Supple Tek Foods vs. DCIT, Karnal on Assessment Year 2019-20

Introduction

In a significant judgment by the Income Tax Appellate Tribunal, Delhi Bench ‘G’, the case between Supple Tek Foods and the Deputy Commissioner of Income Tax (DCIT), Circle, Karnal, concerning the assessment year 2019-20, was decided. The tribunal, comprising Shri Kul Bharat, Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member, delivered a ruling that has been closely observed by taxpayers and professionals alike. The appeal, identified as ITA No. 858/DEL/2022, revolves around crucial issues pertaining to the disallowance of employee’s contribution to Provident Fund (PF) and Employee State Insurance (ESI), delayed deposition, and its implications.

Background of the Case

Supple Tek Foods, a prominent entity in the food industry, based in Karnal, Haryana, found itself at loggerheads with the income tax department over the addition made by the CPC (Central Processing Centre) under section 143(1) of the Income Tax Act, 1961, in relation to the delayed deposit of employees’ contributions towards PF and ESI. The contention was whether the deposits made after the due dates but before the filing of the return of income could be disallowed, affecting the fairness and lawfulness of the taxation process.

Arguments Presented

The appellant, represented by Shri Nimish Nagpal, CA, argued that all contributions had been deposited before the filing of the return of income and hence, in accordance with various judicial precedents, no disallowance should be called for. They relied heavily on earlier decisions like Azamgarh Steel & Power vs. CPC and CIT vs. AIMIL Ltd., which supported the argument that the delay in deposit does not warrant a disallowance if the contribution is deposited before the filing of the return of income.

On the other hand, the department, represented by Shri H.K. Chaudhary, CIT DR, argued in support of the lower authorities’ decision, emphasizing the amendments brought by the Finance Act 2021 which provided a different interpretation on the applicability of disallowance related to employees’ contributions to PF and ESI.

Judgment and Its Implications

The Tribunal analyzed the submissions, the provisions of the Income Tax Act, relevant amendments, and judicial precedents comprehensively. It was observed that the appellant’s adherence to depositing the amounts before the filing of the return of income aligns with the essence of allowing the expenditure. Citing the judgement of PCIT vs. Pro Interactive Service (India) Pvt.Ltd., along with the legislative intent clarified by the Finance Bill 2021, the Tribunal ruled in favor of the appellant, allowing the appeal.

This landmark judgment underscores the Tribunal’s stance on ensuring fairness and compliance with the legislative intent behind the taxation laws. It sends a clear message regarding the treatment of delayed deposits towards employees’ contributions and reaffirms the principle that as long as the deposits are made before the filing of the return of income, they should not result in disallowance.

Conclusion

The case of Supple Tek Foods vs. DCIT, Karnal, marking ITA No. 858/DEL/2022, sets a crucial precedent for similar disputes between taxpayers and the income tax authorities. It is a testament to the evolving interpretations of the law and their application to ensure justice and fairness in the realm of taxation.

Supple Tek Foods vs. DCIT, Karnal on Assessment Year 2019-20