Case Number: ITA 1480/DEL/2021
Appellant: Nishu Singh, Delhi
Respondent: Circle-49(1), New Delhi
Assessment Year: 2018-19
Case Filed On: 2021-10-21
Order Type: Final Tribunal Order
Date of Order: 2022-02-28
Pronounced On: 2022-02-28
The case revolves around the disallowance of employees’ contributions to ESI and EPF under Section 36(1)(va) of the Income Tax Act, 1961. Nishu Singh, the appellant, had deposited the employees’ contributions to ESI and EPF beyond the due dates prescribed under the respective Acts but before the due date for filing the income tax return.
Section 36(1)(va) deals with the contributions made by employees to various welfare funds. According to this section, any sum received by the employer from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees’ State Insurance Act, 1948, or any other fund for the welfare of such employees, is allowed as a deduction only if it is credited by the employer to the employees’ account in the relevant fund before the due date.
Section 43B of the Income Tax Act allows certain deductions only on actual payment. This section applies to the employer’s contribution to welfare funds. However, some courts have applied the provisions of Section 43B to employees’ contributions as well, leading to conflicting decisions.
The Tribunal examined various judgments and amendments related to this issue. It noted that:
Based on these findings, the Tribunal concluded that the delayed payment of employees’ contributions to ESI and EPF is not allowable as a deduction under Section 36(1)(va) if it is not deposited within the due dates prescribed under the respective Acts, even if it is deposited before the due date of filing the income tax return.
Considering the legal precedents and amendments, the Tribunal dismissed the appeals filed by the Revenue and allowed the appeals filed by the assessee. The Tribunal held that no disallowance is called for in cases where the employees’ contributions are deposited before the due date of filing the income tax return.
The judgment in the case of Nishu Singh vs. Circle-49(1), New Delhi, provides clarity on the disallowance of employees’ contributions to ESI and EPF under Section 36(1)(va). It reiterates that timely deposit of these contributions is crucial for claiming deductions and aligns with the amendments introduced by the Finance Act, 2021. This case sets a precedent for future disputes regarding the allowability of such deductions.
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