This article delves into ITA No. 1897/DEL/2020, involving Allied Medical Ltd, New Delhi, and the Assessing Officer (AO), Circle 2(1), New Delhi. The case pertains to the Assessment Year (AY) 2018-19 and was filed on November 24, 2020, with the final order pronounced on August 16, 2022. The core issue in this case revolves around the disallowance of employee contributions for Provident Fund (PF) and Employee State Insurance (ESI) made after the due date under the respective Acts but before the due date of filing the return of income under the Income Tax Act.
Allied Medical Ltd, the appellant, contested the AO Circle 2(1), New Delhi’s disallowance of Rs. 3,33,908 for late payment of employee contributions to PF and ESI. The appellant argued that the payments were made before the due date of filing the return of income, thus making them allowable expenditures.
The appellant’s representative, Shri J.P. Khanna, CA, argued that the payments were made before the due date of filing the return of income and thus should be considered allowable under the Income Tax Act. The appellant also contended that the CIT(A) erred in sustaining and enhancing the disallowance to Rs. 8,29,516 without issuing a notice of enhancement as required under Section 251(2) of the Income Tax Act.
The Senior Departmental Representative (DR), Shri Kanav Bali, argued that the disallowance was justified as the payments were made after the due dates prescribed under the relevant Acts. The DR placed reliance on the decision of the Hon’ble Delhi High Court in the case of CIT vs. Bharat Hotels 410 ITR 417, which supported the disallowance of such late payments.
The ITAT, led by Shri N.K. Billaiya, Accountant Member, and Shri Anubhav Sharma, Judicial Member, reviewed the case. The tribunal referred to the decision of the Hon’ble Jurisdictional High Court of Delhi in the case of CIT vs. AIMIL Limited 321 ITR 508, which allowed such payments if made before the due date of filing the return of income.
The ITAT concluded that no disallowance is warranted for the belated payment of employee contributions to PF and ESI if the amounts were deposited before the due date of filing the income tax return. The tribunal directed the AO to delete the impugned addition.
The ITAT’s decision underscores the importance of considering payments made before the due date of filing the return of income as allowable expenditures. It highlights the need for tax authorities to adhere to judicial precedents and legislative intent while making disallowances.
The final order, pronounced on August 16, 2022, reads:
In the result, the appeal of the assessee in ITA No. 1897/DEL/2020 is allowed.
Signed by:
(N.K. BILLAIYA) Accountant Member
(ANUBHAV SHARMA) Judicial Member
Dated: 16th August, 2022
This judgment reinforces the principle that payments made before the due date of filing the return of income should be considered allowable expenditures, ensuring fair and just tax administration.
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