Case Number: ITA 895/DEL/2021
Appellant: Sanjeev Kumar Hooda, Bahadurgarh
Respondent: DCIT CPC, Bangalore
Assessment Year: 2019-20
Case Filed On: July 22, 2021
Order Type: Final Tribunal Order
Date of Order: February 28, 2022
Pronounced On: February 28, 2022
Sanjeev Kumar Hooda, the appellant, challenged the disallowance of employee contributions to ESI and EPF made by the Deputy Commissioner of Income Tax (DCIT) Central Processing Centre (CPC), Bangalore. The disallowance was made under section 36(1)(va) of the Income Tax Act on the grounds that the payments were not made within the prescribed due dates under the ESI and PF Acts.
The main issues in this case were:
The appellant’s counsel argued that the employee contributions to ESI and EPF were indeed deposited before the due date of filing the income tax return, as per the provisions of section 43B of the Income Tax Act. The counsel cited several judgments from various benches of the Income Tax Appellate Tribunal (ITAT) and High Courts, which supported the view that such payments are allowable as deductions if made before the due date of filing the return.
The respondent’s counsel, however, argued that the payments were not made within the due dates prescribed under the ESI and PF Acts, and hence, the disallowance made by the DCIT was justified.
The tribunal considered the submissions from both sides and reviewed the relevant provisions of the Income Tax Act, including sections 2(24)(x), 36(1)(va), 43B, and the recent amendments made by the Finance Act, 2021. The tribunal also referred to several judicial precedents, including the judgments of the Supreme Court and various High Courts.
The tribunal observed that the employee contributions to ESI and EPF, if paid before the due date of filing the income tax return under section 139(1), are allowable as deductions. This view was supported by the judgments of several High Courts, including the Delhi High Court in the case of CIT vs. AIMIL Ltd., and the Supreme Court in the case of CIT vs. Vinay Cement Ltd.
The tribunal further noted that the recent amendments made by the Finance Act, 2021, clarified that the provisions of section 43B do not apply to employee contributions to ESI and EPF, and the due date for such contributions is as prescribed under the relevant Acts.
Based on the above observations, the tribunal allowed the appeal filed by Sanjeev Kumar Hooda. The tribunal held that the disallowance made by the DCIT under section 36(1)(va) was not justified, as the contributions were deposited before the due date of filing the income tax return. The tribunal directed the DCIT to allow the deduction for the employee contributions to ESI and EPF.
Order pronounced in the open court on February 28, 2022.
Members:
Sh. Saktijit Dey, Judicial Member
Dr. B. R. R. Kumar, Accountant Member
This case revolves around the interpretation and application of sections 36(1)(va) and 43B of the Income Tax Act. Section 36(1)(va) deals with the employee contributions to welfare funds, while section 43B allows certain deductions only on actual payment. The key issue was whether the delayed payment of employee contributions, if made before the due date of filing the income tax return, is allowable as a deduction.
The tribunal’s decision aligns with the judgments of several High Courts and the Supreme Court, which have held that such payments are allowable as deductions if made before the due date of filing the return. The recent amendments by the Finance Act, 2021, further clarify this position by explicitly stating that the provisions of section 43B do not apply to employee contributions to ESI and EPF.
This case sets a significant precedent for similar cases involving the disallowance of employee contributions to welfare funds. It clarifies that such contributions, if paid before the due date of filing the income tax return, are allowable as deductions. This decision will provide relief to many taxpayers who face disallowances on similar grounds.
Taxpayers and tax authorities can refer to this case to understand the correct application of sections 36(1)(va) and 43B and ensure that the deductions are allowed in line with the judicial precedents and legislative intent.
The case of Sanjeev Kumar Hooda vs. DCIT CPC, Bangalore, provides valuable insights into the application of sections 36(1)(va) and 43B of the Income Tax Act concerning employee contributions to welfare funds. The tribunal’s decision to allow the deduction for contributions made before the due date of filing the income tax return underscores the importance of adhering to judicial precedents and legislative clarifications.
This decision will likely influence future tax assessments and disputes involving similar issues, ensuring that the principles of fairness and justice are upheld in the application of tax laws.
Sanjeev Kumar Hooda vs. DCIT CPC, Bangalore – ITA 895/DEL/2021
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