This article provides an in-depth review of the proceedings and judgment of the Income Tax Appellate Tribunal (ITAT) Delhi in the case of ITA No. 1853/DEL/2020, where Vansh Jain appealed against the disallowance of deductions related to employee contributions to PF & ESI for the assessment year 2018-19 by the ITO Ward – 28(1), New Delhi.
Vansh Jain, the appellant, filed his return of income on October 31, 2018, declaring a total income of Rs.20,17,920/-. The Centralized Processing Centre (CPC) processed the return and made an adjustment of Rs.3,26,330/- on account of delayed payment of employee contributions to PF & ESI, resulting in a revised income of Rs.23,44,250/-. Jain subsequently filed a rectification application under section 154 of the Income-tax Act, 1961, claiming that the contributions had been paid before the due date for filing the return under section 139(1). The CPC, however, rejected the rectification application.
The case was heard by the Delhi Benches “SMC-1” of the Income Tax Appellate Tribunal via video conferencing, with Shri R.K. Panda, Accountant Member, presiding. The tribunal’s final order was pronounced on October 13, 2021, addressing the procedural and substantive issues surrounding the disallowance of the claimed deductions.
Aggrieved by the CPC’s decision, Vansh Jain appealed to the Commissioner of Income-tax (Appeals) [CIT(A)]. He argued that the contributions were made before the due date of filing the income tax return and relied on the decision of the Hon’ble Delhi High Court in CIT vs. AIMIL Ltd. [2010] 321 ITR 508 (Del.) and other similar judgments. However, the CIT(A) was not convinced and upheld the CPC’s disallowance, citing the decision in CIT vs. Bharat Hotels Ltd. [2019] 410 ITR 417 (Del.), which supported the disallowance of delayed contributions.
Vansh Jain then appealed to the ITAT, challenging the CIT(A)’s decision. The core of his argument was that the contributions were made before the due date of filing the return under section 139(1), thus qualifying for deduction as per several tribunal and high court decisions.
The appellant’s counsel, Shri Nem Singh, argued that the amendments made to sections 36 and 43B of the Income-tax Act by the Finance Act, 2021, which took effect from April 1, 2021, were prospective and did not apply to the assessment year 2018-19. He cited multiple tribunal decisions that supported the allowance of deductions for contributions made before the due date of filing the return, even if they were delayed under the respective statutes.
Shri Rajesh Kumar Dhanesta, Senior Departmental Representative (DR), argued that the appellant had failed to make the contributions within the statutory due dates and thus, the disallowance was justified. He emphasized that the Finance Act, 2021, clarified the legislative intent, and the belated payments should not be allowed as deductions.
The ITAT examined the arguments and evidence presented by both sides. It noted that the appellant had indeed made the contributions before the due date for filing the return under section 139(1) but beyond the due dates prescribed under the respective PF & ESI statutes.
The tribunal referred to several consistent decisions of various benches, including:
These decisions consistently held that employee contributions to PF & ESI, if paid before the due date of filing the income tax return, were allowable deductions.
The tribunal also considered high court decisions, including:
These judgments supported the view that contributions paid before the due date for filing the return under section 139(1) should be allowed as deductions.
The tribunal acknowledged the amendments introduced by the Finance Act, 2021, but clarified that these amendments applied prospectively from April 1, 2021, and were not relevant to the assessment year 2018-19.
The ITAT concluded that the appellant, Vansh Jain, had made the employee contributions to PF & ESI before the due date for filing the income tax return, and thus, the disallowance was not justified. The tribunal set aside the order of the CIT(A) and directed the Assessing Officer to delete the disallowance of Rs.3,26,330/-. This decision reinforces the consistent legal interpretation that contributions made before the due date of filing the return are allowable deductions.
Order pronounced in the open court on October 13, 2021.
Signed by:
Shri R.K. Panda, Accountant Member
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