This case analysis focuses on ITA 1473/DEL/2021, wherein Pushpa Sharma, a resident of Haryana, appealed against the Income Tax Officer, Ward-2(1), Faridabad, challenging the disallowance of deduction for delayed payment of employees’ contribution to Provident Fund (PF) and Employees’ State Insurance (ESI) for the assessment year 2018-19. The appeal was heard and disposed of by the Delhi Bench ‘SMC’ of the Income Tax Appellate Tribunal (ITAT) on July 29, 2022.
Pushpa Sharma filed her income tax return for the assessment year 2018-19 declaring her total income. However, during the assessment, the ITO disallowed a deduction amounting to Rs. 14,63,054/- due to the delayed payment of employees’ contributions to PF and ESI. The contributions were paid before the due date of filing the income tax return under section 139(1) of the Income Tax Act but were not deposited within the time specified under the relevant statutes.
Pushpa Sharma contested the disallowance, arguing that the payments were made before the due date for filing the return, which should allow for the deduction. She referenced several judicial precedents and amendments to the Income Tax Act to support her claim.
The Tribunal, represented by Judicial Member Shri Saktijit Dey, reviewed the case facts and the relevant legal provisions. The Tribunal noted that the issue was covered by several decisions of the Coordinate Bench, which had held that if employees’ contributions are deposited before the due date of filing the return, no disallowance should be made. Key judgments referenced included those from the cases of Raj Kumar, Crescent Roadways Pvt. Ltd., Dee Development Engineers Ltd., and others.
The Tribunal highlighted the following critical judgments:
The Tribunal also discussed the amendments introduced by the Finance Act 2021, which clarify that the provisions of section 43B do not apply to employees’ contributions. However, these amendments are applicable from April 1, 2021, and do not affect the assessment year under consideration.
Based on the detailed analysis and consistent judicial precedents, the Tribunal concluded that the disallowance of Rs. 14,63,054/- was not justified. The appeal filed by Pushpa Sharma was allowed, and the addition was deleted.
This case reinforces the principle that if employees’ contributions to welfare funds are paid before the due date of filing the income tax return, the deduction should be allowed, notwithstanding the specific due dates under the relevant statutes. The Tribunal’s decision aligns with the intent of the legislative framework and the judicial interpretations that prioritize actual payment over statutory due dates.
The order was pronounced in the open court on July 29, 2022, by the Judicial Member, Shri Saktijit Dey.
Order: In the result, the appeal is allowed.
Order pronounced in the open court on 29th July, 2022.
(SAKTIJIT DEY)
JUDICIAL MEMBER
Dated: 29th July, 2022.
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