Case Number: ITA 1607/DEL/2021
Appellant: Brajesh Garga, Hapur
Respondent: ITO, Ward-2(3)(4), Hapur
Assessment Year: 2019-20
Case Filed On: 2021-11-01
Order Type: Final Tribunal Order
Date of Order: 2022-04-27
Pronounced On: 2022-04-27
Brajesh Garga, the appellant, challenged the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, which sustained the disallowance made under section 36(1)(va) in respect of contributions made to the Provident Fund (PF) and Employees’ State Insurance (ESI). The central issue was the retrospective application of amendments introduced by the Finance Act, 2021, concerning the due dates for such contributions.
The case was heard by Shri Challa Nagendra Prasad, Judicial Member of the ITAT Delhi Bench. Despite the issuance of notice, no representative appeared on behalf of the assessee, nor was any adjournment sought. Given that the issue had been addressed in numerous similar appeals, the tribunal proceeded with the hearing based on the submissions of the Revenue representative, Shri Om Prakash, Sr. DR.
The tribunal noted that the Central Processing Centre (CPC), Bengaluru, disallowed the employees’ contributions towards PF and ESI while processing the intimation under section 143(1). This disallowance was upheld by the CIT(A), who opined that the amendments introduced by the Finance Act, 2021, to sections 36(1)(va) and 43B were clarificatory and thus retrospective in nature.
However, the tribunal found that the issue was covered by its earlier decision in the case of Devendra Yadav vs. ITO (CPC), ITA No. 1100/Del/2021, dated 23.12.2021. In that case, it was held that delayed payments of contributions to PF and ESI, if made before the due date of filing the return of income under section 139(1), were allowable as deductions under section 43B read with section 36(1)(va).
In line with the principles established in prior rulings, the tribunal held that the amendments brought by the Finance Act, 2021, apply prospectively from the assessment year 2021-22. Therefore, for the assessment year 2019-20, the contributions made before the due date of filing the income tax return under section 139(1) should be allowed as deductions.
The tribunal referenced several judgments, including those of the Hon’ble Delhi High Court, to support its decision. Notably, in the case of Pro Interactive Service (India) Pvt. Ltd., the High Court affirmed that belated payments of employees’ contributions to PF and ESI, if made before the due date of filing the return, should not be disallowed.
Based on these considerations, the tribunal directed the Assessing Officer to allow the deduction of the amount of Rs. 21,56,580/-, representing the employees’ contributions to PF and ESI, as these were paid before the due date of filing the return under section 139(1). Consequently, the appeal filed by Brajesh Garga was allowed.
The order was pronounced in the open court on 27th April 2022 by Shri Challa Nagendra Prasad, Judicial Member. The detailed order, including the rationale and legal precedents, underscores the importance of adhering to the prescribed timelines for claiming deductions and the impact of legislative amendments on such claims.
Brajesh Garga vs. ITO, Hapur: Dispute Over PF and ESI Contributions
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