Case Number: ITA 1809/DEL/2022
Appellant: L.R. Sharma & Co., New Delhi
Respondent: DCIT, Circle-62(1), Delhi
Assessment Year: 2017-18
Result: In favor of appellant
Case Filed On: 2022-08-10
Order Type: Final Tribunal Order
Date of Order: 2022-09-21
Pronounced On: 2022-09-21
The case revolves around the disallowance of the employee’s contribution to Provident Fund (PF) and Employee State Insurance (ESI) by the Assessing Officer (AO) due to delays in deposit. The appellant, L.R. Sharma & Co., argued that the contributions were deposited before the due date for filing the income tax return. The Income Tax Appellate Tribunal (ITAT) ruled in favor of the appellant, stating that the contributions were made before the return filing date, and hence, the disallowance was unjustified.
The appellant, L.R. Sharma & Co., New Delhi, filed an appeal against the order passed by the appellate authority for the assessment year 2017-18. The primary issue in the appeal was the disallowance of the employee’s contribution to PF and ESI on account of delays in deposits as per the respective Acts. The appellant contended that the contributions were deposited before the filing of the income tax return, thus making the disallowance unwarranted.
The Tribunal observed that the issue has been settled in favor of the assessee by various judicial pronouncements, including the Delhi High Court’s judgment in the case of PCIT vs Pro Interactive Service (India) Pvt. Ltd. (ITA No.983/2018), which held that the legislative intent was to ensure that the amount is allowed as an expenditure only when payment is actually made, not to treat belated payment as deemed income.
The Tribunal noted that the amendment brought by Finance Act 2021 would apply prospectively from April 1, 2021, and therefore, does not affect the assessment year under consideration.
The Tribunal concluded that the AO was not justified in denying the deduction claimed by the assessee on account of late deposit of PF/ESI, provided the deposits were made before the filing of the income tax return.
In conclusion, the Tribunal allowed the appeal filed by L.R. Sharma & Co., ruling that the disallowance of the employee’s contribution to PF/ESI was unjustified since the contributions were deposited before the due date for filing the income tax return. This judgment reaffirms the position that delays in deposits, if rectified before the return filing date, should not result in disallowance.
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH ‘G’, NEW DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER Sr. Nos ITA No(s) Asst. Year(s) Appeal(s) by Appellant vs. Respondent Assessee By Revenue By Appellant Respondent 1. 1957/Del/2022 2019-20 Innovision Ltd., 1425-A, Sector-B, Pocket-1, Vasant Kunj, New Delhi. PAN : AAKCS4802P ITO, Ward-12(1), New Delhi. Shri Lalit Mohan, CA Ms. Kajal Singh, Sr.D.R. 2. 2039/Del/2022 2019-20 Mohinder Nath Behl, IA-9C, Ashok Vihar, Phase-1, Delhi PAN: ACKPB6630P ITO, Ward-49(1), Delhi. None Ms. Kajal Singh, Sr.D.R. 3. 1927/Del/2022 2018-19 G.K. Fashion P. Ltd., 2151/3B, New Patel Nagar, New Delhi PAN: AAACG3381R DCIT, Circle-10(1), New Delhi. None Ms. Kajal Singh, Sr.D.R. 4. 1928/Del/2022 2019-20 G.K. Fashion P. Ltd., 2151/3B, New Patel Nagar, New Delhi PAN: AAACG3381R DCIT, Circle-10(1), New Delhi. None Ms. Kajal Singh, Sr.D.R. 5. 1934/Del/2022 2018-19 Saran Motors P. Ltd., 40-42, Janpath, New Delhi PAN: AAACS2753H ACIT, Circle-22(2), New Delhi. Shri D.K. Gupta, CA Ms. Kajal Singh, Sr.D.R. 6. 1935/Del/2022 2019-20 Saran Motors P. Ltd., 40-42, Janpath, New Delhi PAN: AAACS2753H ACIT, Circle-23(2), New Delhi. Shri D.K. Gupta, CA Ms. Kajal Singh, Sr.D.R. 7. 1948/Del/2022 2019-20 Hawa Singh, F-228/A, Mian Lane, Lado Sarai, Mehrauli, Delhi. PAN: AVPPS1958R ITO, Ward-62(1), Delhi. Shri Hawa Singh, CA Shri Mukul Gupta, CA Ms. Kajal Singh, Sr.D.R. 8. 1936/Del/2022 2018-19 Shroff Eye Centre, A-9, Kailash Colony, New Delhi PAN: AABFS6789D ACIT, Circle-61(1), New Delhi Shri D.K. Gupta, CA Ms. Kajal Singh, Sr.D.R. 9. 187/Del/2022 2019-20 M/s. SUEZ Private Limited, A-1/132, LGF, Safdarjung Enclave, New Delhi. Assistant Director of Income Tax, CPC Bangalore, DCIT, CC-31, Delhi Jhandewala Ext. Shri Baldev Raj, CA Ms. Kajal Singh, Sr.D.R. 10. 1818/Del/2022 2020-21 Kee Pharma Limited, A-8, 3rd Floor, Naraina Industrial Area, Phase-II, New Delhi. ITO, Ward-14(3), Delhi Shri Aman Garg, CA Ms. Kajal Singh, Sr.D.R. 11. 1809/Del/2022 2017-18 M/s. L.R. Sharma & Company, 981-1, 3rd Floor, Street No. 6, Gandhi Nagar, New Delhi-110031. PAN: AADFL3838H DCIT, Circle-62(1), Delhi. None Ms. Kajal Singh, Sr.D.R. 12. 1929/Del/2022 2018-19 K. J. International, 228, Pocket-D-6, Sector-6, Rohini, Delhi. PAN: AAEFK3731K DCIT, Circle-26(1), New Delhi. None Ms. Kajal Singh, Sr.D.R. 13. 1930/Del/2022 2019-20 K. J. International, 228, Pocket-D-6, Sector-6, Rohini, Delhi. PAN: AAEFK3731K DCIT, Circle-26(1), New Delhi. None Ms. Kajal Singh, Sr.D.R. 14. 