Case Number: ITA 938/DEL/2021
Appellant: Laurels (India) Impex (P) Ltd., New Delhi
Respondent: ADIT, Bengaluru
Assessment Year: 2019-20
Result: 2019-20
Case Filed on: 2021-08-04
Order Type: Final Tribunal Order
Date of Order: 2021-12-08
Pronounced on: 2021-12-08
Tribunal: IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI “SMC” BENCH: NEW DELHI
Before: SHRI KUL BHARAT, JUDICIAL MEMBER
Introduction
This appeal by the assessee, Laurels (India) Impex (P) Ltd., pertains to the assessment year 2019-20 and is directed against the order of the Additional Director of Income Tax (ADIT), Bengaluru, which disallowed the deduction for employee’s contribution to Provident Fund (PF) and Employee State Insurance (ESI) on the grounds of delayed payment.
Background
The appellant, Laurels (India) Impex (P) Ltd., located at RRA Taxindia, D-28, South Extension, Part-1, New Delhi, filed an appeal against the disallowance of Rs. 11,42,844 made by the ADIT on account of delayed deposit of employees’ contributions to PF and ESI as per the respective Acts. The disallowance was made while processing the return of income for AY 2019-20. The appellant then appealed to the Income Tax Appellate Tribunal (ITAT), Delhi Bench “SMC”.
Hearing and Decision
The appeal was heard on 8th December 2021, and the decision was pronounced on the same day. The appellant was represented by Shri Shrey Jain, Adv., and the respondent was represented by Shri Om Prakash, Sr. DR.
Tribunal’s Observations
The Tribunal noted that the ADIT had disallowed the claim of Rs. 11,42,844 on account of delayed deposit of employees’ contributions to PF and ESI. The CIT(A) had confirmed this disallowance, leading to the current appeal.
Appellant’s Arguments
The appellant argued that the disallowance was not justified as the contributions were deposited before the due date of filing the return of income, as permitted by various judicial pronouncements. The appellant relied on the judgment of the Hon’ble Delhi High Court in the case of PCIT vs Pro Interactive Service (India) Pvt. Ltd. in ITA No. 983/2018 dated 10.09.2018, which held that the legislative intent was to allow the expenditure when the payment is made, even if belatedly, as long as it is before the due date of filing the return.
Tribunal’s Conclusion
The Tribunal referred to the binding precedent set by the Hon’ble Delhi High Court in the case of PCIT vs Pro Interactive Service (India) Pvt. Ltd., which held that belated payment of employees’ PF and ESI contributions should not be treated as income of the employer if paid before the due date of filing the return of income. The Tribunal found that the facts of the present case were identical to those in the cited judgment.
The Tribunal concluded that the disallowance made by the ADIT was not justified and directed the Assessing Officer to delete the disallowance of Rs. 11,42,844.
Order
In the result, the appeal of the assessee is allowed. The decision was pronounced in the open court on 8th December 2021.
Final Judgment
Order pronounced in the open court on 08.12.2021
Signed:
[KUL BHARAT]
JUDICIAL MEMBER
Dated: 08.12.2021
Copy forwarded to:
Assistant Registrar
ITAT, New Delhi
Relevant Legal Provisions and Precedents
The Income Tax Act, 1961, under Section 36(1)(va), deals with deductions for contributions to Provident Fund and ESI by employees. This case hinges on whether delayed contributions, if made before the due date of filing the return, can be disallowed. The Hon’ble Delhi High Court’s judgment in PCIT vs Pro Interactive Service (India) Pvt. Ltd. played a crucial role in the Tribunal’s decision.
The Hon’ble Delhi High Court had held that as long as the contributions are paid before the due date of filing the return, the legislative intent is to allow such payments as expenditure, despite any delays. This precedent was instrumental in the Tribunal’s decision to allow the appeal.
Impact of the Judgment
This judgment underscores the importance of understanding the legislative intent behind tax provisions. It clarifies that delayed payments of PF and ESI contributions, if made before the due date of filing the return, should not be disallowed. This ruling provides significant relief to employers who might face challenges in timely depositing these contributions due to various operational issues.
Key Takeaways
This case highlights the importance of adhering to judicial precedents and understanding the legislative intent behind tax laws. The Tribunal’s decision reiterates that the disallowance of PF and ESI contributions for delayed payments is not justified if such payments are made before the due date of filing the return. This ruling serves as a crucial precedent for similar cases and provides clarity on the treatment of delayed payments under Section 36(1)(va) of the Income Tax Act, 1961.
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