The case ITA No. 1627/DEL/2021 involved Sunny International Limited challenging the disallowances made by the assessing officer regarding delayed contributions towards Employee’s State Insurance (ESI), Provident Fund (PF), and Labour Welfare Fund for the assessment year 2019-2020.
Sunny International Limited appealed against the order by the CIT(A), which partly sustained the disallowances imposed by the AO. The core issue was the timing of the deposits made for ESI, PF, and Labour Welfare contributions, which were done after the prescribed due dates but before the due date of filing the tax return under section 139(1) of the Income Tax Act.
The tribunal’s deliberations centered on the application of Section 43B and the recent amendments to Section 36(1)(va) of the Income Tax Act, introduced by the Finance Act, 2021. The discussions highlighted the legislative intent to ensure timely deposits of employee contributions and the ramifications of non-compliance.
The tribunal, referencing various High Court and Supreme Court precedents, determined that if such contributions were made before the filing of the income tax return, they should not result in disallowances. This decision aligns with the judicial tendency to protect taxpayers against retrospective application of tax laws and emphasizes compliance within stipulated timelines to avoid legal disputes.
The case outcome not only provided relief to Sunny International Limited by setting aside the disallowances for the assessment year 2019-2020 but also clarified the application of tax laws concerning employee contributions towards welfare funds.
The ruling serves as a significant precedent for similar cases, outlining the critical aspects of compliance and the interpretation of tax provisions related to employee benefits.
Order pronounced by the ITAT Delhi on January 31, 2022, providing substantial insights into handling of disputes over employee contributions to welfare funds.
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