ITA No. 889/DEL/2022 – Mangla Apparels India P.Ltd vs. ACIT

Understanding the Tribunal’s Decision: Mangla Apparels India P.Ltd vs. ACIT for AY 2018-19

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, passed a notable judgment in ITA No. 889/DEL/2022, involving the appellant, Mangla Apparels India Pvt. Ltd., and the respondent, Assistant Commissioner of Income Tax (ACIT), Circle-16(1), New Delhi, for the assessment year 2018-19. The case highlights critical aspects of income tax law, focusing on the disallowance made under Section 36(1)(va) of the Income Tax Act, 1961 concerning employees’ contribution to ESI and PF deposited after the due date under relevant acts but before the due date for filing the return of income under Section 139(1).

The bench, comprising Judicial Member Shri Challa Nagendra Prasad and Accountant Member Shri Pradip Kumar Kedia, deliberated on various appeals filed by different assessees against orders of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre. These appeals challenged the sustainability of disallowance made under Section 36(1)(va) concerning the late deposit of employees’ contributions to ESI and PF.

In the absence of representation from the assessee’s side and after hearing the Department’s representative, Shri Abhishek Kumar, Senior D.R., the bench proceeded to deliver its judgment. It meticulously analyzed the implications of amendments brought by the Finance Act, 2021, in Sections 36(1)(va) and 43B of the Act and concluded that the amendments are clarificatory in nature and have retrospective applicability. Thus, it allowed the appeal in favor of the assessee, setting a significant precedent.

The tribunal’s decision underscores the importance of timely compliance with the employee contribution to provident funds and ESI but also sheds light on the leeway given if such contributions are deposited before the filing of the income tax return. This judgment provides valuable insights into handling similar cases and the judicial trend in interpreting statutory provisions concerning employees’ contributions to welfare funds.

Key Takeaways from the Judgment

• The tribunal’s analysis and application of the amendments introduced by the Finance Act, 2021, to Sections 36(1)(va) and 43B, demonstrating their retrospective effect.
• An emphasis on the principle that late payment of employees’ contributions to ESI and PF, if rectified before the filing of the income tax returns, does not warrant disallowance under Section 36(1)(va).
• The judgment acknowledges the complexities involved in the interpretation of tax laws and provides a roadmap for similar disputes.

This case underscores the nuanced approach required in tax litigation and the significance of keeping abreast with legislative amendments and judicial interpretations.

ITA No. 889/DEL/2022 – Mangla Apparels India P.Ltd vs. ACIT