Judgment on ITA No. 818/DEL/2022 – TRIO SECURITY AND INTELLIGENCE PRIVATE LIMITED vs AO Ward-25(4), DELHI for Assessment Year 2018-19

The Income Tax Appellate Tribunal, Delhi Bench ‘G’ presided over by Shri Kul Bharat, Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member, delivered a crucial verdict concerning the appeal filed by TRIO SECURITY AND INTELLIGENCE PRIVATE LIMITED against the order passed by AO Ward-25(4), Delhi for the assessment year 2018-19. The case was part of a consolidated order where various appeals were clubbed together due to the common issue of disallowance of employee’s contribution towards Provident Fund (PF) and Employee State Insurance (ESI) on account of delay in deposits as per the respective Acts.

Background: The appeals addressed the aggrievement of various assessees including TRIO SECURITY AND INTELLIGENCE PRIVATE LIMITED, against the appellate authorities’ orders for the assessment year 2018-19 regarding the disallowance of employees’ PF and ESI contributions. The issue revolved around the timing of these deposits, which despite being delayed, were completed before the due date of filing the return of income.

Legal Arguments and Tribunal’s Rationale: The tribunal noted the submission by the Learned Authorized Representative (AR) that although there was a delay in depositing the PF/ESIC Contributions, all such contributions were deposited with the appropriate authorities before the filing of the return of income. Reliance was placed on judicial precedents supporting the view that if contributions are deposited before the filing of the return of income, no disallowance should apply. The decision of the Azamgarh Steel & Power vs. CPC and CIT vs. AIMIL Ltd. was particularly noted. The bench also considered the submission of the Learned Departmental Representative (DR) but found greater merit in the arguments by the appellant’s side. Specifically, the tribunal acknowledged the jurisdictional High Court of Delhi’s ruling in PCIT vs Pro Interactive Service (India) Pvt.Ltd, which supported the appellant’s view.

Final Decision: The tribunal allowed the appeals of the assessees, including that of TRIO SECURITY AND INTELLIGENCE PRIVATE LIMITED, on the basis that the contributions towards PF and ESI, although delayed, were deposited before the due date of filing the return of income. This resolution was in align with the principle of providing relief as long as such deposits are made prior to the specified deadline.

The decision underscored the appellate tribunal’s standpoint on addressing the nuances of tax law compliance, specifically concerning the timely deposit of employees’ contributions towards statutory funds. It sets a precedent that reinforces the compliance flexibility provided that the substantive action of depositing the dues before the due date of income tax return filing is met.

The outcome of ITA No. 818/DEL/2022 offers significant insights into the interpretation of tax laws around employees’ contributions to provident funds and ESI, and the consequential provisions for their allowance or disallowance based on the timing of deposits.

Conclusion

This judgment signifies a pivotal development in the treatment of employees’ contributions towards PF and ESI concerning their tax deductibility. It reinforces the importance of adherence to statutory deadlines while also acknowledging that penal provisions would not apply if the contributions, although delayed, are made before the due date of filing the income tax return.

Judgment on ITA No. 818/DEL/2022 – TRIO SECURITY AND INTELLIGENCE PRIVATE LIMITED vs AO Ward-25(4), DELHI