Case Number: ITA 1141/DEL/2021
Appellant: Magic Wires Private Limited, Delhi
Respondent: Deputy Commissioner of Income Tax (DCIT) Circle 16(1), Delhi
Assessment Year: 2019-20
Case Filed On: 2021-09-17
Order Type: Final Tribunal Order
Date of Order: 2022-05-17
Pronounced On: 2022-05-17
Magic Wires Private Limited, a company based in Delhi, filed an appeal against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre, which sustained the disallowance made on account of the belated payment of Provident Fund (PF) and Employees’ State Insurance (ESI) contributions while processing the return under Section 143(1) by the Central Processing Centre (CPC), Bengaluru. The case centers on the disallowance of these contributions under Section 36(1)(va) of the Income Tax Act, 1961, due to late payment.
The Tribunal noted that the appellant had filed the return of income on time and the contributions towards PF and ESI were deposited before the due date for filing the return under Section 139(1) of the Income Tax Act. However, the disallowance was made by the Assessing Officer (AO) on the grounds that the contributions were not made within the due dates prescribed under the respective Acts (ESI and PF Acts).
The Tribunal carefully considered the arguments presented by both the appellant and the representatives of the Department. It reviewed various judicial precedents, including the decisions of the Supreme Court and High Courts, as well as the amendments introduced in the Finance Act, 2021, which clarified the provisions related to the treatment of employee contributions under Section 36(1)(va) and Section 43B.
The Tribunal referred to several judgments where it was held that employee contributions to PF and ESIC, if paid before the due date of filing the income tax return, are allowable deductions and should not be disallowed. Notable cases included:
The Tribunal concluded that the contributions towards PF and ESI made by Magic Wires Private Limited before the due date for filing the income tax return under Section 139(1) should be allowed as deductions. The Tribunal directed the Assessing Officer to delete the disallowance and allow the deductions claimed by the appellant.
In the result, the appeal of Magic Wires Private Limited was allowed.
Order pronounced in the open Court on 17.05.2022.
Judicial Member: Shri Kul Bharat
Accountant Member: Shri Pradip Kumar Kedia
For Assessee: Shri D.K. Panday, CA
For Revenue: None
Date of Hearing: 17.05.2022
Date of Pronouncement: 17.05.2022
This case highlights the importance of timely depositing employee contributions to PF and ESIC to avoid disallowance under the Income Tax Act. The Tribunal’s decision underscores the principle that payments made before the due date for filing the income tax return should be allowed as deductions, providing clarity and consistency in the interpretation of the relevant provisions.
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