Case Number: ITA 946/DEL/2021
Appellant: Mohammed Darus Salam, New Delhi
Respondent: DCIT, CPC, Bengaluru
Assessment Year: 2018-19
Result: 2018-19
Case Filed on: 2021-08-09
Order Type: Final Tribunal Order
Date of Order: 2021-11-11
Pronounced on: 2021-11-11
Tribunal: IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI “SMC-2” BENCH: NEW DELHI (THROUGH VIDEO CONFERENCING)
Before: SHRI KUL BHARAT, JUDICIAL MEMBER
Introduction
This appeal by the assessee, Mohammed Darus Salam, pertains to the assessment year 2018-19 and is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), dated 28.06.2021. The key issue in the case revolves around the disallowance of a deduction claimed under section 36(1)(va) of the Income Tax Act, 1961, for delayed payment of employee’s contribution to Provident Fund (PF).
Background
The appellant, Mohammed Darus Salam, represented by Shri Manu K. Giri, Advocate, Shri Aseem Chawla, Advocate, and Ms. Sonia Dudeja, Advocate, filed his return of income for the AY 2018-19. During the processing of the return under section 143(1), the Centralized Processing Centre (CPC) disallowed the deduction of Rs. 6,35,393 claimed under section 36(1)(va) due to the delayed payment of employee’s contribution to PF.
Grounds of Appeal
The appellant raised the following grounds of appeal:
Arguments by the Appellant
The counsel for the appellant argued that the issue is covered by the judgments of the Hon’ble Delhi High Court in the cases of PCIT vs Pro Interactive Service (India) Pvt. Ltd. and CIT vs AIMIL Ltd., which allow deductions for employee contributions to PF if paid before the due date for filing the return. They contended that the CIT(A) wrongly applied the amendments of the Finance Act, 2021, which are not applicable retrospectively.
Arguments by the Respondent
The Senior Departmental Representative (DR) opposed the submissions and relied on the CIT(A)’s decision. The DR referred to the Delhi High Court’s judgment in CIT vs Bharat Hotels Ltd., which supported the disallowance of the deduction for delayed payment of employee contributions to PF.
Tribunal’s Observations
The Tribunal noted the following:
The Tribunal referred to the judgments of the Hon’ble Delhi High Court in CIT vs AIMIL Ltd. and PCIT vs Pro Interactive Service (India) Pvt. Ltd., which held that employee contributions to PF paid before the due date of filing the return are allowable as deductions.
Conclusion
The Tribunal concluded that the appellant’s case is covered by the Delhi High Court’s judgments, which allow the deduction of employee contributions to PF if paid before the due date for filing the return. The amendments made by the Finance Act, 2021, do not apply retrospectively to the assessment year in question.
Order
The Tribunal directed the Assessing Officer to delete the disallowance and allowed the appeal of the assessee.
Final Judgment
Order pronounced in the open court on 11.11.2021.
Signed:
[KUL BHARAT]
JUDICIAL MEMBER
Dated: 11.11.2021
Copy forwarded to:
Assistant Registrar
ITAT, New Delhi
Relevant Legal Provisions and Precedents
The Income Tax Act, 1961, under section 36(1)(va), allows deductions for employee contributions to PF if paid before the due date for filing the return. The Hon’ble Delhi High Court in CIT vs AIMIL Ltd. and PCIT vs Pro Interactive Service (India) Pvt. Ltd. held that such deductions are allowable even if the payment is delayed, provided it is made before the due date for filing the return.
The Finance Act, 2021, amended section 36(1)(va) to clarify that delayed payments are not deductible, but this amendment applies prospectively from April 1, 2021.
Impact of the Judgment
This judgment reinforces the principle that judicial precedents allowing deductions for delayed payments of employee contributions to PF, if made before the due date for filing the return, remain applicable for assessment years before the Finance Act, 2021 amendments. It emphasizes the non-retrospective application of amendments, protecting the taxpayer’s right to claim deductions based on previous judicial interpretations.
Key Takeaways
This case highlights the importance of understanding the scope and application of amendments to tax laws. It underscores the need for tax authorities to adhere to judicial precedents and legislative intent while making assessments and revisions. The Tribunal’s decision serves as a significant precedent for similar cases involving the deduction of employee contributions to PF and the impact of legislative amendments.
Mohammed Darus Salam vs DCIT, CPC, Bengaluru: Dispute Over Deduction for AY 2018-19
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