Sudhakar Arora faced an appeal for the assessment year 2019-20 against the order of the CIT(A), which upheld the Assessing Officer’s disallowance of delayed PF/ESI contributions. This case, ITA No.1544/Del/2021, was decided by the ITAT Delhi ‘SMC’ Bench.
The case arose from the assessment order where it was noted that Sudhakar Arora, engaged in the wholesale trading of snacks and beverages, had made late payments of employees’ contributions to Provident Fund and Employee State Insurance, which were not deposited by the due dates as per the respective Acts. Consequently, an addition of Rs.3,69,886 was made under section 36(1)(va) of the Income Tax Act.
At the hearing, no representative for Sudhakar Arora appeared, and the appeal proceeded in his absence. The Senior Departmental Representative supported the decision of the CIT(A), relying on strict interpretations of the statutory deadlines for depositing employee contributions.
The tribunal, led by Judicial Member Shri Kul Bharat, referred to the jurisdictional High Court’s precedent in PCIT vs Pro Interactive Service (India) Pvt. Ltd., which allowed such expenditures if the payments were actually made, regardless of their timing relative to the statutory deadlines. The tribunal ordered the deletion of the disallowance, thus ruling in favor of the taxpayer.
This decision underscores the judicial stance on the allowance of delayed PF and ESI contributions as deductible expenditures, provided they are eventually paid, aligning with the legislative intent to not treat such delays as deemed income under the employer. The outcome was a relief for Sudhakar Arora, setting a significant precedent for similar cases.
Sudhakar Arora vs ITO on Delay in PF/ESI Contributions: ITA 1544/DEL/2021
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