The appeal in ITA No. 1677/DEL/2021 pertains to the assessment year 2018-19 where Sahil Dang challenges the disallowances made by the Income Tax Department regarding delayed contributions to Provident Fund (PF) and Employees’ State Insurance (ESI) totaling Rs.8,00,969.
This case was adjudicated through video conferencing by the ITAT Delhi ‘SMC’ Bench under Shri Kul Bharat, Judicial Member. The primary question was whether the delayed deposits of employee contributions to welfare funds should lead to disallowances under Section 36(1)(va) of the Income Tax Act.
The case revolved around the interpretation of tax laws concerning the timeliness of employee contributions to welfare funds. The tribunal considered precedents, particularly the case of PCIT vs Pro Interactive Service (India) Pvt. Ltd., and directed the Assessing Officer to delete the disallowance, thus allowing the grounds raised by Sahil Dang.
The tribunal’s decision highlights the judicial perspective on the legislative intent regarding the timeliness of payments to employee welfare funds and their impact on tax deductions. It emphasizes the principle that payments should be recognized as expenditures only when actually made, aligning with legislative goals to ensure timely deposits.
The ITAT’s decision provided relief to Sahil Dang by favoring the appeal and overturning the initial disallowance for the fiscal year 2018-19, reinforcing the need for compliance with statutory deadlines while also recognizing the challenges faced by taxpayers.
Order pronounced in the open court on 2nd March, 2022.
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