A K Automatics vs. Circle, Rohtak – ITA 780/DEL/2022

Summary of Final Judgment

In the Income Tax Appellate Tribunal, Delhi Bench ‘G’, the case between A K Automatics, Rohtak and Circle, Rohtak for the assessment year 2019-20 was deliberated upon. The tribunal consisted of Honorable Shri Kul Bharat, Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member. The case was listed under case number ITA 780/DEL/2022.

The crux of the appeals across various cases, including this lead case of A K Automatics, was the issue revolving around the disallowance of employee’s contribution to PF/ESI due to delays in deposits as prescribed by the respective Acts. The tribunal clubbed these cases for convenience and a consolidated order was decided upon.

The appellant raised several grounds challenging the correctness of the order passed by the CIT(A). One of the primary contentions was the alleged violation of principles of natural justice, as the appellant argued that they were not given a proper opportunity to be heard. Additionally, there was a dispute regarding the interpretation of Sections 143(1), 36(1)(va), and 43B of the Income Tax Act, 1961, especially in light of the amendment brought by the Finance Act, 2021.

The appellants contended that there was an undue delay in the deposit of PF/ESI contributions but emphasized that all dues had been cleared before the due date of filing the return of income. They relied on various judicial pronouncements, including the decision in Azamgarh Steel & Power vs. CPC and CIT vs. AIMIL Ltd., to bolster their argument that the delay should not result in disallowance.

On the other hand, the respondents supported the decision of the lower authorities and argued for the applicability of the Finance Act, 2021 amendment to the case at hand. This amendment clarified the non-applicability of Section 43B to cases of employee contributions received after the due dates as per the relevant Acts.

After considering the submissions from both sides and reviewing the relevant judicial precedents, the tribunal concluded in favor of the assessee. It was held that as long as the contributions were deposited before the filing of the return of income, no disallowance should be made. The amendment introduced by the Finance Act, 2021, was deemed not applicable to the case since it was to take effect from a later assessment year.

The tribunal’s decision underscored the significance of the actual date of deposit of these contributions in determining the allowability of such expenses for income tax purposes. The appeals filed by A K Automatics and other assessees were thus allowed.

The order was pronounced in the open court on 19th May 2022, marking a significant decision regarding the treatment of late deposits of employee contributions towards PF and ESI for tax purposes.

A K Automatics vs. Circle, Rohtak – ITA 780/DEL/2022