Case Number: ITA 818/DEL/2021
Appellant: Prowiz Mansystems Private Limited, Meerut
Respondent: DCIT CPC, Bengaluru
Assessment Year: 2019-20
Case Filed On: 2021-07-02
Order Type: Final Tribunal Order
Date of Order: 2022-02-28
Pronounced On: 2022-02-28
This case involves Prowiz Mansystems Private Limited (the appellant) challenging the disallowance of Rs. XXXX under Section 36(1)(va) of the Income Tax Act, 1961. The disallowance was made by the DCIT CPC, Bengaluru (the respondent) due to delayed payment of employee’s contributions to ESI and EPF.
The appellant, Prowiz Mansystems Private Limited, a company based in Meerut, Uttar Pradesh, filed its return for the assessment year 2019-20. During the assessment, the DCIT CPC, Bengaluru, disallowed the employee’s contributions to ESI and EPF, citing that the payments were made after the due date prescribed under the respective acts. However, these contributions were deposited before the due date for filing the return of income under Section 139(1) of the Income Tax Act.
The appellant raised several grounds in their appeal, including:
The Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘G’ heard the case through video conferencing. The bench consisted of Sh. Saktijit Dey, Judicial Member, and Dr. B. R. R. Kumar, Accountant Member.
During the hearing, the appellant’s representative argued that the disallowance should be deleted as the contributions were deposited before the due date of filing the return, in compliance with the principle established in various judicial pronouncements.
The Tribunal examined the relevant amendments brought by the Finance Act, 2021, and considered various precedents, including decisions from other ITAT benches and high courts. The key issue was whether the amendments to Section 36(1)(va) and Section 43B, introduced by the Finance Act, 2021, were retrospective or prospective.
The Tribunal referred to multiple decisions that addressed the issue of delayed payment of employee’s contributions to ESI and EPF. Significant among these were:
These cases generally held that employee’s contributions to PF and ESI, if paid before the due date of filing the return under Section 139(1), should be allowed as a deduction.
The Tribunal also discussed judgments from various high courts, including the Gujarat High Court’s decision in the case of Gujarat State Road Transport Corporation and the Delhi High Court’s decision in the case of CIT vs. AIMIL Ltd., which supported the view that delayed payments made before the filing of the return are deductible.
The Finance Act, 2021, introduced amendments clarifying that the provisions of Section 43B do not apply to employee’s contributions covered under Section 36(1)(va). The Tribunal noted that these amendments were intended to clarify the existing law and remove any ambiguity regarding the due date for depositing employee’s contributions.
The Tribunal concluded that the disallowance of Rs. XXXX under Section 36(1)(va) was not justified, given that the contributions were deposited before the due date of filing the return. The Tribunal directed the Assessing Officer to delete the disallowance.
The appeal was allowed, and the case was disposed of with directions to re-compute the interest under Sections 234A, 234B, and 234C, and to allow consequential relief to the appellant.
This decision reaffirms the principle that employee’s contributions to ESI and EPF, if paid before the due date of filing the return, are allowable as deductions. The Tribunal’s reliance on various judicial precedents and the clarifications provided by the Finance Act, 2021, played a crucial role in arriving at this decision.
The case highlights the importance of adhering to due dates and the impact of legislative amendments on ongoing disputes. Taxpayers should ensure timely compliance to avoid such disputes and benefit from the allowable deductions.
Order pronounced on 28th February 2022 by the ITAT Delhi Bench ‘G’.
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform