The case of Joneja Bright Steels Pvt. Ltd., Faridabad, against the DCIT Circle-1, Faridabad, pertains to the assessment year 2017-18. The appeal was filed on June 23, 2021, under case number ITA 780/DEL/2021. The final tribunal order was pronounced on September 12, 2022.
The appellant, Joneja Bright Steels Pvt. Ltd., filed its return of income declaring an income of Rs. 6,11,73,970/-. The case was processed under Section 143(3) of the Income Tax Act, 1961, and the Assessing Officer (AO) assessed the income at Rs. 6,17,96,240/-, adding a sum of Rs. 6,12,715/- towards late payment of ESI and PF under Section 36(1)(va) of the Act. This addition was sustained by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), leading the appellant to file an appeal before the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘C’.
The primary issue in this case was the disallowance of Rs. 6,12,715/- on account of late deposition of employees’ contributions to ESI and PF. The appellant contested this disallowance, arguing that the contributions were deposited within the time allowed under Section 43B, i.e., up to the due date for filing the income tax return under Section 139(1).
The appellant’s counsel, Shri Ruchesh Sinha, contended that the disallowance was unwarranted as the payments were made before the due date for filing the return of income. He relied on the precedent set by the Hon’ble Delhi High Court in the case of CIT vs. AIMIL Ltd. (2010) 321 ITR 508, which held that such contributions are allowable if deposited before the due date for filing the return.
The respondent’s counsel, Shri Anuj Garg, Sr. DR, argued that the disallowance was justified based on the amendments made to Sections 36(1)(va) and 43B of the Act by the Finance Act, 2021. However, he acknowledged that these amendments are applicable from assessment year 2021-22 onwards.
The tribunal, after considering the arguments and reviewing the relevant legal provisions and precedents, observed that the amendments made by the Finance Act, 2021, explicitly state that they are effective from April 1, 2021, and apply to assessment years 2021-22 and onwards. Therefore, these amendments were not applicable to the assessment year 2017-18 in question.
The tribunal referred to several judgments, including those by the ITAT Benches of Kolkata, Hyderabad, and Jodhpur, which consistently held that the amendments are prospective and do not apply to earlier assessment years. The tribunal also cited the decision of the Hon’ble Delhi High Court in the case of CIT vs. AIMIL Ltd., which supported the appellant’s contention that contributions made before the due date for filing the return are allowable deductions.
The tribunal concluded that the interpretation of Section 36(1)(va) by the lower tax authorities was incorrect. Since the appellant had deposited the employees’ contributions before the due date for filing the return under Section 139(1), the disallowance was not justified. The tribunal set aside the order of the CIT(A) and directed the Assessing Officer to delete the addition of Rs. 6,12,715/-.
Order pronounced in the open court on September 12, 2022.
Signed by:
Shamim Yahya, Accountant Member
Anubhav Sharma, Judicial Member
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