Date of Order: 2022-05-17
Varahamurti Flexirub Industries Pvt. Ltd., based in New Delhi, challenged the disallowance of employees’ contributions to Provident Fund (PF) and Employee State Insurance (ESI) by the CPC, Bengaluru for the assessment year 2018-19. The appeal was heard by the ITAT Delhi Bench ‘G’.
The primary issue in this case was whether the delay in depositing PF and ESI contributions could justify disallowance under Section 36(1)(va) of the Income Tax Act, despite the payments being made before the filing of the return of income.
The appellant argued that despite delays, all contributions were deposited before the due filing date of the return, citing several precedents supporting that such contributions should not be disallowed if deposited before the filing deadline. The tribunal agreed with the appellant, referencing the decision in the case of PCIT vs. Pro Interactive Service and others, which upheld that such payments, if made before the filing of the return, should not result in disallowance.
During the proceedings, discussions also touched upon the implications of the Finance Act, 2021. The tribunal noted that the amendments made by the Finance Act 2021, which clarify the non-applicability of Section 43B to certain delays, do not apply retrospectively to the assessment year in question and would not affect the appellant’s case.
The tribunal’s decision to allow the appeal has implications for the treatment of delayed PF and ESI deposits. It underscores the necessity of timely compliance while also clarifying the conditions under which penalties may not apply.
Final Judgment: The appeal of Varahamurti Flexirub Industries Pvt. Ltd. was allowed, providing significant relief and setting a precedent on the handling of similar cases in future.
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