Judgment Summary for ITA No. 1004/DEL/2022: Brij Gopal Construction Co. P. Ltd vs. ACIT, New Delhi

In the Income Tax Appellate Tribunal Delhi Bench ‘G’: Delhi, presided over by Shri Challa Nagendra Prasad, Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member, the case of Brij Gopal Construction Co. P.Ltd, Delhi versus ACIT, New Delhi, was concluded for the assessment year 2019-20. The verdict allowed the appellant’s claims, marking a pivotal decision in ITA No. 1004/DEL/2022.

Background

The case pertains to disallowance made under Section 36(1)(va) of the Income Tax Act, 1961, concerning the employees’ contribution to ESI and PF. The primary contention was whether the contributions deposited after the due date under relevant acts but before the filing of income tax returns under section 139(1) could be disallowed.

Decision

The tribunal acknowledged the longstanding debate surrounding the disallowance of employees’ contributions to ESI and PF. It referenced several precedent cases, including the jurisdictional High Court’s decision in the case of CIT Vs. AIMIL Ltd. and the Supreme Court’s stance in M.M. Aqua Technologies Ltd. Vs. CIT, to underscore the principle that contributions paid before the filing of the income tax return should not warrant disallowance.

Moreover, the tribunal observed that amendments brought by the Finance Act, 2021, which sought to clarify the issue, are to be applied prospectively from April 1, 2021. Accordingly, it ruled that the disallowance made under Section 36(1)(va) in respect of employees’ contributions to ESI and PF, if deposited before the due date of filing income tax returns, is not justified.

Implications

This ruling provides significant relief to taxpayers facing similar disallowances and clarifies the applicability of the relevant income tax provisions regarding employees’ contributions to welfare funds. It reinforces the principle that timely compliance in depositing employees’ contributions, as per income tax filing deadlines, protects taxpayers from disallowance under Section 36(1)(va).

Conclusion

The ITA No. 1004/DEL/2022 judgment is a landmark in interpreting the Income Tax Act provisions concerning employees’ welfare fund contributions. By allowing Brij Gopal Construction Co. P.Ltd’s appeals, the tribunal has set a precedent that emphasizes compliance with tax filing deadlines over the technical due dates specified by other statutes.

Judgment Summary for ITA No. 1004/DEL/2022: Brij Gopal Construction Co. P. Ltd vs. ACIT, New Delhi