GDA Security P. Ltd. vs Ward-10(1), Delhi – ITA No. 745/DEL/2022

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH ‘G’, NEW DELHI

Before Shri Kul Bharat, Judicial Member and Shri Pradip Kumar Kedia, Accountant Member

Case Number: ITA No. 745/DEL/2022

Assessment Year: 2019-20

Appellant: GDA Security P. Ltd., Delhi

Respondent: Ward-10(1), Delhi

Date of Hearing: 18.05.2022

Date of Pronouncement: 18.05.2022

Result: Allowed

This document represents the summary and the judgment of the appeals filed concerning the disallowance of employee’s contribution of PF/ESI owing to the delay in deposits as per the respective Acts for various assessment years including the leading case of ITA No. 97/Del/2022 for the Assessment Year -2019-20. The appeals were clubbed together due to the commonality of the issues involved.

The appellant, GDA Security P. Ltd., raised the issue against the confirmation of additions made by the Assessing Officer (CPC, Bangalore) on account of late deposit of employee contribution towards ESI/PF, asserting that the payments were made before the due date of filing the Income Tax Return, hence in view of Section 43B of the Income Tax Act, 1961 and considering various judicial pronouncements, such disallowance was not justified.

The tribunal, noting multiple precedents including decisions favoring the assessee where late deposits were made but before the filing of the Income Tax Return, allowed the appeals filed by the assessees. It was also observed that the legislative intent was to allow the amount as an expenditure only when the payment is actually made and not to treat belated payments of employee’s contributions as deemed income under Section 2(24)(x) of the Act.

The judgment also touched on the amendments brought by Finance Act, 2021, clarifying that it would apply prospectively from A.Y 2021-22 and does not affect the current case of the Assessment Year 2019-20. Consequently, the appeals of the respective assesses were allowed, marking a significant ruling on the timing of employee’s contribution deposit and its implications on tax deductions.

In conclusion, the tribunal’s decision on ITA No. 745/DEL/2022 along with other connected cases, underscored the principle that for the purpose of claiming deduction under the Income Tax Act, the critical factor remains the actual payment of the employees’ contribution towards PF/ESI before the due date of filing of the return of income.