Case Number: ITA 1202/DEL/2021
Appellant: SMV Enterprises Pvt Ltd, Meerut
Respondent: Income Tax Department, CPC, Bangalore
Assessment Year: 2018-19
Case Filed On: 2021-09-23
Order Type: Final Tribunal Order
Date of Order: 2022-02-28
Pronounced On: 2022-02-28
The appellant, SMV Enterprises Pvt Ltd, Meerut, filed an appeal against the Income Tax Department, CPC, Bangalore, concerning the disallowance of employee’s contribution to the Employees’ Provident Fund (EPF) and Employees’ State Insurance (ESI) for the Assessment Year 2018-19. The primary issue in this case revolves around the interpretation and application of sections 36(1)(va) and 43B of the Income Tax Act, 1961, regarding the deductibility of employee contributions to welfare funds.
The appellant argued that the contributions were made before the due date of filing the income tax return under section 139(1) and, therefore, should be allowed as deductions. They relied on various judicial precedents, including the decision of the Hon’ble Supreme Court in the case of CIT vs. Vinay Cement Ltd., which supported the claim that such payments should be considered allowable deductions if made before the due date for filing the return.
The respondent, Income Tax Department, CPC, Bangalore, contended that the deductions were disallowed because the contributions were not deposited within the due dates prescribed under the EPF and ESI Acts. They cited the amendments introduced by the Finance Act, 2021, which clarified that the provisions of section 43B do not apply to employee contributions and should be treated separately under section 36(1)(va).
The Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘G’, comprising Sh. Saktijit Dey, Judicial Member, and Dr. B. R. R. Kumar, Accountant Member, examined the facts of the case, the amendments in the Income Tax Act, and the judicial precedents. The Tribunal noted that the amendments introduced by the Finance Act, 2021, specifically clarified that the provisions of section 43B do not apply to employee contributions and should be treated under section 36(1)(va).
The Tribunal also reviewed various judgments from different High Courts and the Supreme Court, which held that employee contributions to EPF and ESI, if paid before the due date of filing the income tax return, should be allowed as deductions. The Tribunal cited several cases, including:
These cases supported the view that employee contributions paid before the due date of filing the return should be allowed as deductions.
After considering the arguments and the judicial precedents, the Tribunal concluded that the disallowance of the employee’s contribution to EPF and ESI made by the Income Tax Department was not justified. The Tribunal allowed the appeal filed by SMV Enterprises Pvt Ltd, stating that the employee contributions paid before the due date of filing the income tax return should be allowed as deductions.
Therefore, the Tribunal directed the Assessing Officer to allow the deductions for the employee contributions to EPF and ESI made before the due date of filing the return for the Assessment Year 2018-19.
Order Pronounced in the Open Court on 28/02/2022
Per Dr. B. R. R. Kumar, Accountant Member
Dated: 28/02/2022
Subodh Kumar, Sr. PS
Copy forwarded to:
ASSISTANT REGISTRAR
SMV Enterprises Pvt Ltd vs ITD, CPC: EPF and ESI Deduction Dispute for AY 2018-19
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