In a notable ruling by the Income Tax Appellate Tribunal, Delhi Bench ‘H’, the case of Chitra Exports, Meerut against the Deputy Commissioner of Income Tax, CPC, Bengaluru was deliberated upon with significant outcomes. The tribunal’s decision in ITA No. 1255/DEL/2021 concerning the Assessment Year 2018-19 addressed the contentious issue of late payment of employee contributions to provident funds and ESI.
Chitra Exports, a prominent exporter based in Meerut, faced adjustments and disallowances under Section 143(1)(a)(iv) amounting to Rs.6,78,168 for the late deposit of employees’ share of ESI and EPF contributions. These amounts were deposited after the due dates prescribed under the respective Acts but before the due date for filing of the Return of Income (ROI).
The appellant argued that the deposits, although late as per the statutory requirements, were made before the due date of the income tax return filing, thereby complying with the Income Tax Act’s provisions. The case highlighted the applicability of Explanation 2 to section 36(1)(va) and Explanation 5 to section 43B, which were introduced by the Finance Act, 2021.
The tribunal reviewed several precedents, including the landmark judgment of the Delhi High Court in the case of CIT Vs. AIMIL Ltd., which allowed such contributions if paid before the filing of the income tax returns. The tribunal noted discrepancies in the application of these rulings in the context of new amendments introduced in the Finance Act, 2021.
Significantly, the tribunal observed that the amendments were intended to clarify the non-applicability of certain provisions to the payments of employee contributions, thus providing relief from the stringent penalties imposed for late payments under the Income Tax Act.
The tribunal’s decision to allow the appeals filed by Chitra Exports sets a precedent on how amendments to tax laws are interpreted in light of judicial decisions. It underscores the importance of the timing of contributions versus the statutory deadlines and the filing date of the income tax return.
This case serves as a crucial reference for businesses dealing with similar issues, emphasizing the need to understand the implications of legislative changes on tax compliance.
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