This article explores ITA No. 1892/DEL/2020, involving Indo States Exports, Delhi, and the Assistant Commissioner of Income Tax (ACIT), Circle-28(1), New Delhi. The case concerns the Assessment Year (AY) 2018-19, was filed on November 23, 2020, and the final order was pronounced on June 30, 2021. The core issue revolves around the disallowance of employee’s PF and ESI contributions under Section 36(1)(va) of the Income Tax Act.
Indo States Exports is engaged in the business of exports. For AY 2018-19, the assessee filed its return of income declaring a certain amount as income. However, during the processing of the return under Section 143(1), an addition of Rs. 3,01,631/- was made on account of the delayed payment of employee’s contribution towards Provident Fund (PF) and Employees’ State Insurance (ESI) beyond the due date as per the respective Acts, but within the time allowed for filing the Income Tax Return (ITR) under Section 139(1) of the Income Tax Act.
The assessee contended that the authorities were not justified in disallowing the claim regarding employee’s contributions. The learned Counsel for the assessee argued that the issue is covered by the latest judgment of the Hon’ble Delhi High Court in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd. (ITA No. 983/2018), where it was held that contributions made before the due date of filing the ITR are allowable.
The Senior Departmental Representative (DR) opposed the submissions of the assessee and supported the orders of the lower authorities, which relied on the decision in the case of Bharat Hotels Ltd. (2019) 103 Taxmann.com 295 (Delhi).
The ITAT, comprising Shri Kul Bharat, Judicial Member, reviewed the case. The tribunal noted that the learned CIT(A) rejected the claim of the assessee based on the judgment in the case of Bharat Hotels Ltd. However, the tribunal observed that the Hon’ble Delhi High Court in a later judgment dated September 10, 2018, in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd. held that contributions made before the due date of filing the ITR are allowable, thereby covering the issue against the Revenue.
The ITAT concluded that in view of the judgment in the case of Pro Interactive Service (India) Pvt. Ltd., the addition made by the AO was not justified. The tribunal directed the AO to delete the addition of Rs. 3,01,631/-.
The ITAT’s decision underscores the importance of adhering to judicial precedents, especially in matters related to the disallowance of employee’s contributions towards PF and ESI. The judgment highlights that contributions made before the due date of filing the ITR are allowable, providing clarity on the issue.
The final order, pronounced on June 30, 2021, reads:
In the result, the appeal filed by the assessee is allowed.
Signed by:
(KUL BHARAT) Judicial Member
Dated: 30th June, 2021
This judgment reiterates the legislative intent to allow expenditure only when payment is actually made and aligns with the principle that belated payment of employee’s contributions, if made before the due date of filing the ITR, should not be disallowed.
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