The case of Chitra Exports, Meerut against the Deputy Commissioner of Income Tax, CPC, Bengaluru, encapsulated in ITA No. 1256/DEL/2021 for the Assessment Year 2019-20, presented critical insights into disputes over the timing of employee contributions to provident funds and ESI.
Chitra Exports faced significant financial adjustments by the CPC due to the alleged late deposit of employees’ contributions to social security funds. The adjustments totalled Rs.3,69,074, claimed to be deposited after statutory deadlines but before the tax return filing deadline, leading to disputes on allowable deductions under the Income Tax Act.
The primary contention revolved around the interpretations of recent amendments made by the Finance Act, 2021, particularly Explanation 2 to section 36(1)(va) and Explanation 5 to section 43B, and their applicability from the assessment year 2021-22 onwards.
The tribunal examined precedents and legislative amendments, concluding that the late payments, although after the due dates under respective social security legislations, were compliant if made before the income tax return filing deadline. This interpretation aligned with earlier judgments aiming to balance statutory compliance with practical realities faced by businesses.
The Tribunal’s decision to allow the appeal for Chitra Exports not only rectified the immediate financial grievances but also set a precedent on interpreting the timelines for depositing employee contributions to provident funds and ESI under the amended tax laws. This case serves as a significant reference for tax compliance and planning for businesses managing employee contributions.
Chitra Exports, Meerut vs. DCIT, CPC, Bengaluru: Dispute Over Employee Contributions for AY 2019-20
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