Case Analysis: Allowability of Employees’ Contribution to PF/ESIC in MH Exports vs. ITO, Ward-1(1), Moradabad for AY 2019-20

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH ‘G’, NEW DELHI

Before Shri C.N. Prasad, Judicial Member and Shri Pradip Kumar Kedia, Accountant Member

Case Overview

Case Number: ITA 1292/DEL/2022
Appellant: MH Exports, Moradabad
Respondent: ITO, Ward-1(1), Moradabad
Assessment Year: 2019-20
Result: Allowed

Introduction

The case of MH Exports versus ITO, Ward-1(1), Moradabad, draws attention to a pivotal issue concerning the taxation realm – the allowability of employees’ contribution to Provident Fund (PF) and Employees’ State Insurance (ESIC). This issue has been a topic of significant debate and legal scrutiny, with implications for both employers and employees under the Indian Income Tax framework.

Background

The genesis of this legal battle lies in the Income Tax Department’s disallowance of the claim made by MH Exports for the deduction of employees’ contributions to PF/ESIC for the assessment year 2019-20. The contention from the revenue side was primarily based on the timing of these contributions, asserting that the deductions were inadmissible due to the delay in depositing the amounts to the respective funds.

The appellant, MH Exports, challenged the order passed by the lower appellate authorities, leading to the escalation of the matter to the Income Tax Appellate Tribunal (ITAT). The crux of the argument revolved around the interpretation of Section 2(24)(x) read with Section 36(1)(va) of the Income Tax Act, 1961, concerning the due dates for depositing the employees’ contributions to provident funds and state insurance schemes.

Legal Proceedings and Deliberations

The Tribunal’s bench, after meticulous examination of the arguments presented by both sides, delved into the legal precedents and the pertinent sections of the Income Tax Act. The discussions highlighted the legislative intent behind these provisions, aiming to ensure that employees’ welfare contributions are made timely. However, the Tribunal also recognized the practical challenges and inadvertent delays that might occur in such processes.

Significantly…

Case Analysis: Allowability of Employees’ Contribution to PF/ESIC in MH Exports vs. ITO, Ward-1(1), Moradabad for AY 2019-20