The case number ITA 1727/DEL/2020 was filed by Bindal Apparels Pvt Ltd, New Delhi against the DCIT CPC, Bangalore. This appeal pertains to the assessment year 2018-19 and was filed on October 19, 2020. The final order was pronounced on February 16, 2023, by the Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘A’. The tribunal’s decision addresses the disallowance of Provident Fund (PF) and Employee State Insurance (ESI) payments made beyond the due date specified under the respective acts.
Appellant: Bindal Apparels Pvt Ltd, located at LGF, Plot No. 12, V3S Mall, District Centre, New Delhi-110092 (PAN: AAACB5289R).
Respondent: DCIT CPC, Bangalore.
The case was heard by Sh. C. M. Garg, Judicial Member, and Dr. B. R. R. Kumar, Accountant Member.
The appeal filed by Bindal Apparels Pvt Ltd was against the disallowance of PF and ESI payments made beyond the due date specified under the respective acts. The disallowance was made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals), leading to the current appeal before the ITAT.
The appellant argued that the disallowance was not justified as the payments were made before the filing of the return of income and should be allowed as deductions.
The appellant’s representative, Sh. Sujit Kr. Yadav, Accountant, argued that the disallowance of PF and ESI payments was not justified as the payments were made before the filing of the return of income. He contended that various High Courts have ruled in favor of the assessee in similar cases, allowing such payments as deductions if made before the filing of the return.
The respondent, represented by Sh. Kanv Bali, Sr. DR, maintained that the disallowance was justified as the payments were made beyond the due date specified under the respective acts.
The tribunal reviewed the arguments and evidence presented by both parties. It was observed that the issue of disallowance of PF and ESI payments has been settled in favor of the revenue by the Hon’ble Supreme Court in the case of Checkmate Services P. Ltd. vs. Commissioner Of Income Tax-I in CA No. 2833/2016 vide order dated October 12, 2022. The Supreme Court held that employers must deposit the employee’s contribution towards EPF/ESI on or before the due date for availing of the deduction.
The tribunal noted that the Hon’ble Apex Court’s decision emphasized the distinction between the employer’s contribution and the employee’s contribution. The employee’s contribution is deemed as income since it is deducted from the employee’s salary and held in trust by the employer. Therefore, it must be deposited on or before the due date specified under the respective acts to be eligible for deduction.
The Supreme Court’s decision effectively overruled the earlier judgments by various High Courts, including those of Bombay, Himachal Pradesh, Calcutta, Guwahati, and Delhi, which had favored the assessee.
In light of the Supreme Court’s ruling, the tribunal concluded that the disallowance of PF and ESI payments made beyond the due date was justified. The tribunal dismissed the appeal filed by Bindal Apparels Pvt Ltd, upholding the disallowance made by the AO.
As a result, the appeal filed by Bindal Apparels Pvt Ltd (ITA No. 1727/DEL/2020) for the assessment year 2018-19 was dismissed.
The order was pronounced in the open court on February 16, 2023, by the tribunal members, Sh. C. M. Garg, Judicial Member, and Dr. B. R. R. Kumar, Accountant Member.
Conclusion: This case underscores the importance of adhering to the statutory due dates for depositing employee contributions towards PF and ESI. The tribunal’s decision, in line with the Supreme Court’s ruling, highlights that such payments must be made on or before the due date specified under the respective acts to be eligible for deduction, ensuring compliance with the legal requirements.
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