In the Income Tax Appellate Tribunal, Delhi Bench ‘G’, New Delhi
Case Number: ITA 1697/DEL/2021
Appellant: Finesco International, Moradabad
Respondent: ACIT-2, Moradabad
Assessment Year: 2019-20
Order Type: Final Tribunal Order
Date of Order: 2022-04-26
Pronounced On: 2022-04-26
The present appeals are filed by Finesco International, feeling aggrieved by the orders passed by the appellate authority for the assessment year 2019-20.
The issue in this case revolves around the disallowance of employee contributions to Provident Fund (PF) and Employees’ State Insurance (ESI) on account of delayed deposits as per the respective Acts. The appellant, Finesco International, contends that all contributions received from its employees were deposited with the appropriate authorities before the filing of the return of income. The main grievance of the appellant is the confirmation of additions due to the delay in deposit of these contributions.
The appellant raised the following grounds:
The appellant argued that although there was a delay in the deposit of PF/ESI contributions, all contributions received from employees were deposited before the filing of the return of income. The appellant relied on the decision of Azamgarh Steel & Power vs. CPC in ITA No.1626/Del/2020 dated 31.05.2021 and CIT vs. AIMIL Ltd. [2010] 188 Taxman 265 (Delhi), among other decisions, to support their claim that no disallowance is called for if the amounts were deposited before filing the return.
The Learned Senior Departmental Representative (Sr. DR) supported the lower authorities’ order and placed reliance on the decision of the Delhi Tribunal in the case of Vedvan Consultants Pvt. Ltd. vs DCIT in ITA No.1312/Del/2020 order dated 26.08.2021. The Sr. DR also submitted that the amendment brought out by the Finance Act, 2021 would be applicable to the present case, clarifying that provisions of Section 43B of the Act shall not apply to a sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of Clause (24) of Section 2 apply.
The tribunal noted that the issue is no longer res-integra and has been settled in favor of the assessee by various judicial pronouncements. The Hon’ble Jurisdictional High Court of Delhi in the case of PCIT vs Pro Interactive Service (India) Pvt.Ltd. in ITA No.983/2018 [Del.] order dated 10.09.2018 held:
“In view of the judgement of the Division Bench of Delhi High Court in Commissioner of Income Tax versus AIMIL Limited, (2010) 321 ITR 508 (Del.), the issue is covered against the Revenue, and therefore, no substantial question of law arises for consideration in this appeal. The legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee’s Provident Fund (EPD) and Employee’s State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x) of the Act.”
In conclusion, the tribunal held that the amendment brought out by Finance Act, 2021, does not apply to the assessment year under consideration as the notes on clauses to the Finance Bill 2021 state that the amendment will take effect from 01st April 2021 and will apply in relation to the assessment year 2021-22 and subsequent assessment years. Since the contributions were deposited before the filing of the return of income, no disallowance is called for. Consequently, the appeal filed by the assessee is allowed.
Order Pronounced in the Open Court on 26/04/2022.
Judicial Member: Sh. Kul Bharat
Accountant Member: Sh. Anil Chaturvedi
Date: 26/04/2022
Finesco International vs ACIT: Disallowance of Employee Contributions to PF and ESI
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