Appeal Allowed for MH Exports in Case Against ITO Ward-1(1), Moradabad for AY 2018-19

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH ‘G’, NEW DELHI

Case Number: ITA 1265/DEL/2022

BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER

Appellant: MH Exports, Opp. Lal Mandir, Moradabad
Respondent: ITO, Ward-1 (1), Moradabad

Assessment Year: 2018-19
Result: Allowed

Summary

The Income Tax Appellate Tribunal (ITAT), Delhi, deliberated on the appeals filed against the orders passed by the appellate authorities for various assessment years. The focal point of these appeals included the correctness of disallowance of amounts under section 2(24)(x) read with section 36(1)(va) towards employees’ contribution to PF/ESIC. The tribunal observed that the essential issue was whether late payments of these contributions could be allowed if made before the filing of income tax returns, despite being past the due date specified under the respective acts.

The tribunal noted that the contention of allowing these contributions as deductions, albeit made late, has been supported by various judicial precedents, notably the ruling by the Hon’ble Jurisdictional High Court of Delhi in the case of PCIT vs. Pro Interactive Service (India) Pvt.Ltd. It was clearly highlighted that the legislative intent behind these provisions was to ensure that the expenditures were allowed only when the payment had actually been made, not to treat belated payments as deemed income under section 2(23)(x) of the Act.

Furthermore, the tribunal addressed the amendments introduced by the Finance Act 2021, clarifying that these changes were to be applied prospectively from the assessment year 2021-22 onwards, thus not affecting the current proceedings for the assessment year 2018-19.

Highlighting the absence of any contrary material by the Revenue to challenge the aforementioned judicial positions, and considering the assurance that the employees’ contributions were deposited before the due date of filing the income tax return as stipulated under section 139(1) of the Act, the tribunal found no justification in denying the deduction claims by the assessee. Consequently, the appeals filed by the assessees, including MH Exports for the assessment year 2018-19, were allowed, thereby delivering a significant verdict in favor of the appellant.

Conclusion

This landmark judgment reinforces the principle that compliance with the procedural timelines for the deposit of employees’ contributions to PF/ESIC, if made before the filing of the income tax return, should not prejudice the assessee’s right to claim deductions. It calls for a balanced interpretation of the statutory provisions, aligning with the judicial precedents and the legislative intent behind these laws.

Order pronounced in the open court on 20.06.2022.

Appeal Allowed for MH Exports in Case Against ITO Ward-1(1), Moradabad for AY 2018-19