Case Number: ITA 1144/DEL/2021
Appellant: Munish Ahmed, Panipat, Haryana
Respondent: ITD, CPC, Bengaluru
Assessment Year: 2018-19
Case Filed on: 2021-09-17
Order Type: Final Tribunal Order
Date of Order: 2022-02-28
Pronounced on: 2022-02-28
Case Conclusion: In the Income Tax Appellate Tribunal, Delhi Bench ‘G’, New Delhi
Panel: Sh. Saktijit Dey, Judicial Member and Dr. B. R. R. Kumar, Accountant Member (Through Video Conferencing)
The case involves the disallowance of employee’s contribution to EPF and ESI under Section 36(1)(va) of the Income Tax Act, 1961 for the Assessment Year 2018-19. The issue centers around whether the contributions made by the employer but deposited after the due date prescribed under the ESI and EPF Acts can be allowed as a deduction if paid before the due date of filing the income tax return under Section 139(1) of the Income Tax Act.
During the assessment proceedings, the Assessing Officer (AO) disallowed the contributions on account of delayed payment, despite being deposited before the due date of filing the return of income. The Commissioner of Income Tax (Appeals) upheld the AO’s decision, leading to an appeal before the ITAT.
The tribunal reviewed multiple judgments from various high courts and previous ITAT orders, including:
Based on these precedents and the amendments introduced by the Finance Act 2021, which clarified that Section 43B does not apply to employee contributions, the tribunal concluded that:
No disallowance is warranted for the delayed payment of the employee’s contribution to ESI and EPF, provided it is deposited before the due date of filing the Income Tax Return.
The appeal filed by Munish Ahmed was allowed, and the tribunal directed that no disallowance should be made for the delayed deposit of employee contributions to EPF and ESI for the Assessment Year 2018-19.
The detailed order reads as follows:
We have examined the decision of the Hon’ble Allahabad High Court in the case of Sagun Foundry Pvt. Ltd. Vs CIT (145 DTR 265) wherein it was held that as the payments have been made before the due date specified u/s 139(1) and as such are fully allowable.
The judgment of the Hon’ble High Court of Delhi in CIT Vs. Bharat Hotels Ltd. (410 ITR 417) further supports this conclusion, confirming that contributions made before the due date of filing the return are allowable deductions.
In light of these decisions, the appeals of the assessee are allowed and the appeals of the Revenue are dismissed.
This judgment provides significant clarity on the treatment of employee contributions to EPF and ESI, emphasizing the importance of making these contributions before the due date of filing the return to ensure their deductibility. It aligns with the legislative intent to ensure timely compliance while providing relief to employers who may face operational delays.
Order Pronounced in the Open Court on 28/02/2022.
Panel: Sh. Saktijit Dey, Judicial Member and Dr. B. R. R. Kumar, Accountant Member
Copy forwarded to:
Assistant Registrar
Munish Ahmed vs. ITD, CPC, Bengaluru: EPF and ESI Disallowance for AY 2018-19
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