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Income Tax Appellate Tribunal, [ DELHI BENCH “S.M.C.”NEW DELHI ]
Before: SHRI CHALLA NAGENDRA PRASAD, S.M.C.
आदेश /O R D E R
PER C.N. PRASAD, J.M. :
This appeal is filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-8, New Delhi [hereinafter referred to CIT (Appeals)] dated 15.09.2020 for assessment year 2017-18.
I.T.A.No.1806/Del/2020
The sole issue in the appeal of the assessee is in respect of confirming the disallowance of employees’ contribution to ESI and EPF. Brief facts are that assessee filed return of income declaring income of Rs.15,11,425/- and the same was processed under Section 143(1) of the Income Tax Act, 1961 (the Act) on 30.03.2019 determining the income of the assessee at Rs.31,99,450/-. CPC while processing the return u/s. 143(1) disallowance of Rs.16,88,048/- on account of employees’ contribution to ESI and EPF was made. Rectification petition under Section 154 of the Act was filed by the assessee on 27.06.2019, which was rejected by the CPC by order dated 26.08.2019. The assessee filed appeal before the ld. CIT (Appeals) contending that employees’ contribution to ESI and EPF filed before the due date for filing the return of income are allowable as deduction. Reliance was placed on the decision of the Hon’ble Delhi High Court in the case of CIT Vs. AIMIL Ltd. (2010) 321 ITR 508 (Del.) and the decision of the Hon’ble Karnataka High Court in the case of M/s. Essae Teraoka Pvt. Ltd. Vs. DCIT (2014) [(3) TMI 386] (Kar). However, the ld. CIT (Appeals) placed reliance on the decision of Hon’ble Delhi High Court in the case of CIT Vs. Bharat Hotels Ltd. (2019) 410 ITR 417 (Del.) sustained the disallowance made by the Centralized Processing Centre (CPC) in disallowing the employees’ contribution to ESI and EPF.
The ld. Counsel for the assessee before me submits that assessee has remitted the employees’ contribution to ESI and EPF before the due date for filing the return of income with few days of delay from due dates as specified in the respective Acts. In other words, he submits that the contributions were remitted beyond the grace period allowed in the respective Acts, but before the due date of filing the return of income under Section 139(1) of I.T.A.No.1806/Del/2020 the Act. The ld. Counsel for the assessee submits that as the contributions were remitted before the due date of filing return of income under Section 139(1) of the Act, the same are allowable as deduction. The ld. Counsel relied on the following decisions in support of his contentions:-
(a) CIT Vs. AIMIL Ltd. 321 ITR 508 (Del.) (b) Pr. CIT Vs. Pro Interactive Service (India) Pvt. Ltd. (ITA. 983/2018 dated 10.09.2018) (Delhi HC); (c) M/s. Aroon Facilitation Management Services Pvt. Ltd. (ITA. 1824/Del/2020 dated 13.10.2021) (ITAT, Delhi); (d) Insta Exhibitions Pvt. Ltd. Vs. Addl. CIT (ITA. 6941/Del/2017 dated 03.08.2021) (ITAT, Delhi); (e) DCIT Vs. Planman HR (P) Ltd. (ITA. 5152/Del/2017 dated 15.07.2021) (ITAT, Delhi); (f) M/s. Crescent Roadways Private Limited Vs. DCIT (ITA. 1952/Hyd/2018 dated 01.07.2021) (ITAT, Hyd.); (g) Mahadev Cold Storage Vs. Jurisdictional Assessing Officer (ITA.Nos.20/Agra/2021 & Ors. dt.14.6.2021) (ITAT Agra); (h) DCIT Vs. M/s. Talentpro India HR Pvt. Ltd. (ITA.265/Chny/2019 dated 9.04.2021) (ITAT, Chennai); (i) DCIT Vs. Dee Development Engineers Ltd. (ITA.4959/Del/2016 dated 08.04.2021) (ITAT, Delhi).
The ld. DR strongly placed reliance on the orders of the authorities below.
