Case Number: ITA 1006/DEL/2021
Appellant: SS4 Safenet, Delhi
Respondent: CPC ITD, Bengaluru
Assessment Year: 2018-19
Result: 2018-19
Case Filed on: 2021-08-24
Order Type: Final Tribunal Order
Date of Order: 2022-04-26
Pronounced on: 2022-04-26
This case involves an appeal filed by SS4 Safenet against the order dated 28.07.2021, passed by the National Faceless Appeal Center (NFAC), New Delhi, concerning the assessment year 2018-19. The dispute pertains to the disallowance of employees’ contributions to the Employees’ Provident Fund (EPF) and Employees’ State Insurance (ESI) under Section 36(1)(va) of the Income Tax Act, 1961, due to late payment.
The appellant, SS4 Safenet, filed its return of income for AY 2018-19. The Central Processing Centre (CPC), Bengaluru, processed the return under Section 143(1) of the Income Tax Act and made an addition due to the late payment of employees’ contributions to EPF and ESI. Although the contributions were deposited after the due dates prescribed under the respective Acts, they were made before the due date for filing the return of income under Section 139(1) of the Act.
The appellant challenged the addition before the CIT(A), who upheld the CPC’s adjustment on the grounds that the contributions were not deposited within the due dates prescribed under the EPF and ESI Acts. The CIT(A) concluded that the late payment should be disallowed, despite being made before the due date for filing the return of income.
The appellant then appealed to the Income Tax Appellate Tribunal (ITAT). The primary grounds of appeal were:
The ITAT considered the appellant’s arguments and the binding precedents set by various High Courts, including the Delhi High Court in PCIT vs. Pro Interactive Service (India) Pvt. Ltd. (ITA No. 983/2018), where it was held that the legislative intent was to allow the expenditure when payment is actually made, and belated payments to EPF/ESI should not be treated as income of the employer under Section 2(24)(x) of the Act.
The ITAT also referred to numerous other judgments that supported the appellant’s stance, such as CIT vs. AIMIL Ltd. [2010] 321 ITR 508, CIT vs. Bharat Hotels Ltd. [2019] 103 taxmann.com 295, and Azamgarh Steel & Power Pvt. Ltd. [2021] 1626/Del/2020.
The Tribunal, following the precedents, directed the Assessing Officer to delete the disallowance for the delayed payment of employees’ contributions to PF/ESI. The grounds raised by the appellant were allowed, leading to the conclusion that the disallowance was unjustified.
Order: The appeal of the appellant is allowed.
Order Pronounced in the Open Court on 26th April, 2022.
-Sd/- (Kul Bharat, Judicial Member)
-Sd/- (Anil Chaturvedi, Accountant Member)
Date: 26th April, 2022
Copy forwarded to:
Assistant Registrar
ITAT, New Delhi
SS4 Safenet vs. CPC ITD: Late Payment of PF/ESI for Assessment Year 2018-19
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