Ram Kumar Tomar vs. ITO WARD – 34(1) – 2018-19 – Late Deposit of PF and ESI Contributions Case
Case Number: ITA 1730/DEL/2020
Appellant: Ram Kumar Tomar, New Delhi
Respondent: ITO WARD – 34(1), New Delhi
Assessment Year: 2018-19
Case Filed On: 2020-10-19
Order Type: Final Tribunal Order
Date of Order: 2022-03-21
Pronounced On: 2022-03-21
Case Background
The case involved Ram Kumar Tomar (the appellant), challenging the disallowance of Rs. 5,58,690 made by the Assessing Officer (AO) due to the late deposit of employee’s contributions to Provident Fund (PF) and Employee State Insurance (ESI). The disallowance was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The appellant filed an appeal to the Income Tax Appellate Tribunal (ITAT) against this decision.
Key Issues and Arguments
The primary issue was whether the delayed deposit of employee’s contributions towards PF and ESI warranted the disallowance made by the AO under Section 36(1)(va) of the Income Tax Act.
Appellant’s Arguments
The contributions were deposited before the due date for filing the income tax return, despite being delayed beyond the statutory due dates under the PF and ESI Acts.
The AO’s action of disallowing the contributions was challenged based on legal precedents and the principles of natural justice.
The appellant relied on various judicial precedents, including the cases of Rajasthan State Beverages Ltd (2017) 84 Taxmann.com 185 (SC), CIT Vs. Alom Extrusion Ltd (2010) 1 SCC 489, CIT Vs. Vinay Cement Ltd 213 CTR 268, and CIT Vs. AIMIL Ltd 321 ITR 508 (Delhi).
Respondent’s Arguments
The AO and CIT(A)’s actions were justified as the contributions were deposited after the due dates prescribed under the PF and ESI Acts.
The respondent relied on the judgments of various High Courts, including CIT Vs M/s. Bharat Hotels Ltd., [2019] 410 ITR 417 (Delhi), Gujarat State Road Transport Corporation Ltd., CIT Vs. Merchem Ltd. (2015) 378 ITR 443 (Kerala), and Unifac Management Services (India) P. Ltd. (2018) 100 taxmann.com 2414 (Madras).
Tribunal’s Analysis and Findings
The ITAT considered the submissions from both parties and noted the following:
The issue of delayed PF and ESI contributions has been settled in favor of the assessee in various judicial pronouncements.
The Hon’ble Supreme Court in the cases of CIT Vs. Alom Extrusion Ltd (supra) and CIT Vs. Vinay Cement Ltd (supra) ruled that contributions deposited before the due date for filing the return of income should be allowed as a deduction.
The Hon’ble Delhi High Court in CIT Vs. AIMIL Ltd 321 ITR 508 (Delhi) affirmed that the deduction should not be disallowed if the contributions were deposited before the due date of filing the return.
The amendment by the Finance Act 2021, stating that Section 43B does not apply to employee contributions, is effective from 1st April 2021 and is not applicable to the assessment year under consideration (2018-19).
Conclusion and Order
The ITAT ruled in favor of Ram Kumar Tomar. The tribunal found that the AO was not justified in disallowing the deductions for the late deposit of PF and ESI contributions, as the payments were made before filing the income tax return. The disallowance of Rs. 5,58,690 was deleted, and the appeal filed by the appellant was allowed.
Significance of the Case
This case highlights the judiciary’s stance that delays in depositing statutory dues like PF and ESI contributions, if rectified before the filing of the income tax return, do not warrant disallowance of deductions. The decision provides clarity and relief to taxpayers regarding the treatment of such contributions.
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