Case Number: ITA 1029/DEL/2021
Appellant: SKY IT Infratech Pvt. Ltd., New Delhi
Respondent: Deputy Commissioner of Income Tax, CPC
Assessment Year: 2018-19
Case Filed on: 2021-08-27
Order Type: Final Tribunal Order
Date of Order: 2022-05-25
Pronounced on: 2022-05-25
The case of SKY IT Infratech Pvt. Ltd. versus the Deputy Commissioner of Income Tax (DCIT), CPC, centers on the disallowance of employee contributions to Provident Fund (PF) and Employee State Insurance (ESI) that were deposited after the due date prescribed under the respective Acts but before the due date for filing the return of income under Section 139(1) of the Income Tax Act, 1961.
The case was heard by the Delhi Bench “S.M.C.” of the Income Tax Appellate Tribunal (ITAT), with Shri Challa Nagendra Prasad, Judicial Member, presiding over the proceedings.
The appeals were filed by the assessee against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), dated 28.06.2021, for the assessment years 2018-19 and 2019-20. The main issue was the disallowance of Rs. 1,66,109/- and Rs. 1,95,642/- under Section 36(1)(va) of the Income Tax Act in respect of employees’ contribution to ESI and PF deposited after the due date under the relevant Acts.
The Authorized Representatives (AR) for SKY IT Infratech Pvt. Ltd., Shri Prateek and Shri Kalpit, argued that the contributions to PF and ESI were remitted to the government account before the due date for filing the return of income. They cited the decision of the jurisdictional High Court in the case of CIT vs. AIMIL Ltd. (321 ITR 508) and the Hon’ble Supreme Court’s decision in the case of M.M. Aqua Technologies Ltd. vs. CIT (Civil Appeal Nos. 4742-4743 of 2021 dated 11.08.2021).
The Senior Departmental Representative (Sr. DR), Shri Om Parkash, supported the disallowance, arguing that the amendments brought by the Finance Act, 2021, in Sections 36(1)(va) and 43B of the Act by inserting Explanation 2 and Explanation 5 respectively were clarificatory in nature and therefore had retrospective applicability. The Sr. DR cited various case laws to support the disallowance.
Upon hearing the submissions of both parties and perusing the orders of the authorities below, the tribunal found that no disallowance towards the contribution to employees’ PF and ESI was warranted while processing the returns under Section 143(1) of the Act, as the issue was highly debatable in nature.
The tribunal noted that the issue was squarely covered by the decision of the jurisdictional High Court in the case of CIT vs. AIMIL Ltd. (321 ITR 508) and the Hon’ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. (319 ITR 306). The tribunal also referred to the recent decision in the case of Raj Kumar vs. ITO CPC Bengaluru (ITA. No. 1392/Del/2021 and others dated 28.02.2022), which held that the amendment brought by the Finance Act, 2021, is effective from 01.04.2021, and no disallowance is called for on belated payment of employees’ contribution to ESI and PF if the assessee deposited the said contribution before the due date for filing the return of income under the Income Tax Act.
The tribunal concluded that the contributions to PF and ESI deposited before the due date for filing the return of income should not be disallowed under Section 36(1)(va) of the Act. The tribunal directed the Assessing Officer/CPC to delete the disallowances in both appeals as the contributions were remitted before the due date of filing the return of income.
Order: The appeals filed by SKY IT Infratech Pvt. Ltd. are allowed.
This case underscores the importance of adhering to the due dates for depositing employee contributions to PF and ESI but also highlights the tax authorities’ stance on contributions deposited before the due date for filing the return of income. It reaffirms the principle that such contributions should not be disallowed if they are deposited before the due date for filing the return, aligning with judicial precedents and legislative amendments.
Taxpayers should ensure timely compliance with deposit requirements for employee contributions to PF and ESI to avoid disallowances. This judgment serves as a precedent for cases where contributions are deposited before the due date for filing the return, providing clarity and certainty in such matters.
This detailed review of the case of SKY IT Infratech Pvt. Ltd. vs. Deputy Commissioner of Income Tax highlights the key aspects of the tribunal’s decision and its implications for other taxpayers.
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