1819/Del/2022 2019-20 Kee Pharma Limited, A-8, 3rd Floor, Naraina Industrial Area, Phase-II, New Delhi. PAN: AAACK3992Q DCIT, Circle-14(3), New Delhi Shri Aman Garg, CA Ms. Kajal Singh, Sr.D.R. Date of Hearing: 14.09.2022 Date of Pronouncement: 21.09.2022 ORDER Per Shri Chandra Mohan Garg, Judicial Member: The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals) National Faceless Appeal Centre, (NFAC), Delhi dated 25.07.2022 for the Assessment Year 2017-18. 2. The grounds of appeal raised by the assessee are as follows :- 1. That the Ld. CIT(A) has erred in law and on facts in upholding the action of the AO in making addition of Rs.2,46,000/- on account of alleged delayed deposit of Employee's contribution to PF/ESI. 2. That on the facts and circumstances of the case and in law the action of the Ld. CIT(A) in upholding the addition made by AO is unjust, unwarranted and bad in law. 3. That the Ld. CIT(A) has erred in law and on facts in upholding the action of the AO in not appreciating that the payment of Employee's contribution of PF/ESI is to be considered u/s 43B r.w.s. 36(1)(va) of the Act and if the same is deposited before the due date of filing of return u/s 139(1), no disallowance is warranted. 4. That the Ld. CIT(A) has erred in law and on facts in upholding the action of the AO in making the addition by placing reliance on the amendment brought by Finance Act 2021, which is prospective in nature and not retrospective. 3. The appeal of the assessee was heard and both the sides were duly considered. 4. The assessee in the present appeal is aggrieved by the action of the AO in making addition on account of delayed deposit of employee's contribution to PF/ESI. The AO noted that the contribution to PF/ESI was not deposited within the due date prescribed in the relevant acts. Accordingly, he made addition on this account. 5. Before the Ld. CIT(A), the assessee submitted that the contributions towards PF and ESI were deposited before the due date of filing the income tax return. He further relied on the decision in Azamgarh Steel & Power vs. CPC (ITA No.1626/Del/2020) and CIT vs. AIMIL Ltd. [2010] 188 Taxman 265 (Delhi). 6. The Ld. CIT(A), however, upheld the addition made by the AO. Aggrieved by the order of the Ld. CIT(A), the assessee has filed the present appeal before us. 7. We have heard the submissions of the Ld. DR and have perused the material available on record. The main issue in the present appeal is whether the delayed deposit of employee's contribution to PF/ESI beyond the due dates prescribed in the respective acts can be allowed as a deduction if the same is deposited before the due date of filing the income tax return. 8. We find that the issue is no longer res integra and has been settled in favour of the assessee by various judicial pronouncements. In the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd. (ITA No.983/2018), the Hon'ble Delhi High Court has held that the legislative intent was to ensure that the amount is allowed as an expenditure only when payment is actually made. The proviso was inserted to ensure that the employees' contributions were not treated on par with the employer's contributions which are allowable under Section 43B. The proviso to Section 36(1)(va) was inserted by Finance Act 2021 to clarify this intention. However, this proviso was to take effect prospectively from April 1, 2021 and hence would not apply to the assessment year under consideration. 9. In the present case, the contribution to PF/ESI was deposited before the due date of filing the income tax return. Therefore, the disallowance made by the AO is not justified. 10. In view of the above, we allow the appeal filed by the assessee. The addition made by the AO is deleted. 11. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 21.09.2022. Sd/- Sd/- (PRADIP KUMAR KEDIA) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 21.09.2022 *Pooja* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR ITAT, New Delhi AR, ITAT New Delhi **Date of dictation** 20.09.2022 **Date on which the typed draft is placed before the dictating member** 20.09.2022 **Date on which the typed draft is placed before the other member** 21.09.2022 **Date on which the approved draft comes to the Sr.PS/PS** 21.09.2022 **Date on which the fair order is placed before the dictating member for pronouncement** 21.09.2022 **Date on which the fair order comes back to the Sr.PS/PS** 21.09.2022 **Date on which the final order is uploaded on the website of ITAT** 21.09.2022 **Date on which the file goes to the Bench Clerk** 21.09.2022 **Date on which the file goes to the Head Clerk** 21.09.2022 **Date on which the file goes to the Assistant Registrar for signature on the order** 21.09.2022 **Date of dispatch of the order** 21.09.2022
L.R. Sharma & Co. vs DCIT, Circle-62(1), Delhi – Disallowance of Employee’s Contribution to PF/ESI
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