Case Number: ITA 1005/DEL/2021
Appellant: Eastman Cast and Forge Limited, New Delhi
Respondent: CPC, Bangalore
Assessment Year: 2019-20
Result: 2019-20
Case Filed on: 2021-08-24
Order Type: Final Tribunal Order
Date of Order: 2022-04-28
Pronounced on: 2022-04-28
This case involves an appeal filed by Eastman Cast and Forge Limited against the order dated 28.07.2021, passed by the National Faceless Appeal Center (NFAC), New Delhi, concerning the assessment year 2019-20. The dispute pertains to the disallowance of Rs. 18,05,483/- for the late payment 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.
The appellant, Eastman Cast and Forge Limited, filed its return of income for AY 2019-20 on 30.09.2019. The Central Processing Centre (CPC), Bengaluru, processed the return under Section 143(1) of the Income Tax Act and made an addition of Rs. 18,05,483/- for the late payment of employees’ contributions to EPF and ESI, which was 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 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. Nipso Polyfabriks Ltd. [2013] 350 ITR 327, 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 of Rs. 18,05,483/- 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.
Regarding the disallowance of Rs. 58,90,642/- on account of provision for gratuity, the Tribunal upheld the CIT(A)’s direction to the Assessing Officer to verify the appellant’s claim that the amount was already added back in its computation of income, ensuring no double taxation occurs.
Order: The appeal of the appellant is partly allowed.
Order Pronounced in the Open Court on 28th April, 2022.
-Sd/- (R.K. Panda, Accountant Member)
-Sd/- (Anubhav Sharma, Judicial Member)
Date: 28th April, 2022
Copy forwarded to:
Assistant Registrar
ITAT, New Delhi
Eastman Cast and Forge Limited vs. CPC: Late Payment of PF/ESI for Assessment Year 2019-20
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