Case Analysis: Blue Stamping & Forgings Ltd vs. ACIT, Circle-1, Faridabad – ITA No. 1305/DEL/2022

Introduction

This article delves into the detailed case analysis of ITA No. 1305/DEL/2022, wherein Blue Stamping & Forgings Ltd, based in Ballabhgarh, challenged the order passed by the ACIT, Circle-1, Faridabad for the assessment year 2019-20. The crux of the appeal was the correctness of the disallowance of a certain amount towards employees’ contribution to PF/ESIC under sections 2(24)(x) read with 36(1)(va) of the Income Tax Act, 1961.

Background

Blue Stamping & Forgings Ltd filed an appeal aggrieved by the orders of the appellate authorities. The bone of contention revolved around the disallowance made by the assessing officer concerning the employees’ contribution to PF/ESIC. The appellants argued that the contributions were deposited before the prescribed date for filing the return of income under section 139(1), despite some delays in adherence to the dates prescribed under the respective Acts.

Arguments Presented

During the proceedings, various judicial pronouncements were cited by the counsels, arguing that the issue had been settled in favor of the assessee by precedent. Notably, the Honourable Jurisdictional High Court of Delhi in the case of PCIT vs Pro Interactive Service (India) Pvt.Ltd in ITA No.983/2018, rendered a judgment that supported the assessee’s stance, emphasizing the legislative intent to allow such expenditures when the payment was actually made, irrespective of a slight delay.

Judicial Reasoning and Rationale

The tribunal meticulously analyzed the submissions, judicial pronouncements, and legislative amendments. It was concluded that the amendment brought by the Finance Act, 2021, which sought to rectify this legal loophole, was not applicable to the assessment year in question. Furthermore, the tribunal found no material evidence presented by the Revenue challenging the precedents or proving the assessee’s failure to comply with the Income Tax Act’s provisions.

Conclusion and Judgment

The tribunal, architected by Shri C.N. Prasad (Judicial Member) and Shri Pradip Kumar Kedia (Accountant Member), ruled in favor of the assessee. It was held that the AO was not justified in denying the deduction claimed on account of late deposit of PF/ESI/EPF contributions, provided they were made before filing the return of income. Accordingly, the appeal filed by Blue Stamping & Forgings Ltd was allowed, marking a significant judgment in the realm of tax litigation related to employee contributions toward provident funds and insurance schemes.

Case Analysis: Blue Stamping & Forgings Ltd vs. ACIT, Circle-1, Faridabad – ITA No. 1305/DEL/2022