Lumenis India Pvt. Ltd. vs ADIT, CPC: Delay in PF and ESI Deposit

Final Tribunal Order in ITA 1580/DEL/2021: Lumenis India Pvt. Ltd. vs ADIT, CPC

Case Number: ITA 1580/DEL/2021
Appellant: Lumenis India Pvt. Ltd., Delhi
Respondent: ADIT, Central Processing Centre, PAN Jurisdiction DCIT, Circle 15(2), Delhi
Assessment Year: 2019-20
Case Filed on: 2021-10-29
Order Type: Final Tribunal Order
Date of Order: 2022-05-18
Pronounced on: 2022-05-18

Case Summary

In the matter of Lumenis India Pvt. Ltd. versus ADIT, CPC, the appeal was filed by Lumenis India Pvt. Ltd. challenging the disallowance of employee contributions to Provident Fund (PF) and Employee State Insurance (ESI) due to delayed deposits. The appellant argued that despite the delays, the contributions were made before the due date of filing the income tax return, hence should be allowable as per various judicial pronouncements.

Tribunal Proceedings

The case was heard before the Delhi Bench ‘G’ of the Income Tax Appellate Tribunal, consisting of Judicial Member Shri Kul Bharat and Accountant Member Shri Pradip Kumar Kedia. The tribunal consolidated several similar appeals for brevity and convenience, including ITA No. 97/Del/2022 (Assessment Year 2019-20), which was taken as the lead case.

Arguments by the Appellant

The appellant’s representative argued that the disallowance was made by the Central Processing Centre (CPC), Bangalore, under Section 36(1)(va) of the Income Tax Act, 1961. Despite the delays in depositing PF/ESI contributions, all amounts were deposited before the due date of filing the income tax return. The appellant cited various judicial decisions supporting their claim, including:

• CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC)
• CIT v. Vinay Cement Ltd. [2007] 213 CTR 268 (SC)
• Pr. CIT v. Raj. State Bev. Corpn. Ltd. [2017] 84 taxmann.com 185 (SC)
• CIT v. AIMIL Limited [2010] 321 ITR 508 (Delhi)
• Pro Interactive Service (India) Pvt. Ltd., ITA No. 983/2018 (Delhi High Court)

Arguments by the Respondent

The respondent’s representative, Sr. DR, supported the lower authorities’ orders and argued that the Finance Act 2021 amendments clarified that the provisions of Section 43B of the Act would not apply to employee contributions to PF/ESI. The amendment was deemed to have always been in effect, making the disallowance justified.

Tribunal’s Decision

After hearing both parties, the tribunal noted that the issue had been settled in favor of the assessee by various judicial pronouncements. The Hon’ble Jurisdictional High Court of Delhi had consistently held that the legislative intent was to allow expenditure when payment is actually made, not to treat delayed payments as deemed income under Section 2(24)(x) of the Act.

The tribunal also noted that the Finance Act 2021 amendments were to apply prospectively from April 1, 2021, and thus did not affect the assessment year under consideration. Consequently, the tribunal held that the Assessing Officer (AO) was not justified in denying the deduction claimed by the assessee for late deposits of PF/ESI, provided these were made before filing the income tax return.

Conclusion

The tribunal allowed the appeal filed by Lumenis India Pvt. Ltd., holding that the disallowance made by the AO-CPC was not sustainable in law. The tribunal’s decision was pronounced on May 18, 2022.

Order:
In the result, the appeal filed by Lumenis India Pvt. Ltd. is allowed.

Order pronounced in the open court on May 18, 2022.

—
(PRADIP KUMAR KEDIA)
ACCOUNTANT MEMBER

(KUL BHARAT)
JUDICIAL MEMBER

Date: May 18, 2022

Lumenis India Pvt. Ltd. vs ADIT, CPC: Delay in PF and ESI Deposit