This article reviews the tribunal decision in the case of Pawan Kumar Janghu vs ITO for the assessment year 2019-20, where the key issue revolved around the delayed deposit of employees’ contributions to PF and ESI and its tax treatment under recent legislative amendments.
The appellant, Pawan Kumar Janghu, faced additions made by the Central Processing Centre (CPC), Bangalore due to the delayed deposit of employees’ contributions to PF and ESI. The adjustments were initially processed under section 143(1) of the Income Tax Act, leading to a dispute over the timeliness of the deposits relative to tax filing deadlines.
The tribunal’s examination centered on whether these contributions, although delayed as per statutory requirements, were deposited before the tax return filing deadline under section 139(1) of the Income Tax Act, which would make them allowable deductions. The case references judgments from the Punjab & Haryana High Court which support the appellant’s position, contrasting with other High Court rulings favoring the revenue on similar matters.
The tribunal, aligning with precedents set by the Delhi High Court, particularly in cases like AIMIL Ltd., decided in favor of the taxpayer. It highlighted that if the actual payment is made before the tax return is filed, it should be considered compliant with the legislative intent of not treating such payments as the employer’s deemed income.
The decision reinforces the position that timely tax compliance in terms of payment can mitigate potential penalties, despite procedural delays. It also clarifies the application of amendments made by the Finance Act, 2021, particularly concerning the treatment of employee contributions to welfare funds.
The tribunal’s decision in favor of Pawan Kumar Janghu provides significant relief and sets a precedent for similar cases, emphasizing the importance of understanding legislative changes and judicial interpretations in tax compliance.
Pawan Kumar Janghu vs ITO on Delayed PF and ESI Contributions: ITA 1545/DEL/2021
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