The case of Kamlesh Kumar Singh Engineers Private Limited, Panipat, against the CPC, Bengaluru, pertains to the assessment year 2019-20. The appeal was filed on June 22, 2021, under case number ITA 771/DEL/2021. The final tribunal order was pronounced on September 12, 2022.
The appellant, Kamlesh Kumar Singh Engineers Private Limited, filed an appeal against the order passed by the Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC) regarding the disallowance of Rs. 53,12,549/- on account of delayed payment of employee’s contribution towards PF and ESI.
The hearing for this case was conducted on September 12, 2022, before the Delhi ‘C’ Bench of the Income Tax Appellate Tribunal, with the order being pronounced on the same day. The case was presented by Shri Mukul, Adv., representing the assessee, and Ms. Anjula Jain, CIT DR, representing the revenue.
The key legal principles in this case revolved around the provisions of Sections 143(1) and 36(1)(va) of the Income-tax Act. The primary contention was whether the disallowance made by the CPC in the intimation issued under Section 143(1) was justified, especially concerning the amounts claimed under Section 36(1)(va) for delayed payment of employee’s contributions towards PF and ESI.
The counsel for the assessee argued that the employee’s contributions towards PF and ESIC had been paid and deposited before the due date allowed under Section 139(1) of the Act, although the payments were made beyond the due dates specified in the respective Acts. The counsel cited several judicial pronouncements, including the decision of the Hon’ble Delhi High Court in the case of Pr.CIT vs. Pro Interactive Service (India) Pvt. Ltd. (ITA No.983/2018), to support their contention that deductions are allowable under Section 36(1)(va) if the contributions are paid before the due date of filing the return of income.
The tribunal observed that the Assessing Officer had made the impugned addition on the ground that the assessee had deposited employee’s contributions towards Provident Fund and ESI after the due date prescribed under the relevant Acts/Rules. The Assessing Officer resorted to the additions under Section 36(1)(va) read with Section 2(24)(x) of the Act.
The tribunal noted that the identical issue had been decided in favor of the assessee by the Hon’ble Delhi High Court in the case of Pr.CIT vs. Pro Interactive Service (India) Pvt. Ltd. (ITA No.983/2018), wherein it was held that the legislative intent was to ensure that the amount paid is allowed as an expenditure only when payment is actually made. The court did not intend to treat belated payment of Employee’s Provident Fund (EPF) and Employee’s State Insurance Scheme (ESI) as deemed income of the employer under Section 2(24)(x) of the Act.
Respectfully following the binding precedents of the Hon’ble Delhi High Court, the tribunal directed the Assessing Officer to allow the claim of the assessee and delete the addition. The tribunal also took note of the plea of the assessee that the delayed payment of employee’s contribution to PF/ESIC is not disallowable as the amendments to Section 36(1)(va) and Section 43B effected by the Finance Act, 2021, were applicable prospectively in relation to the Assessment Year 2021-22 and subsequent years. Therefore, the claim of deduction of contribution to Employee’s State Insurance Scheme (ESI) and Provident Fund under Section 36(1)(va) could not be denied to the assessee in the Assessment Year 2019-20 based on the amendments made by the Finance Act, 2021.
The tribunal allowed the appeal of Kamlesh Kumar Singh Engineers Private Limited, directing the deletion of the unwarranted disallowance and corrections in the income assessment as per the factual records and judicial principles.
The detailed judgment underscores the importance of accurate reporting and compliance with statutory deadlines, while also highlighting that procedural errors should not lead to unwarranted disallowances if the substantive compliance is met. The tribunal’s decision serves as a significant reference for similar cases involving employee’s contributions and statutory dues.
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