Case Number: ITA 2075/DEL/2022
Appellant: ITO, Ward-4(1), Gurgaon
Respondent: Sandeep Sandha, Gurgaon
Assessment Year: 2017-18
Case Filed On: 2022-08-30
Order Type: Final Tribunal Order
Date of Order: 2022-09-21
Date of Pronouncement: 2022-09-21
Result: Appeal Dismissed
The case involves the appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], Gurgaon, dated 15.04.2019, 20.05.2020, and 21.09.2021, for the assessment years 2017-18, 2019-20, and 2020-21. The appeal challenges the reversal of disallowance made by the Assessing Officer (AO) under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961, on account of delayed deposit of employee’s contribution towards PF and ESIC.
The Revenue’s grounds of appeal in all three cases challenge the CIT(A)’s decision to reverse the AO’s disallowance of the employee’s contribution to Provident Fund (PF) and Employee State Insurance Corporation (ESIC) deposited after the due date prescribed under the relevant Act/Rules.
The AO argued that the employee’s contribution was deposited after the due date prescribed under the relevant Act/Rules, hence disallowable under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act.
The respondent contended that the employee’s contribution to PF and ESIC was deposited before the due date of filing of the return of income under Section 139(1) of the Income Tax Act, thereby eligible for deduction.
Upon hearing both parties and examining the records, the Tribunal observed that the AO disallowed the contributions on the grounds of late deposit. However, the CIT(A) reversed the disallowance, citing compliance with the due date under Section 139(1) for filing the return of income.
The Tribunal noted the Delhi High Court’s judgment in Pr.CIT vs. Pro Interactive Service (India) Pvt. Ltd., which supported the respondent’s argument. The High Court ruled that the legislative intent was to ensure the amount paid is allowed as an expenditure only when payment is actually made, and belated payment of employee’s contributions should not be deemed as income under Section 2(24)(x).
The Tribunal agreed with the CIT(A) that the amendments to Section 36(1)(va) and Section 43B by the Finance Act, 2021, apply prospectively from AY 2021-22 onwards. Therefore, the disallowance for AY 2017-18, 2019-20, and 2020-21 cannot be sustained based on these amendments.
The Tribunal dismissed the Revenue’s appeals for all three assessment years, affirming the CIT(A)’s orders to allow the deductions for the delayed deposit of employee’s contributions towards PF and ESIC.
The order was pronounced in the open court on 21/09/2022.
[CHANDRA MOHAN GARG] JUDICIAL MEMBER
[PRADIP KUMAR KEDIA] ACCOUNTANT MEMBER
DATED: 21/09/2022
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