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Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI
Before: SHRI PRADIP KUMAR KEDIA & SHRI N. K. CHOUDHRYShri Anil Gupta, AR
O R D E R PER N.K. CHOUDHRY, J. M.:
The Revenue has preferred the instant appeal against the order dated18.03.2019, impugned herein, passed by the Ld. Commissioner of Income Tax-20, New Delhi [in short ‘Ld. Commissioner] u/s.250(6) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), whereby the ld. Commissioner directed the Assessing Officer to delete the disallowance to the tune of Rs. 1,22,64,482/- which was made by the Assessing officer for late deposit of employees’ contribution qua PF and ESI.
In this case the Assessee had deposited employees’ contributions qua PF and ESI after the due date as prescribed in the relevant Acts, however, before the due date of filing of return of income u/s.139(1) of the Act, which resulted into addition of Rs.1,22,64,482/- made by the AO on account of disallowance on the ground that there has been delay in deposit of aforesaid amount beyond the due date of deposit prescribed under the PF and ESIC Acts.The detailsof amount of Rs. 1,22,64,482- deposited qua employees’ contribution towards PF and ESI are mentioned in para- 6 of the assessment order.
The said disallowancewas challenged by the Assessee before the Ld. Commissioner, who vide impugned order, directed the Assessing Officer to delete the disallowance by concluding as under:
“5.3 Ground No. 3:-
5.3.1 The Assessing Officer during scrutiny found that the appellant has not deposited an amount of Rs. 1,22,64,482/- as employees contribution of 'PF' and 'ESI' to the respective funds within the due dates provided by the respective funds. The Assessing Officer then treated the amount as income of the appellant as per Section 36(1) (va) r.w.s. 2(24)(x) of the Act.
5.3.2 The appellant during appeal hearing submitted that the amounts were paid by him le due date of filing of 'Return of Income'. The due date for filing the Return of income for the A.Y. 2014-15 was extended to 30.11.2014 vide CBDT Notification No. F. No. 153/53/2014-Pt.I dated 26.09.2014. All the challans of employees' share of both ESI and PF were deposited before 30.11.2014. The appellant further submitted that the Hon’ble higher authorities have decided that the amount if paid before the due date of filing of Return should be allowed as expenses. The appellant quoted the order of the. hon’ble Supreme Court in the case of Alom Extrusions Ltd. where this issue has been settled and the Hon’ble Supreme Court made no distinction between the contribution of employers or employees’. The relevant part of the order of the Hon’ble Supreme Court is produced in the submission of the appellant above in this order. As the issue has been settled as discussed above the Assessing Officer is directed to delete the addition.”
Being aggrieved, the Revenue Department is in appeal before us.
The ld. DR by raising arguments against the impugned order submitted that since the Assessee failed to deposit the employees’ contribution towards PF/ESI within the period stipulated under the relevant statutory Acts, therefore the ld. Commissioner was not justified in deleting the impugned disallowance. Ld.AR, on the other hand, vehemently supported the impugned order passed by the ld. Commissioner.
Having heard the parties and perused the material available on record. The issue raised by the Revenue Department relates to the deletion of disallowance/addition made by the AO on depositing of employee’s contribution qua ‘PF’ and 'ESI' to the respective funds after the due dates prescribed in the respective Acts but before the due date of filing of 'Return of Income’ u/s 139 of the Act.
Admittedly the issue under controversy travelled upto the Hon’ble Apex Court in the cases of Rajasthan State Beverages Ltd (supra), CIT Vs. Alom Extrusion Ltd (supra) and CIT Vs. Vinay Cement Ltd (supra) and the Hon’ble Apex Court clearly held the amount claimed on payment of PF and ESI if deposited on or before due date of filing of return, then the same cannot be disallowed u/s 43B or u/s 36(1)(va) of the Act.
7.1 Even Hon’ble Punjab and Haryana High Court in the case of CIT Vs. M/s Hemla Embroidery Mills (P) Ltd. (366 ITR 167) (P&H HC) and in the case of CIT Vs. M/s Mark Auto Industries Ltd. (358 ITR 43) (P&H HC) has clearly held that the Assessee is entitled to claim deduction of employee’s share of ESI & PF u/s.43B of the Act, if the same has been deposited prior to the filing of return of income u/s.139(1) of the Act.
7.2 Jurisdictional High Court as well, in the case of CIT Vs. AIMIL Ltd 321 ITR 508 affirmed the action of the ITAT, in deleting the addition made by the Assessing Officer under Section 36(1)(va) of the Act, on account of employees’ contributions qua Provident Fund and ESI, deposited before the due date of filing of return.
7.3 In the judgment delivered by the jurisdictional High Court in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd., (ITA.No.983/2018 order dated 10.09.2018), the decision of the Hon’ble High Court in the case of CIT Versus AIMIL Ltd., (supra), has been followed by holding as under :-
“In view of the judgment 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 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(24)(x) of the Act.
Appeal is dismissed.”
7.4 From the Judgments referred above, it is clear that the Hon’ble Courts have allowed the employees’ contributions qua PF and ESI as expenditure on actual payment may be made after the due date as prescribed in the relevant Acts, but before the due date of filing of return of income u/s.139(1) of the Act and also not drawn any distinction between the employee’s and employer’s share qua PF & ESI contributions, hence, the conclusion drawn by the ld. Commissioner in deleting the impugned disallowance do not call for any interference.