ITA No. 1312/DEL/2020 involves Vedvan Consultants Pvt. Ltd., contesting an addition of Rs.94,33,788 under section 36(1)(va) of the Income Tax Act, 1961. This addition was made by the DCIT, CPC, Bengaluru due to a delay in depositing the EPF and ESI contributions for the assessment year 2018-19.
The appeal was filed against the order of the ld. CIT(A)-9, New Delhi dated 12.02.2020, which upheld the addition made by the Assessing Officer (AO) on account of delays in the statutory deposits of Employee’s Provident Fund (EPF) and Employee’s State Insurance (ESI).
The key issue was the allowability of a deduction for the employee’s contribution to provident fund and ESI if not paid by the statutory due date. The appellant relied on various judicial precedents arguing that if the contributions were paid before the due date of filing the income tax return, they should be allowed as deductions.
The tribunals and courts have distinguished between the employer’s and the employee’s contributions, noting that the strict timelines for depositing employees’ contributions are crucial for ensuring compliance with employee welfare legislation. Late deposits, therefore, do not qualify for deductions under section 36(1)(va), which clearly mandates that such sums must be credited to the employee’s account in the relevant fund on or before the due date specified in the respective legislation.
The tribunal upheld the decision of the CIT(A), agreeing that the law explicitly requires timely deposit of employee contributions to qualify for deductions. The appeal was dismissed, reaffirming the importance of compliance with statutory timelines for depositing employee contributions.
This case highlights the strict interpretation of tax laws regarding employee contributions to welfare funds. It serves as a crucial reminder for all employers about the significance of adhering to statutory due dates for depositing employees’ contributions to avoid adverse tax implications.
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform