This article provides a detailed analysis of the proceedings and final judgment in ITA No. 1880/DEL/2020, involving Vigilant Security Placement & Detective Services Pvt Ltd, New Delhi, and the Deputy Commissioner of Income Tax (DCIT), Centralized Processing Center (CPC), Bangalore. The case pertains to the Assessment Year (AY) 2018-19, was filed on November 20, 2020, and the final order was pronounced on February 14, 2022.
Vigilant Security Placement & Detective Services Pvt Ltd, the appellant, contested the disallowance of Rs. 1,78,20,549 made by the CPC Bangalore on account of delayed deposit of employees’ contributions to the Provident Fund (PF) and Employee State Insurance (ESI). The appellant also challenged the CIT(A)’s decision not to condone a 124-day delay in filing the appeal.
The appellant, represented by Dr. Rakesh Gupta, Advocate, and Shri Somil Agarwal, Advocate, argued that the employees’ contributions to PF and ESI were deposited before the due date of filing the income tax return under Section 139(1) of the Income Tax Act, despite being delayed beyond the due dates specified under the respective Acts. The appellant relied on various judicial precedents to support the claim that such contributions should be allowed as deductions if deposited before the due date of filing the return.
The respondent, represented by Shri Ajay Kumar, Sr. DR, supported the CPC’s action and the CIT(A)’s decision. The respondent argued that the contributions were deposited after the due dates specified under the respective Acts, making the disallowance justified under Section 36(1)(va) of the Income Tax Act.
The Income Tax Appellate Tribunal (ITAT), presided over by Shri Pradip Kumar Kedia, Accountant Member, and Shri Amit Shukla, Judicial Member, reviewed the facts and arguments presented. The tribunal noted that the appellant had indeed deposited the employees’ contributions to PF and ESI after the due dates prescribed under the respective Acts but before the due date for filing the return of income under Section 139(1).
The tribunal referred to the judgment of the Hon’ble Delhi High Court in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd., which held that the legislative intent was to allow the expenditure when the payment is actually made and not to treat belated payments as deemed income of the employer. The tribunal also cited the coordinate Bench’s decision in CIT vs. Dee Development Engineers Ltd., which supported the appellant’s claim under similar circumstances.
Based on the judicial precedents and the facts of the case, the tribunal held that no disallowance under Section 36(1)(va) read with Section 2(24)(x) could be made if the employees’ contributions to PF and ESI were deposited before the due date of filing the return of income. The tribunal set aside the CIT(A)’s order and allowed the grounds raised by the appellant.
The final order, pronounced on February 14, 2022, reads:
In the result, the appeal filed by the assessee is allowed.
Signed by:
Shri Amit Shukla, Judicial Member
Shri Pradip Kumar Kedia, Accountant Member
This judgment underscores the importance of adhering to the legislative intent and highlights the circumstances under which belated payments of employees’ contributions to PF and ESI can be allowed as deductions.
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