ZENITH WELDAIDS LIMITED,GHAZIABAD vs. CPC, ITD, BENGALURU

This appeal filed by the assessee is directed against the order dated 20.07.2021 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi relating to Assessment Year 2019-20.

1. “Ld. CIT(A) has erred in law and on merits of the case was not justified in confirming the addition of Rs 1,85,294/- made by A.O (CPC) on account of late deposit of employee contribution towards PF/ESI, even it is paid before due date of filing of ITR in view of Section 43B of the Income Tax Act, 1961 and ignored various judicial pronouncement cited by the assessee.

2. CIT(A) has erred in law in confirming the disallowance of employee contribution to PF/ESI in the light of amendment in sections 36(va) as well as in section 43B by inserting corresponding Explanations through Finance Act, 2021. Although the impugned employee PF / ESI now comes under the provision of section 36(va) only, but the memorandum explaining Finance Bill, 2021 says that these amendments will take effect from 01.04.2021 and will accordingly apply to AY 2021-22 and subsequent Assessment Years. Thus the legislature itself has condoned the impugned default before 01.04.2021.

3. ITAT bench of Delhi in the case of Insta Exhibitions Private Limited vs ACIT (and ITA no 4959/DEL/2016) wherein it was held that belated payments of ESI and PF cannot be treated as deemed income u/s 2(24). Further it was held that ‘notes on clauses introducing Finance Bill holds that amendment is effective from A.Y 2021-22’ and thus deleted the addition on this account.

4. That the appellant craves leave to add, amend or alter any of the grounds of appeal on or before the date of hearing.

4. Before me, at the outset, Learned AR submitted that the sole grievance of the assessee is confirming the additions on account of delay in deposit of employee’s contribution towards provident fund and ESI fund.

5. Before me, Learned AR submitted that additions has been made in the intimation issued by CPC, Bangalore u/s 36(1)(va) of 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 in the case of Azamgarh Steel & Power vs. CPC in dated 31.05.2021 and CIT vs. AIMIL Ltd. [2010] 188 Taxman 265 (Delhi) and various other decisions.

“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 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.”

Order pronounced in the open court on 16.06.2022