Satpal Singh, Ballabgarh vs ITO, Ward-3, Fardiabad – Case Number ITA 1107/DEL/2022

In the Income Tax Appellate Tribunal, Delhi Bench ‘G’, the case (ITA No. 1107/DEL/2022) between Satpal Singh, a resident of HUDA Colony, Sector – 3, Ballabgarh, Faridabad, Haryana (Appellant) and the Income Tax Officer, Ward-3, Faridabad (Respondent) for the assessment year 2019-20 was brought under consideration. The case was presided over by Shri Challa Nagendra Prasad, Judicial Member and Shri Pradip Kumar Kedia, Accountant Member.

The crux of the case pertains to the disallowance made under Section 36(1)(va) of the Income Tax Act, 1961 relating to the appellant’s employees’ contribution to ESI and PF which was deposited after the due date as per the relevant acts but before the due date for filing the return of income under Section 139(1) of the Act.

Upon careful examination of the arguments presented by both sides and the reliance on various precedents, the Bench delved into the intricate aspects of the Income Tax Act provisions, specifically focusing on the amendments brought in by the Finance Act, 2021. It was contended that the amendments to Sections 36(1)(va) and 43B are clarificatory in nature and have retrospective applicability, a point majorly debated during the proceedings.

The appellant’s counsel argued that the amendments are prospective, impacting only Assessment Years 2021-22 onwards, and bolstered their stance by citing the jurisdictional High Court’s decision in CIT Vs. AIMIL Ltd. and the Hon’ble Supreme Court’s judgment in M.M. Aqua Technologies Ltd. Vs. CIT. It was emphasized that contributions made to PF and ESI were duly remitted to the government account before the cutoff date for filing returns, thereby urging for the disallowance to be overturned.

The Tribunal, after meticulous considerations, alluded to the precedents and the legislative intent behind the amendments. It concluded that the contributions towards employees’ PF and ESI, if deposited before the due date of filing of return as prescribed by the Income Tax Act, should not be subject to disallowance. Substantiating their decision with various judicial citations, the Tribunal allowed the case in favor of the appellant.

In their conclusive order, the members underscored the paramountcy of adherence to statutory deadlines for deposits towards social security contributions. This case sets a significant precedent, particularly in interpreting the amendments introduced by the Finance Act, 2021 concerning employees’ contributions to Provident Fund and ESI.

The outcome of ITA No. 1107/DEL/2022 reiterates the judiciary’s intent to safeguard employees’ welfare contributions against belated deposits, while also setting a procedural benchmark for the assessment years ahead. This landmark judgment brings to the fore the clarity on compliance requirements and thus serves as a guiding beacon for similar disputes arising in the realm of Income Tax Law.

Satpal Singh, Ballabgarh vs ITO, Ward-3, Fardiabad – Case Number ITA 1107/DEL/2022