Case Number: ITA 1072/DEL/2021
Appellant: Hari Om Anand And Son, Meerut
Respondent: ACIT, Circle-1, Meerut
Assessment Year: 2019-20
Case Filed on: 2021-09-08
Order Type: Final Tribunal Order
Date of Order: 2022-02-28
Pronounced on: 2022-02-28
This case examines the decision of the Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘G’ regarding the disallowance of employee contributions to ESI and EPF due to delays in deposit. The case involves the appellant, Hari Om Anand And Son, Meerut, challenging the disallowance made by the Assessing Officer (AO), ACIT, Circle-1, Meerut, for the assessment year 2019-20.
Hari Om Anand And Son, Meerut, filed its income tax return for the assessment year 2019-20. The return revealed that there were delays in depositing employee contributions towards ESI and EPF. The AO disallowed these contributions under Section 36(1)(va) of the Income Tax Act, 1961, citing delays in deposit beyond the due date as prescribed under the ESI and EPF Acts.
The appellant argued that although there were delays in depositing employee contributions, all amounts were paid before the due date of filing the income tax return as specified under Section 139(1) of the Income Tax Act. They contended that such contributions should be allowed as deductions based on precedents set by various ITAT benches and High Courts.
The respondent, represented by Shri Umesh Takyar, Sr. DR, maintained that the disallowance under Section 36(1)(va) was justified because the contributions were not deposited within the due dates specified under the respective Acts, regardless of whether they were deposited before the due date for filing the income tax return.
The Tribunal, comprising Sh. Saktijit Dey, Judicial Member, and Dr. B. R. R. Kumar, Accountant Member, reviewed the case through video conferencing. They analyzed various precedents, including:
The Tribunal noted that various benches have consistently held that employee contributions to ESI and EPF, if paid before the due date of filing the income tax return under Section 139(1), are allowable deductions and should not be disallowed merely due to delays beyond the statutory due dates.
The Tribunal also examined relevant High Court and Supreme Court judgments, including:
These judgments emphasized that while the statutory due dates for deposits are crucial, the overarching principle is that if the contributions are deposited before the due date of filing the return, they should be allowed as deductions to avoid penalizing employers unduly.
The Tribunal further referred to the Finance Act, 2021, which introduced clarifications that Section 43B does not apply to employee contributions under Section 36(1)(va). The legislative intent highlighted the distinction between employer and employee contributions and underscored the importance of timely deposits to prevent employers from misusing employee funds.
Based on the analysis, the Tribunal ruled in favor of the appellant, Hari Om Anand And Son, Meerut. The Tribunal held that since the employee contributions were deposited before the due date of filing the return, the disallowance under Section 36(1)(va) was not warranted.
In conclusion, the appeals of the assessee were allowed, and the appeals of the Revenue were dismissed.
Order Pronounced in the Open Court on 28/02/2022.
Judicial Member: Sh. Saktijit Dey
Accountant Member: Dr. B. R. R. Kumar
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