This article examines the decision of the Income Tax Appellate Tribunal (ITAT) in the case of Vigilant Security Placement & Detective Services Pvt. Ltd. versus the DCIT, Circle-16(1), New Delhi, focusing on the assessment year 2019-20. The appeal concerns the disallowance of Rs.2,65,53,841 on account of delayed deposit of employees’ contributions to provident fund (PF) and Employees’ State Insurance (ESI).
The Central Processing Centre (CPC) initially found that the company had claimed deductions for employees’ contributions to PF and ESI but had not deposited these amounts within the due date as prescribed by the relevant acts. The case was escalated after the first appellate authority upheld the disallowance, leading to the company’s appeal to the ITAT.
During the proceedings, the company argued that the contributions were deposited within the due dates if considered from the date the salaries were disbursed. The ITAT directed the Assessing Officer to examine the company’s claim regarding the timing of these deposits, referencing the provisions under the PF and ESI Acts. The ITAT’s decision was influenced by recent Supreme Court judgments, which clarified that delayed contributions should not be deductible.
The ITAT’s directive to re-examine the timing of the contributions highlights the complexities involved in interpreting statutory due dates for depositing employee contributions to PF and ESI. This case is significant as it underscores the stringent requirements for compliance with employee benefit contributions and the potential for substantial financial implications if these are not met. The final decision could have broader implications for how businesses manage payroll and compliance with employee benefit laws.
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