The case of Dayal Industries Private Limited versus the Deputy Commissioner of Income Tax (DCIT), Centralized Processing Center (CPC), Bangalore in ITA No. 1079/DEL/2021 revolves around the issue of delayed deposits of Provident Fund (PF) and Employee State Insurance (ESI) contributions for the assessment year 2018-19. The judgment, which was pronounced on May 17, 2022, addresses significant concerns related to employer contributions and their timely deposit as per income tax regulations.
Dayal Industries faced adjustments and disallowances made by the CPC, Bangalore regarding the provident fund and employee state insurance contributions that were not deposited by the due dates stipulated by the respective Acts. The appeal was filed against the order of the Commissioner of Income Tax (Appeals) which confirmed the adjustments made in the intimation under section 143(1) on October 16, 2019.
The appellant, represented by Sanjeev Sapra, Chartered Accountants, argued that the delay in depositing PF and ESI contributions was due to valid reasons and that all contributions were deposited before the filing of the income tax return, which should allow for the deduction as per existing legal precedents. The respondent, represented by Senior Departmental Representative Sanjay Kumar Nargas, upheld the adjustment citing statutory provisions and recent amendments intended to tighten the norms around such contributions.
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, composed of Shri Kul Bharat, Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member, evaluated the nuances of the case. They referred to various judicial precedents, particularly the judgement in the case of Azamgarh Steel & Power vs. CPC and the High Court ruling in CIT vs. AIMIL Ltd., which favor the view that contributions deposited before the income tax return filing date should not be disallowed.
The Tribunal found that the legislative intent of the relevant income tax provisions is not to penalize genuine delays in depositing employees’ contributions towards PF and ESI that are subsequently rectified before the tax return is filed. Therefore, the Tribunal set aside the disallowance of Rs.12,52,401 and ruled in favor of the assessee. This decision underscores the importance of considering the circumstances and timelines of deposits in determining compliance with tax laws.
This ruling has significant implications for other employers and sets a precedent in cases involving similar disputes over the timing of PF and ESI deposits. It emphasizes the judiciary’s willingness to consider reasonable delays in deposits provided they are rectified within the stipulated period for filing tax returns.
The Dayal Industries case highlights the complexities involved in the compliance of statutory contributions and the interpretation of tax laws in India. It also reflects the judiciary’s approach to balancing statutory compliance with practical challenges faced by businesses.
The order was pronounced in the open court on May 17, 2022, by the ITAT, marking a conclusive decision on the matter for the assessment year 2018-19.
Analyzing Dayal Industries Pvt. Ltd. vs. DCIT, Bangalore: Delay in PF and ESI Deposits
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