1961, prompting a reevaluation of the law as understood till then.
Judicial Findings
The Tribunal, led by Judicial Member Shri Challa Nagendra Prasad and Accountant Member Shri Pradip Kumar Kedia, provided clarity on the contentious issue. Their examination of the matter, including considerations of amendments made by the Finance Act, 2021, to sections 36(1)(va) and 43B of the Income Tax Act, 1961, was thorough.
It was observed that the amendments made were of a clarificatory nature, aiming to resolve doubts regarding ‘due dates’ for the deposition of employees’ contributions to ESI and PF. The Tribunal underscored that contributions made before the due date for filing of returns should be considered valid deductions, nullifying the disallowances upheld by the Commissioner of Income Tax (Appeals) and the assessing officer.
Implications of the Ruling
This judgment serves as a significant reference point for both taxpayers and tax practitioners. It elucidates the standpoint of the law regarding employee contributions to welfare funds, highlighting the legal acceptance of contributions made before the due date of filing returns. It also provides a clear distinction between the employer’s and the employee’s contributions towards welfare funds, emphasizing the importance of timely deposition by the employers in a fiduciary capacity.
Conclusion
The Tribunal’s decision in Rajender Singh vs ITO, Gurgaon, for the assessment year 2018-19, sets a precedent in the interpretation of the law regarding employees’ contributions to ESI and PF. It reaffirms the need for adherence to the statutory timelines for the deposition of these contributions, aligning with the objective of ensuring compliance and safeguarding the interests of employees.
