Allowance of Employees’ Contribution to PF/ESIC Upheld in ITA 1276/DEL/2022
The Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘G’, in a landmark ruling regarding case number ITA 1276/DEL/2022 between Micro Rubber Industries P. Ltd., and ITO, Ward-17(2), New Delhi, has allowed the appeal filed by the appellant, concerning the assessment year 2018-19. This pivotal judgment sheds light on the contentious issue surrounding the disallowance of employees’ contributions to Provident Fund (PF) and Employee State Insurance Corporation (ESIC), highlighting the tribunal’s stance on adherence to statutory due dates versus actual payment dates for the purpose of claiming deductions under the Income Tax Act.
Background of the Case
Micro Rubber Industries P. Ltd., based in Delhi, contested the disallowance made by the Income Tax Officer (ITO), Ward-17(2), New Delhi regarding the employees’ contributions to PF/ESIC. The crux of the appeal was whether the late deposit of employees’ contributions to PF/ESIC could be permitted as a deduction if such contributions were made before the due date of filing the return of income under Section 139(1) of the Income Tax Act, despite failing to comply with the prescribed due dates under the relevant Acts governing such contributions.
Judgment and Analysis
The tribunal, in its judgment, thoroughly deliberated on the legal provisions, prior case laws, and the submissions made by the parties. It underscored the significance of the judicial pronouncements that have settled the issue in favor of the assessee in similar circumstances. One of the pivotal references made was to the judgment of the Hon’ble Jurisdictional High Court of Delhi in the case of PCIT vs. Pro Interactive Service (India) Pvt.Ltd., which aligned with the assessee’s contention that if the payments are made before the due date for filing the return of income, then such payments should be allowed as deductions.
Furthermore, the bench also highlighted the amendments brought by the Finance Act, 2021. It noted that these amendments apply prospectively and, hence, would not affect the assessment year in question. The crucial aspect of the ruling emphasized that the legislative intent was to ensure deductions for actual payments made.
The tribunal conclusively found that the appellant had indeed deposited the contributions before the due date of filing the return of income and, as such, was entitled to claim deductions for the same. This interpretation acts as a reaffirmation of the principle that compliance with substance over form should be the guiding factor in the evaluation of such cases.
Impact of the Ruling
The ruling in ITA 1276/DEL/2022 is a significant milestone that provides clarity and relief to taxpayers regarding the allowability of employees’ contributions to PF/ESIC as deductions. It assures taxpayers that adherence to the due date of filing the return of income for depositing employees’ contributions holds paramount importance in the eyes of the law, rather than strict compliance with the due dates prescribed by other relevant Acts.
This judgment serves as a guiding beacon for both taxpayers and practitioners in understanding the implications of the timing of such contributions and reiterates the judiciary’s approach towards ensuring justice and fairness in the interpretation of tax laws.
Conclusion
In conclusion, the ITAT Delhi’s decision in the case of Micro Rubber Industries P. Ltd. vs. ITO, Ward-17(2), New Delhi, symbolizes a progressive approach towards tax litigation, emphasizing the essence of genuine compliance. It accentuates that timely payment before the deadline for filing returns, even if belated as per other statutory obligations, should not preclude the entitlement to claim deductions, thus offering a sigh of relief to the industry stakeholders.