Appeal in ITA No. 1625/DEL/2022: Examination of Disallowances under Sections 43B and 36(1)(va)

In the landmark case of ITA No. 1625/DEL/2022, the Income Tax Appellate Tribunal, Delhi Bench, addressed the intricate issues surrounding the disallowances under sections 43B and 36(1)(va) of the Income Tax Act, 1961. This case pits the Assistant Commissioner of Income Tax (ACIT) Circle-1(1), Gurgaon, against Bellsonica Auto Component India Private Limited, a Gurgaon-based entity, for the Assessment Year 2018-19, resulting in a nuanced judgment that has far-reaching implications for taxation jurisprudence.

The appeal filed by the Revenue challenges the order of the National Faceless Appeal Centre, Delhi, which had deleted disallowances amounting to significant sums under sections 43B and 36(1)(va) based on various grounds, igniting a legal debate on the interpretation and applicability of these sections.

The Revenue’s appeal articulated concerns over the deletion of an addition of Rs. 1,79,16,137/- disallowed u/s 43B, which pertains to certain deductions only being allowed upon actual payment. Secondly, the controversy extended to the disallowance of Rs. 43,26,453/- made under section 36(1)(va), related to the payment of employees’ contributions to provident funds and ESI beyond the prescribed due dates.

The respondent, Bellsonica Auto Component India Pvt. Ltd., defended the deletions made by the CIT(A), arguing that the disallowed amounts under both sections were, in fact, justly deleted in line with the legislative intent and judicial precedents.

The Tribunal’s perusal of the appeals and cross objections brought forth several pivotal discussions. Regarding the disallowance under section 43B, the essence of contention was the timely payment of certain dues which the Act mandates for claiming deductions. The deliberations underscored that if such payments, specifically bonuses in this case, were made before the due date of tax filing, they should be allowed as deductions.

For the disallowance under section 36(1)(va), the debate revolved around whether contributions made by employers to employees’ provident funds after the specified dates, but before tax filing, qualify for deductions. The Tribunal judiciously assessed the applicability of the cited sections and the amendments thereto, in alignment with the precedents set by higher judiciary verdicts, notably the Supreme Court’s stance in Checkmate Services Pvt. Ltd. vs. CIT-1.

The Tribunal’s decision to partially allow the appeal for statistical purposes, emphasizing the need for re-examination of specific disallowances by the Assessing Officer, underscores the complexity and the need for meticulous consideration of the facts and laws governing tax deductions on disallowances under sections 43B and 36(1)(va).

In its conclusion, the Tribunal’s nuanced approach in ITA No. 1625/DEL/2022 showcases the dynamic interpretation of tax laws, serving as a critical precedent for future taxation disputes. The formal dismissal of the Cross Objection No. 114/Del/2022 by the respondent further aligns with the intricate legal ballet between statutory provisions and judicial discretion, marking a significant development in the lexicon of income tax jurisprudence.

Appeal in ITA No. 1625/DEL/2022: Examination of Disallowances under Sections 43B and 36(1)(va)