This article delves into the case of ITA No. 1645/DEL/2021, where Sterling Management and Project Services Pvt Ltd faced the Deputy Commissioner of Income Tax, CPC, Delhi, challenging the tax assessments made due to delayed deposits of employees’ contributions to Provident Fund (PF) and Employee’s State Insurance (ESI).
The appeal was filed against the orders made by the income tax appellate authority for the assessment year 2017-18. The central issue in this appeal was whether the late deposit of PF and ESI contributions by the employer should lead to tax disallowances, despite the deposits being made before the filing of the tax returns.
Both the appellant and the respondent presented extensive arguments. The appellant, represented by Shri Priyanshu Goyal and Shubham, C.A., contested the tax authority’s decision to disallow deductions for the contributions made after the statutory due date but before the return filing date. They cited several precedents where similar cases were ruled in favor of the assessee, arguing that the late payment does not convert these contributions into taxable income as per existing judicial interpretations.
The tribunal, led by Sh. Anil Chaturvedi and Sh. Kul Bharat, reviewed the legislative intent and judicial precedents, particularly focusing on the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd., which supported the assessee’s position. The tribunal also considered the amendments brought by the Finance Act 2021 but noted that these were not applicable to the assessment year in question.
The tribunal decided in favor of the assessee, allowing the appeal and dismissing the revenue’s appeal. This decision underscores the importance of understanding the nuances of tax laws regarding employee contributions to statutory funds. The case highlights the judiciary’s stance on encouraging compliance without penalizing the technical delays when the substantive compliance—depositing the dues before filing the tax returns—is met.
Legal Scrutiny Over Delayed Deposits of PF and ESI Contributions in ITA 1645/DEL/2021
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