Case Number: ITA 882/DEL/2021
Appellant: Vista Knitberry Fashions Ltd, Gurgaon
Respondent: ACIT CPC, Bengaluru
Assessment Year: 2018-19
Result: Appeal Allowed, Disallowance Quashed
Case Filed on: 2021-07-20
Order Type: Final Tribunal Order
Date of Order: 2022-02-28
Pronounced on: 2022-02-28
Vista Knitberry Fashions Ltd, Gurgaon, filed an appeal challenging the disallowance made by the Assistant Commissioner of Income Tax (ACIT) CPC, Bengaluru, regarding employee contributions to the Employees’ State Insurance (ESI) and Employees’ Provident Fund (EPF) for the assessment year 2018-19. The case was filed on the grounds that the disallowance was improper as the contributions were made before the due date for filing the income tax return.
Vista Knitberry Fashions Ltd filed its income tax return for the assessment year 2018-19, declaring the necessary contributions to ESI and EPF. The ACIT CPC, Bengaluru, disallowed these contributions under Section 36(1)(va) of the Income Tax Act, 1961, on the grounds that the payments were made after the due date prescribed under the respective Acts. The disallowance was based on the assertion that the contributions were not eligible for deduction, despite being deposited before the due date of filing the income tax return under Section 139(1).
The appellant, represented by their Chartered Accountant, argued that the disallowance made by the ACIT was incorrect as the contributions were indeed made before the due date for filing the return under Section 139(1). They contended that, as per various judicial precedents, contributions made before the due date of filing the return should be allowed as deductions. The appellant cited several judgments from different benches of the Income Tax Appellate Tribunal (ITAT) and High Courts supporting this view.
The respondent, represented by Shri Umesh Takyar, Senior Departmental Representative (DR), argued that the disallowance was justified as the contributions were made beyond the due dates prescribed under the ESI and EPF Acts. They maintained that the provisions of Section 36(1)(va) should be strictly followed, and any delay in payment should result in disallowance.
The Tribunal, comprising Dr. B. R. R. Kumar, Accountant Member, and Sh. Saktijit Dey, Judicial Member, reviewed the submissions and the relevant facts of the case. The key observations are as follows:
The Tribunal concluded that the disallowance made by the ACIT CPC, Bengaluru, was not justified. They held that the contributions made by Vista Knitberry Fashions Ltd before the due date of filing the income tax return under Section 139(1) were eligible for deduction. The Tribunal allowed the appeal filed by Vista Knitberry Fashions Ltd and quashed the disallowance made by the ACIT.
In conclusion, ITA No. 882/DEL/2021 filed by Vista Knitberry Fashions Ltd was allowed, and the disallowance of employee contributions to ESI and EPF made by ACIT CPC, Bengaluru, was quashed. This case underscores the importance of timely payments and the interpretation of tax provisions regarding employee contributions.
Order pronounced in the open court on 28th February, 2022.
Sd/- (Saktijit Dey)
JUDICIAL MEMBER
Sd/- (Dr. B. R. R. Kumar)
ACCOUNTANT MEMBER
Date: 28th February, 2022
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
Assistant Registrar, ITAT, New Delhi
Vista Knitberry Fashions vs ACIT: Disallowance of Late ESI and EPF Payments
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