Case Number: ITA 1702/DEL/2021
Appellant: M INTERGRAPH SYSTEMS PVT LTD, Kalkaji, New Delhi
Respondent: DCIT, Circle-16(1), Delhi
Assessment Year: 2018-19
Case Filed On: 2021-11-18
Order Type: Final Tribunal Order
Date of Order: 2022-02-28
Pronounced On: 2022-02-28
The case of M Intergraph Systems Pvt Ltd vs DCIT primarily dealt with the issue of delayed payment of employee contributions towards the Employees’ State Insurance (ESI) and Provident Fund (PF). The core dispute was whether the contributions made after the due dates prescribed under the respective Acts, but before the filing of the income tax return, should be disallowed under Section 36(1)(va) of the Income Tax Act, 1961.
The proceedings were conducted before the Delhi Bench ‘G’ of the Income Tax Appellate Tribunal, presided over by Sh. Saktijit Dey, Judicial Member, and Dr. B. R. R. Kumar, Accountant Member. The tribunal heard the case through video conferencing.
During the hearing, the representatives of the appellant, M Intergraph Systems Pvt Ltd, argued that the disallowance under Section 36(1)(va) was unwarranted as the contributions were made before the due date for filing the return of income under Section 139(1). The appellant cited various judicial precedents where similar issues were decided in favor of the taxpayer.
The tribunal examined numerous cases and judicial interpretations to determine the outcome. Key precedents included:
These cases consistently held that contributions made before the due date for filing the return of income are allowable deductions under Section 43B, despite being paid after the statutory due dates under the ESI and PF Acts.
The tribunal also considered recent amendments introduced by the Finance Act, 2021, which clarified that the provisions of Section 43B do not apply to employee contributions, and that such contributions must be deposited within the due dates prescribed under the respective statutes to be eligible for deduction.
The memorandum explaining the provisions of the Finance Bill, 2021, underscored the distinction between employer and employee contributions and emphasized the penal nature of Section 36(1)(va) for delayed deposits of employee contributions.
After thorough examination of the facts, judicial precedents, and legislative amendments, the tribunal concluded that the disallowance of the delayed employee contributions under Section 36(1)(va) was justified. The tribunal held that the amendments and judicial pronouncements clearly established that employee contributions must be deposited within the statutory due dates to qualify for deduction.
The tribunal’s order stated:
“In light of the legislative amendments and judicial precedents, we find that the disallowance of the employee contributions to ESI and PF, made beyond the due dates prescribed under the respective statutes, is justified under Section 36(1)(va) of the Income Tax Act, 1961.”
The appeal filed by M Intergraph Systems Pvt Ltd was dismissed, and the disallowance of the delayed ESI and PF contributions was upheld. The tribunal’s decision reaffirmed the importance of adhering to statutory due dates for depositing employee contributions to ensure eligibility for deductions under the Income Tax Act.
This case serves as a crucial reminder for employers to ensure timely deposits of employee contributions to avoid disallowances and potential penalties under the Income Tax Act.
M Intergraph Systems Pvt Ltd vs DCIT: Dispute Over Delayed ESI and PF Contributions
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