This document provides a detailed analysis of the Income Tax Appellate Tribunal’s final decision on the case between DCIT and DEC Property Management (India) Pvt. Ltd., concerning the assessment year 2019-20. The case number is ITA 2667/DEL/2022, presided over by Accountant Member Shri Anil Chaturvedi and Judicial Member Shri Anubhav Sharma.
The appeal filed by the Revenue, DCIT, was directed against the order dated 08.09.2022 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, relating to the assessment year 2019-20. The primary issue in this case was the disallowance of delayed deposit of employees’ contribution towards Provident Fund (PF) and Employees’ State Insurance (ESI) under Section 36(1)(va) of the Income Tax Act, 1961.
During the hearing on 25.05.2023, the appellant was represented by Shri Jaspal Sathi, Adv., while the Revenue was represented by Shri Javed Akhtar, CIT – D.R. The Tribunal proceeded to adjudicate the appeal based on the materials on record and submissions made by both parties.
The grounds raised by the Revenue were as follows:
The assessee, DEC Property Management (India) Pvt. Ltd., is a company that filed its return of income on 18.10.2018 for the assessment year 2018-19, declaring a total income of Rs.3,79,62,255/-. The Centralized Processing Centre (CPC), Bangalore, issued an intimation under Section 143(1) of the Act, determining the total income at Rs.1,79,37,310/- after disallowing Rs.2,00,25,945/- on account of delayed deposit of employees’ contribution towards PF/ESI.
The Revenue argued that the delayed payment of employees’ contribution to PF/ESI should be disallowed based on the Supreme Court’s decision in the case of Checkmate Services Pvt. Ltd. vs. CIT (2022) 448 ITR 518 (SC). The Revenue maintained that the CIT(A) erred in deleting the addition made by the AO.
The assessee contended that the CIT(A) was justified in deleting the addition as the payment was made before the due date of filing the return under Section 139(1) of the Act. The assessee argued that the disallowance did not fall within the purview of Section 143(1) as it was a debatable issue.
The Tribunal noted that the Supreme Court in the case of Checkmate Services Pvt. Ltd. held that the deduction for employees’ contribution to the relevant funds can only be allowed if such amount is deposited before the due date stipulated under the respective Acts. The Tribunal also referred to the decision of the Pune Bench of the Tribunal in the case of Cemetile Industries, which held that the delayed deposit of employees’ contribution cannot be allowed as a deduction and the adjustment could be made in the intimation issued under Section 143(1) of the Act.
The Tribunal concluded that the CIT(A) was not justified in deleting the addition made in the intimation issued under Section 143(1) of the Act. The Tribunal allowed the appeal of the Revenue, setting aside the order of the CIT(A).
Order pronounced in the open Court on 30.05.2023.
(ANIL CHATURVEDI)
ACCOUNTANT MEMBER
(ANUBHAV SHARMA)
JUDICIAL MEMBER
This case underscores the importance of adhering to the due dates for depositing employees’ contributions to PF/ESI as stipulated under the respective Acts. The Tribunal’s decision clarifies that the deduction for such contributions is not permissible if the deposit is made after the due date, even if it is before the filing of the return under Section 139(1) of the Act.
The appellant, DCIT, challenged the CIT(A)’s decision to delete the addition made for the delayed deposit of employees’ contributions to PF/ESI.
The Revenue argued that the CIT(A) erred in deleting the addition based on the Supreme Court’s decision in the case of Checkmate Services Pvt. Ltd. The assessee maintained that the CIT(A) was justified in deleting the addition as the payment was made before the due date of filing the return under Section 139(1).
The Tribunal referred to previous judgments and concluded that the deduction for employees’ contributions to PF/ESI is only permissible if the contributions are deposited before the due date stipulated under the respective Acts. The Tribunal found that the CIT(A)’s decision was not justified.
The Tribunal’s decision in the case of DCIT vs. DEC Property Management (India) Pvt. Ltd. reaffirms the principle that the deduction for employees’ contributions to PF/ESI is not permissible if the deposit is made after the due date stipulated under the respective Acts, even if it is before the filing of the return under Section 139(1). This decision provides clarity on the applicability of TDS provisions to similar payments, ensuring that entities are not unjustly penalized for non-deduction of TDS.
Final Tribunal Order for DCIT vs. DEC Property Management (India) Pvt. Ltd., Assessment Year 2019-20
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