Case Summary: Virender Kumar vs ITO, Gurgaon – Appeal Allowed [ITA No. 1156/DEL/2022]

Introduction

In the case of Virender Kumar vs Income Tax Officer, Ward 4(1), Gurgaon (ITA No. 1156/DEL/2022) for the assessment year 2019-20, the Income Tax Appellate Tribunal, Delhi, allowed the appeal of the appellant. This case revolves around the disallowance made under Section 36(1)(va) of the Income Tax Act, 1961 concerning employees’ contributions to ESI and PF deposited after the due date under the relevant Acts, but before the due date for filing return of income under Section 139(1) of the Act.

Case Background

The appellant, Virender Kumar, filed an appeal against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), which sustained the disallowance made by the Assessing Officer. The crux of the matter was whether employees’ contributions to ESI and PF, deposited after the due date prescribed under the relevant Acts but before the due date for filing the return of income, should be allowed as a deduction.

Tribunal’s Decision

The Tribunal, after considering various precedents and the amendments brought in by the Finance Act, 2021, decided in favor of the appellant. It was held that the disallowance of employees’ contributions to ESI and PF, if deposited before the due date for filing the return of income, is not warranted. This decision was guided by the intent to not penalize employers who deposit such contributions within the timeline for filing income tax returns, reiterating the distinction between employers and employees’ contributions towards welfare funds.

Conclusion

The Tribunal’s decision in ITA No. 1156/DEL/2022 sets a precedent concerning the treatment of employees’ contributions to ESI and PF. It clarifies that as long as such contributions are deposited before the due date for filing income tax returns, they should not be disallowed. This ruling not only provides relief to the appellant but also offers guidance on the interpretation of related income tax provisions.

Case Summary: Virender Kumar vs ITO, Gurgaon – Appeal Allowed [ITA No. 1156/DEL/2022]