The case ITA 1835/DEL/2020 involves Advance Ventilation Pvt. Ltd., which appealed against the CIT(A)’s decision sustaining the disallowance of employee contributions to welfare funds, as per the order of the Income Tax Appellate Tribunal, Delhi ‘A’ Bench.
The appeal was lodged following a disallowance made by the CPC under section 143(1) of the Income Tax Act, claiming that the payments related to PF/ESI were not made within the prescribed timelines. The primary legal contention was whether the payments made before the filing of the return of income could be considered timely and thus allowable as deductions.
The tribunal reviewed various judicial precedents, including the landmark decision in CIT vs. AIMIL Ltd, which supported the assessee’s position. The tribunal also considered amendments introduced in the Finance Act, 2021, which further clarified the treatment of employee contributions to welfare funds under the Income Tax Act.
The tribunal ruled in favor of the assessee, directing the Assessing Officer to delete the additions related to the disallowance of employee contributions. This decision was based on the interpretation that if the actual payment of employee contributions is made before the return is filed, it should be allowed as a deduction.
This decision underscores the critical nature of timely compliance with statutory provisions regarding employee contributions to welfare funds. It also highlights the evolving interpretations of these provisions, aiding taxpayers in understanding their compliance obligations under the Income Tax Act.
Advance Ventilation Pvt. Ltd. vs. DCIT on Employee Contribution Disallowance – ITA No. 1835/DEL/2020
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