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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: SHRI KUL BHARAT & SHRI PRADIP KUMAR KEDIA
Consolidated Appeals (45)
PER BENCH :
The present appeals are filed by the above mentioned
assessees feeling aggrieved by the orders passed by appellate
authority for various assessment years mentioned hereinabove.
Since the issue in all the appeals is common and is related to disallowance of employee’s contribution of PF/ESI on account of delay in deposits as per the respective Acts. Therefore, we clubbed all of them together for the sake of brevity and convenience and disposing the same by way of this consolidated order. However, we are taking ITA No.1079/Del/2021 [Assessment Year -2018-19] as a lead case wherein the assessee has raised the following grounds:
“That the Ld. CIT(A) vide his order u/s 250 of the Income Tax Act, 1961 (“Act”) dated 28/08/2021 erred on facts and in law in confirming the adjustment/disallowance made in intimation u/s 143(1) dated 16/10/2019 passed by CPC Bangalore of Rs.12,52,401 u/s 36(1)(va) of the Act on account of alleged delayed payment of ESI and EPF. 2. That disallowance of such nature of Rs.12,52,401 could not have been confirmed by Ld. CIT(A) keeping in view the limited powers as available for making adjustment u/s 143(1) of the Act. 3. That on the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming such adjustment/disallowance of Rs.12,52,401/-in view of the favourable and binding judgments of jurisdictional and other High Courts.
7 4. That issues which are debatable in nature cannot be subjected to adjustment/disallowance u/s 143(1) of the Act and from this angle also, the Ld. CIT(A) ought not to have confirmed the adjustment/disallowance of Rs.12,52,401/-. 5. That having regard to the facts and the circumstances of the case, the Ld. CIT(A) ought to have quashed the intimation order passed u/s 143(1) by CPC, Bangalore as the jurisdiction was not validly assumed as per law. 6. That without prejudice to Ground Nos. 1 to 5 above, such disallowance of Rs.12,52,401/-as made is very excessive. 7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred on facts and in law in confirming the action of CPC in charging interest u/s 234A at Rs.2,827 and u/s 234C at Rs.9,189. At any rate, without prejudice, such interest as charged is very excessive. 8. That the Appellant reserves its right to add, amend/modify the grounds of appeal.” 3. Similar grounds with different amounts and assessment years have been raised in other appeals but however, the sum & substance and the issues involved in all the appeals are identical.
Before us, at the outset, Learned AR submitted that the sole grievance of the assessee is confirming the additions on account of
8 delay in deposit of employee’s contribution towards provident fund and ESI fund.
Before us, Learned AR submitted that additions have been made in the intimation issued by CPC, Bangalore u/s 36(1)(va) of the Income Tax Act, 1961 (“the Act”) for the reason that the contribution received towards PF/ESIC by the assessee from its employees was not deposited before the due date. He submitted that though there has been delay in deposit of PF/ESIC Contributions but all the contributions received by the assessee from its employees, have been deposited with the appropriate authorities before the filing of return of income by the assessee. He therefore, submitted that since the amounts have been deposited before the filing of return of income, no disallowance is called for and for aforesaid proposition, he relied on the decision of Azamgarh Steel & Power vs. CPC in ITA No.1626/Del/2020 dated 31.05.2021 and CIT vs. AIMIL Ltd. [2010] 188 Taxman 265 (Delhi) and various other decisions.
Learned Sr. DR on the other hand supported the order of lower authorities and also placed reliance on the decision of Delhi Tribunal in the case of Vedvan Consultants Pvt. Ltd. vs DCIT in
9 ITA No.1312/Del/2020 order dated 26.08.2021. He also submitted that the amendment brought out by Finance Act 2021 would be applicable to the present case as by the amendment, it has been clarified that provisions of Section 43B of the Act shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of sub clause (x) of Clause (24) of Section 2 applies.
We have heard the rival submissions and perused the material available on record. The issue is no more res-integra. The issue has already been settled in favour of the assessee by various judicial pronouncements by the Tribunal. The Hon’ble Jurisdictional High Court of Delhi in the case of PCIT vs Pro Interactive Service (India) Pvt.Ltd. in ITA No.983/2018 [Del.] order dated 10.09.2018 held as under:-
“In view of the judgement of the Division Bench of Delhi High Court in Commissioner of Income Tax versus AIMIL Limited, (2010) 321 ITR 508 (Del.) the issue is covered against the Revenue and, therefore, no substantial question of law arises for consideration in this appeal. The legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and
10 objective is to treat belated payment of Employee’s Provident Fund (EPD) and Employee’s State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x) of the Act.” 8. As far as reliance by Ld. Sr. DR on the amendment brought out by Finance Act, 2021 is concerned, “notes on clauses” to the Finance Bill 2021 clearly states that the amendment will take effect from 01st April 2021 and will prospectively apply in relation to the assessment year 2021-22 and subsequent assessment year. In such a situation, we are of the view that the amendment brought out by Finance Act, 2021 does not apply to the assessment year under consideration.
Before us, the Revenue has not placed any material on record to demonstrate that the aforesaid order cited hereinabove has been overruled/stayed/set aside by higher judicial forum. In view of the aforesaid facts, we are of the view that the AO was not justified in denying the deduction claimed by the assessee on account of late deposit of PF/ESI/EPF, albeit before filing the return of income. Admittedly, in all the above-stated matters, the Revenue had not contended that the assessee has deposited the contribution after the filing of the return of income.
11 10. We have proceeded to conclude the issue of allowability of expenses attributable to employee provident fund and employee state insurance scheme on the assurance that the employee’s contributions towards PF & ESI have been deposited before the due date of filing of return of income. However, the Revenue shall be at liberty to seek restoration of the appeal where it is found as a matter of fact that the assessee has failed to deposit the employee’s contribution before the due date of filing of return of income stipulated u/s 139(1) of the Act in accordance with law. In view of the above and respectfully following the decision of the Hon’ble Jurisdictional High Court of Delhi cited hereinabove, we allow the appeals filed by the captioned assessees.
Apropos to ITA No.1233/Del/2021 concerning Assessment Year 2018-19 in the case of Chatru Mal Garg appearing at Serial No.33 captioned above, it was pointed out that the AO has attempted to make adjustment in respect of disallowance of expenditure towards belated payment of employee’s contribution towards PF & ESI in the proceedings initiated u/s 154 of the Act. We express our agreement with the plea delved on behalf of the assessee that such disallowance being highly debatable in nature in the light of the decision of Hon’ble High Court, is not susceptible
12 to rectification u/s 154 of the Act at the threshold. Thus, the additions on accounts of belated employee’s contribution is neither permissible under the normal provisions nor under section 154 of the Act insofar as this appeal is concerned.
In the result, all captioned appeals of the respective assessees are allowed.
Order pronounced in the open court on 17.05.2022.
Sd/- Sd/-
(PRADIP KUMAR KEDIA) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER
Date:-17.05.2022 *Amit Kumar* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI