VEDVAN CONSULTANTS PRIVATE LIMITED,NEW DELHI vs. DCIT CPC, BENGALURU

The issue involved in the instant appeal relates to the making of addition of Rs. 94,33,788/- by the AO for late deposit of employees’ contributions towards ESI & PF after the due date as prescribed under the Provident Fund and ESI Act, but before the due date of filing of return of income u/s.139(1) of the Act. The said addition was confirmed by the Ld. Commissioner in appeal mainly relying upon the judgment passed by the Hon’ble Jurisdictional High Court in the case of CIT Vs. M/s. Bharat Hotels Ltd., [2019] 410 ITR 417 (Del) and holding that provisions of Section 43B of the Act are not applicable to the employee’s share qua ESI & PF.

Heard the parties and perused the material available on record. The Assessee raised the arguments against the impugned order, whereas the Ld. DR vehemently supported the same. 3.1 The Assessee before the Authorities below has claimed that as the Assessee has deposited the employee’s contributions towards ESI & PF before the due date of filing of the return of income u/s 139 of the Act, hence no disallowance is warranted. In support of its contention the Assessee also relied upon various judgments as it appears from the impugned order. 3.2 The Ld. Commissioner though considered the claim of the Assessee, however uphold the disallowance/additionqua employee’s contributions towards PF & ESI, mainly on two aspects/ determinations- (i) Judgment of the Hon’ble Delhi High Court in the case of CIT Vs. M/s. Bharat Hotels Ltd., [2019] 410 ITR 417 (Del) (ii) Non-applicability of the provisions of Section 43B of the Act to the employee’s share qua ESI & PF. 3.3 Admittedly there is plethora of judgments in favour of the Assessee’s contention and of the Revenue, however the controversy with regard to divergent views of different High Courts, has been settled by the Hon'ble Apex Court in the case of CIT Vs. M/s. Vegetables Products Ltd. (88 ITR 192) by laying down the dictum ‘if two reasonable constructions of a taxing provision are possible that construction which favours the Assessee must be adopted.’ Meaning thereby when two different views of the Courts are available on an issue, then the view which favors the Assessee or the judgment which favors the Assesseemay be followed, hence for brevity we are referring the judgments of the jurisdictional High Court, which covered the issue. 3.4 The Hon’bleJurisdictional high Court in the case of CIT Vs. AIMIL Ltd {(2010) 321 ITR 508 (Del)}affirmed the action of the ITAT in deleting the addition relating to employees’ contribution deposited before the due date of filing of return, in respect of Provident Fund and ESI made Page | 3 by the Assessing Officer under Section 36(1)(va) of the Income Tax Act, 1961. 3.5. Again the Hon’ble Jurisdictional High Court in the case of PCIT vs., Pro Interactive Service (India) Pvt. Ltd., vide ITA.No.983/2018 order dated 10.09.2018 while following the aforesaid decision in the case of CIT Versus AIMIL Ltd., (supra), has held that legislative intent was/is to ensure that the amount paid is allowed as expenditure only when payment is actually made. It was further held that it was not the legislative intent and objective to treat belated payment of Employees’ Provident Fund & Employees’ State Insurance Scheme as deemed income of the employer under section 2(24)(x) of the I.T. Act, 1961.