Case Number: ITA 1206/DEL/2021
Appellant: Suman Saraswat, New Delhi
Respondent: CPC, ITD, Bangalore
Assessment Year: 2019-20
Case Filed on: 2021-09-23
Order Type: Final Tribunal Order
Date of Order: 2022-03-28
Pronounced on: 2022-03-28
In the Income Tax Appellate Tribunal, Delhi Bench ‘SMC’, New Delhi, the case of Suman Saraswat (the appellant) versus the CPC, ITD, Bangalore (the respondent) involved an appeal regarding the disallowance of PF and ESI contributions for the assessment year 2019-20.
This appeal was directed against the order passed by the learned CIT(A), National Faceless Appeal Centre, Delhi dated 29.07.2021.
The primary issue in this appeal was the disallowance of Rs. 21,45,553/- under Section 36(1)(va) of the Income Tax Act, 1961, on account of the delayed deposit of employees’ contributions to PF and ESI. The Central Processing Centre (CPC), Bengaluru, via intimation dated 18.11.2019 under Section 143(1) of the Income Tax Act for the assessment year 2019-20, made adjustments by disallowing the expenditure due to the late deposit.
This disallowance was confirmed by the CIT(A) on the premise that the contributions were not deposited by the due date as prescribed in the respective acts. Aggrieved by this decision, the appellant, Suman Saraswat, filed an appeal before the tribunal.
The appellant’s representative argued that since the employees’ contributions to PF and ESI were paid before the due date of filing the return under Section 139(1) of the Income Tax Act, the disallowance was unwarranted. They relied on various judicial decisions supporting this view.
On the other hand, the department’s representative contended that the disallowance was justified because the contributions were not deposited by the due dates specified in the respective acts.
After considering the rival arguments and perusing the record, the tribunal noted that it was undisputed that the contributions were deposited before the due date of filing the return, though after the due dates specified in the respective acts.
The tribunal referred to several judicial decisions that have consistently held that if employees’ contributions to PF and ESI are deposited before the due date of filing the return, no disallowance under Section 36(1)(va) can be made. They also noted that the amendment to Sections 43B and 36(1)(va) by the Finance Act, 2021, is prospective and applies only from 01.04.2021.
In the final judgment pronounced on March 28, 2022, the Income Tax Appellate Tribunal, Delhi Bench ‘SMC’, ruled in favor of the appellant, Suman Saraswat. The tribunal directed the Assessing Officer to delete the disallowance of Rs. 21,45,553/-.
This case reaffirms that contributions to PF and ESI deposited before the due date of filing the return are allowable deductions and that the amendments brought by the Finance Act, 2021, are prospective.
Tribunal Member:
Shri R.K. Panda, Accountant Member
Date of Pronouncement: March 28, 2022
The tribunal’s order was pronounced in the open court, bringing closure to the appeal in favor of Suman Saraswat.
Disallowance of PF and ESI Contributions: Suman Saraswat vs CPC, ITD
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