Case Number: ITA 1024/DEL/2021
Appellant: Dayal Fertilizers Private Limited, New Delhi
Respondent: DCIT, CPC, Bangalore
Assessment Year: 2018-19
Case Filed on: 2021-08-27
Order Type: Final Tribunal Order
Date of Order: 2022-05-18
Pronounced on: 2022-05-18
The case of Dayal Fertilizers Private Limited versus the Deputy Commissioner of Income Tax, Central Processing Centre, Bangalore, revolves around the issue of the delayed deposit of employee contributions towards the Employees’ State Insurance (ESI) and Provident Fund (PF). The appellant, Dayal Fertilizers Pvt. Ltd., challenged the disallowance of these contributions by the CPC, Bangalore, arguing that the contributions were deposited before the due date for filing the income tax return.
The case was heard by the Delhi Bench ‘G’ of the Income Tax Appellate Tribunal (ITAT), with Judicial Member Shri Kul Bharat and Accountant Member Shri Pradip Kumar Kedia presiding over the proceedings.
The appeals were filed by Dayal Fertilizers Pvt. Ltd. and several other assessees against the disallowance of employee contributions towards ESI and PF on the grounds of late deposit. The appellant contended that while there was a delay in depositing the contributions, they were made before the due date for filing the income tax return as per Section 139(1) of the Income Tax Act, 1961. The appellant cited various judicial pronouncements supporting their claim that such contributions should not be disallowed if deposited before the due date of filing the return.
The Learned Authorized Representative (AR) for Dayal Fertilizers submitted that the disallowance made by the CPC, Bangalore, under Section 36(1)(va) was unjustified since the contributions were deposited before the due date for filing the income tax return. The AR relied on several judicial precedents, including the cases of Azamgarh Steel & Power vs. CPC and CIT vs. AIMIL Ltd., which supported the appellant’s position.
The Learned Senior Departmental Representative (Sr. DR) supported the disallowance, citing the amendment brought by the Finance Act, 2021. According to the Sr. DR, the amendment clarified that the provisions of Section 43B do not apply to sums received by the assessee from employees towards ESI and PF if not deposited by the due dates under the respective laws.
The ITAT reviewed the arguments and judicial precedents presented by both parties. The tribunal noted that the issue had already been settled in favor of the assessee by various judicial pronouncements, including the decision of the Delhi High Court in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd.. The court had held that belated payments of employee contributions towards ESI and PF should be allowed as deductions if deposited before the due date for filing the income tax return.
The tribunal also considered the amendment introduced by the Finance Act, 2021, which took effect from April 1, 2021, and applied prospectively for the assessment year 2021-22 and subsequent years. Therefore, the amendment did not apply to the assessment year 2018-19 under consideration in this case.
The ITAT concluded that the disallowance of employee contributions towards ESI and PF for the assessment year 2018-19 was not justified since the contributions were deposited before the due date for filing the income tax return. The appeals filed by Dayal Fertilizers Pvt. Ltd. and other assessees were allowed, and the disallowance made by the CPC, Bangalore, was set aside.
Order: The appeals filed by the respective assessees are allowed.
This case reaffirms the principle that employee contributions towards ESI and PF should be allowed as deductions if deposited before the due date for filing the income tax return, irrespective of the amendments introduced by the Finance Act, 2021. It provides clarity on the applicability of these amendments and reinforces the legal position in favor of taxpayers who comply with the filing deadlines.
The judgment serves as a precedent for other taxpayers facing similar disallowances. It emphasizes the importance of depositing employee contributions towards ESI and PF on time and highlights the legal recourse available to taxpayers if disallowances are made unjustly. Taxpayers should ensure compliance with the filing deadlines to avoid such disputes and potential disallowances in the future.
This detailed review of the case of Dayal Fertilizers Pvt. Ltd. vs. DCIT, CPC Bangalore, highlights the key aspects of the tribunal’s decision and its implications for other taxpayers.
Dayal Fertilizers vs. DCIT: Case Filed for Delay in ESI/PF Deposit
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