The dispute revolves around the ITA No. 1676/DEL/2021 for the assessment year 2019-20 where VHS Enterprises contests disallowances by the National Faceless Appeal Centre (NFAC) concerning delayed contributions to Provident Fund (PF) and Employees’ State Insurance (ESI) for the sum of Rs.14,29,600.
This case was heard by the ITAT Delhi Bench ‘F’, under the membership of Shri Saktijit Dey, Judicial Member, and Shri N.K. Billaiya, Accountant Member. The primary issue was whether delayed payments of employee contributions to PF and ESI, although made before the statutory due date of filing the return under Section 139(1) of the Income Tax Act, should be disallowed when they were not deposited within the time limits set by respective employment laws.
Arguments focused on the interpretation of Section 36(1)(va) juxtaposed with the judicial precedents set by various High Courts and the ITAT itself. The bench considered the precedents and recent amendments brought by the Finance Act 2021, ultimately aligning with the view that if such contributions were remitted before the due date of filing the income tax returns, no disallowance should be applied, reversing the initial disallowance for the assessment year 2019-20.
The decision is crucial for employers who face similar disallowances due to timing discrepancies between the statutory and tax filing deadlines. It underscores the importance of understanding nuanced legislative changes and judicial interpretations in tax law, offering a significant precedent for future cases involving delayed contributions to employee welfare funds.
The tribunal’s decision provided relief to VHS Enterprises by allowing deductions for the contested fiscal year, emphasizing adherence to judicial precedents and legislative intent behind tax deductions for employee contributions.
Order pronounced in the open court on 28th March, 2022.
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