Case Number: ITA 1032/DEL/2021
Appellant: Maxx Solutions, Gurgaon
Respondent: CPC, Bengaluru
Assessment Year: 2019-20
Result: 2019-20
Case Filed on: 2021-08-27
Order Type: Final Tribunal Order
Date of Order: 2021-11-29
Pronounced on: 2021-11-29
The case of Maxx Solutions, Gurgaon versus CPC, Bengaluru revolves around the disallowance of Rs.5,78,203/- under section 36(1)(va) of the Income Tax Act, 1961. This disallowance was made by the CPC, Bengaluru, on account of the delayed payment of employees’ contributions to the Provident Fund (PF) and Employees’ State Insurance (ESI).
Maxx Solutions, a company based in Gurgaon, filed its return of income on 26th October 2019, declaring a total income of Rs.18,50,524/-. The return was processed by the CPC, Bengaluru under section 143(1) of the Act on 6th March 2020. During this process, a disallowance of Rs.5,78,203/- was made as per the provisions of section 36(1)(va) due to the delayed payment of employees’ contributions to PF and ESI.
Aggrieved by this disallowance, Maxx Solutions appealed to the CIT(A), who upheld the action of the CPC, Bengaluru, relying on various decisions that supported the disallowance.
Dissatisfied with the CIT(A)’s decision, Maxx Solutions appealed to the Income Tax Appellate Tribunal (ITAT), Delhi, raising the following grounds:
The Ld. CIT(A) was wrong in confirming the addition of Rs.5,78,203/- under section 36(1)(va) of the IT Act, 1961 without any base.
The appeal was heard by Shri R.K. Panda, Accountant Member of the ITAT, Delhi. The Tribunal considered the rival arguments, perused the orders of the AO and CIT(A), and reviewed the paper book filed by the assessee.
The Tribunal noted that the only dispute was regarding the allowability of Rs.5,78,203/- on account of delayed payment of employees’ contributions to PF and ESI. The Tribunal found no dispute in the fact that these payments were deposited before the due date of filing the return of income under section 139(1) of the Act.
The Tribunal referred to the decision of the Hon’ble Delhi High Court in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd., which held that the legislative intent was to ensure that the amount paid is allowed as an expenditure only when the payment is actually made. The Hon’ble High Court further clarified that the legislative intent was not to treat belated payment of employees’ contributions to PF and ESI as deemed income of the employer under the Act.
Following this precedent, the Tribunal found that the coordinate Bench of the Tribunal in the case of CIT v. Dee Development Engineers Ltd. held that no disallowance under section 36(1)(va) read with section 2(24)(x) could be made if the employees’ contributions to PF and ESI were deposited after the due date prescribed under the relevant Acts but before the due date of filing the return of income.
Since Maxx Solutions had deposited the employees’ contributions to PF and ESI before the due date of filing the return of income, the Tribunal held that no disallowance under section 36(1)(va) read with section 2(24)(x) could be made in this case. Accordingly, the Tribunal set aside the order of the CIT(A) and allowed the grounds raised by the assessee.
In conclusion, the ITAT, Delhi allowed the appeal filed by Maxx Solutions, Gurgaon, and set aside the disallowance of Rs.5,78,203/- made by CPC, Bengaluru, under section 36(1)(va) for the assessment year 2019-20.
Pronounced in the open court on 29th November 2021.
Signed:
(R.K. PANDA)
ACCOUNTANT MEMBER
Dated: 29th November 2021
Copy forwarded to:
Asstt. Registrar, ITAT, New Delhi
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