The Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘G’, reviewed the case ITA 1240/DEL/2021 involving Mehra Metal Components Pvt. Ltd., Delhi, and the Deputy Commissioner of Income Tax (DCIT), Centralized Processing Center (CPC), Bangalore. This case centers on the financial year 2018-19, specifically addressing the issue of delayed employee contributions to Provident Fund (PF) and Employee State Insurance (ESI).
Mehra Metal Components Pvt. Ltd., located in New Delhi, faced adjustments and subsequent appeals regarding the timing of their PF and ESI contributions. The focal point of the dispute was whether the late deposit of these contributions justified the disallowances imposed by the DCIT, CPC, Bangalore.
The case was presided over by Judicial Member Shri Kul Bharat and Accountant Member Shri Pradip Kumar Kedia, who were tasked with deciding whether the disallowances based on the late payment of employee contributions were in line with the Income Tax Act, 1961.
The company argued that although there were delays in depositing PF and ESI contributions, all funds were ultimately deposited before the statutory due date for filing the tax return. They contended that this should exempt them from penalties, leaning on previous judgments that supported their view.
The Tribunal found merit in the appellant’s arguments, noting that the legislative intent of the relevant tax provisions did not aim to penalize taxpayers who rectified their contribution defaults before the tax filing deadline. This interpretation was consistent with prior judicial rulings cited during the proceedings.
This decision reaffirms the Tribunal’s approach to dealing with issues of delayed contributions to employee welfare funds. It emphasizes the importance of adhering to statutory timelines while also recognizing corrective actions taken before critical deadlines.
The ruling serves as a crucial reference for other corporations facing similar issues, highlighting the need for timely compliance while also understanding the possible legal recourse available for unintentional delays.
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