Case Number: ITA 1513/DEL/2021
Appellant: Airif Engineers Pvt. Ltd., Delhi
Respondent: DCIT, CPC, Bengaluru, Karnataka
Assessment Year: 2018-2019
Case Filed On: 2021-10-25
Order Type: Final Tribunal Order
Date of Order: 2022-05-18
Pronounced On: 2022-05-18
The case of Airif Engineers Pvt. Ltd. vs. DCIT, CPC, Bengaluru pertains to the disallowance of employee contributions to the Provident Fund (PF) and Employees’ State Insurance (ESI) by the DCIT, CPC, Bengaluru for the assessment year 2018-2019. The appellant, Airif Engineers Pvt. Ltd., based in Delhi, filed the appeal disputing the disallowance made due to the delay in depositing the employee contributions.
The hearing for the case took place on 18th May 2022, with the final pronouncement on the same day. The appellant argued that although there was a delay in depositing the contributions, all amounts were deposited with the appropriate authorities before the filing of the income tax return. The appellant’s representative relied on several judicial precedents, including the decision of the Delhi High Court in the case of CIT vs. AIMIL Ltd. [2010] 321 ITR 508 (Delhi), which held that contributions deposited before the due date of filing the return should not be disallowed.
On the other hand, the Departmental Representative (DR) supported the lower authorities’ orders and cited the amendment brought by the Finance Act 2021, which clarified that the provisions of Section 43B would not apply to employee contributions received by the employer. The DR argued that the amendment should apply retrospectively to the assessment year in question.
The Tribunal, comprising Judicial Member Shri Kul Bharat and Accountant Member Shri Pradip Kumar Kedia, analyzed the submissions and material on record. They noted that the issue of disallowance of employee contributions deposited after the due date under the respective Acts but before the filing of the return had been settled in favor of the assessee by various judicial pronouncements. The Tribunal cited the Delhi High Court’s decision in PCIT vs. Pro Interactive Service (India) Pvt. Ltd., which held that belated payment of employee contributions to PF and ESI before the due date of filing the return did not warrant disallowance.
The Tribunal further noted that the amendment by the Finance Act 2021, which specifies that the provisions of Section 43B do not apply to employee contributions, would only take effect from 1st April 2021 and would apply prospectively to assessment year 2021-22 and subsequent years. Thus, the amendment did not apply to the assessment year under consideration (2018-19).
The Tribunal found no material from the Revenue to demonstrate that the cited judicial decisions had been overruled or set aside by a higher judicial forum. Therefore, they concluded that the AO was not justified in denying the deduction claimed by the assessee for late deposit of PF/ESI contributions, as long as the contributions were deposited before the due date of filing the return of income.
In the final judgment, the Tribunal allowed the appeal filed by Airif Engineers Pvt. Ltd. The Tribunal emphasized that the contributions to PF and ESI deposited before the due date of filing the return should not be disallowed, aligning with established judicial precedents.
In conclusion, the appeal filed by Airif Engineers Pvt. Ltd. against the disallowance of employee contributions to PF/ESI was allowed. The Tribunal underscored that the contributions deposited before the due date of filing the return should not be disallowed, and the amendment by the Finance Act 2021 did not apply retrospectively to the assessment year 2018-19.
Order Pronounced: 18th May 2022
Judicial Member: Shri Kul Bharat
Accountant Member: Shri Pradip Kumar Kedia
Note: This summary is based on the final order pronounced by the Income Tax Appellate Tribunal, Delhi Bench ‘G’, New Delhi.
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