This case concerns the assessment year 2018-19, where Sugandh, a business based in Moradabad, contested the CPC’s disallowance of Rs. 3,19,823 for delayed contributions to provident fund (PF) and employee state insurance (ESI).
Sugandh filed a tax return reporting a gross income of Rs.40,62,934. During processing, the CPC added back Rs. 3,19,823 due to late payment of PF and ESI contributions, raising the tax liability.
The business appealed this decision, citing various precedents that supported the deduction of such payments if made before the income tax return filing deadline. However, both the CPC and CIT(A) upheld the original disallowance.
The Tribunal reviewed the case in light of precedents from the Hon’ble Delhi High Court and others, which have historically sided with the assessee in similar situations. Despite strong opposition from the Department’s representative, the Tribunal decided in favor of Sugandh, directing the CPC to reverse the disallowance.
This decision underscores the ongoing debate over the timing of welfare contributions and their deductibility for tax purposes. It highlights the critical nature of compliance with statutory timelines in payroll processing and the potential relief available under judicial review.
Sugandh, Moradabad vs. ITD, CPC, Bengaluru: Dispute Over Delayed PF and ESI Payments for AY 2018-19
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