I have heard the rival submissions, perused the orders of the authorities below. I find that the issue in appeal is squarely covered by the decision of the jurisdictional High Court in the case
I.T.A.No.1806/Del/2020 of CIT Vs. AIMIL Ltd. (supra). Following this decision the Hon’ble Delhi High Court in the case of Pr. CIT Vs. Pro Interactive Service (India) Pvt. Ltd. In (order dated 10.09.2018) decided the issue in favour of the assessee relying upon the judgement in the case of CIT Vs. AIMIL Ltd. (supra). Considering all these decisions the Tribunal in the case of Insta Exhibitions Pvt. Ltd. Vs. Addl. CIT in ITA. No. 6941/Del/2017 (order dated 03.08.2021) held that the employees’ contribution to EPF and ESI deposited before the due date of filing of return of income, but beyond the due date prescribed under the respective EPF and ESI laws is allowable as deduction. While holding so, the Tribunal observed as under:-
“6. We have carefully considered contentions of the learned departmental representative and perused the orders of the lower authorities. The facts shows that the assessee has collected the sum of Rs. 12,16,260/- being employee’s contribution under the provident fund and with respect to ESI laws. The above contribution was admittedly not deposited by the assessee within the due date prescribed under the respective ESI and PF statue however, same was deposited before the due date of filing of return of income. Therefore, the ld AO as well as the ld CIT(A) disallowed the same holding that such contribution becomes the income of the assessee under the provision of section 2(24)(x) of the Act and thereafter if the same is deposit within the due date prescribed under the respective laws then same is allowable as deduction u/s 36(1)(va) of the Act. Coordinate bench in case of DCIT Vs Dee Development Engineers in ( A.Y 2011-12) has held as Under:- “7. We have heard both the parties and perused all the relevant material available on record. As regards Ground No. 1, the assessee company has not deposited the employees’ contribution within the due date which is prescribed under the said statute i.e. Provident Fund and ESIC. This issue is dealt by the Hon’ble Delhi High Court in case of CIT vs. M/s Bharat Hotels Ltd. 410 ITR 417 wherein the issue is decided in favour of the revenue, without considering the decision of the Hon’ble Delhi High Court in case of CIT vs. AIMIL
I.T.A.No.1806/Del/2020
Ltd.(2010) 321 ITR 508 (Del.). But the Ld. AR relied upon the decision of the Hon’ble Delhi High Court in case of Pr. CIT vs. Pro Interactive Service (India) Pvt. Ltd. pronounced on 10.09.2018 wherein the Hon’ble High Court decided the issue in favour of the assessee relying upon the judgment of AIMIL Ltd. (supra). The Hon’ble Delhi High Court held that the legislative intent was/is to ensure that the amount paid is allowed as 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. It is settled law that when two judgments are available giving different views then the judgment which is in favour of the assessee shall apply as held in case of Vegetable Products Ltd. 82 ITR 192 by the Hon’ble Supreme Court. Hence, in light of the latest decision in case of Pro Interactive Service (India) Pvt. Ltd., the issue is covered in favour of the assessee. Hence, Ground No. 1 is dismissed.”
Further with respect to the argument of the learned departmental representative that amendment made with finance act 2021 wherein explanation 1 is added u/s 36 (1) (va) of the act with effect from 1 April 2021, is applicable to the present case, we referred to the “Notes on clauses” at the time of introduction of the finance bill 2021 which says as Under:- “Clause 8 of the Bill seeks to amend section 36 of the Income-tax Act, relating toother deductions. Sub-section (1) of the said section provides for allowing of deductions provided for in the clauses thereof for computing the income referred to in section 28 of the said Act. Clause (va) of the said sub-section provides for allowance of deduction for any sum received by the assessee from any of his employees to which the provisions of sub- clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation to the said clause provides that for the purposes of this clause, "due date" means the 5
I.T.A.No.1806/Del/2020 date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. It is proposed to insert Explanation 2 to clause (va) of sub-section (1) of the said section so as to clarify that the provisions of section 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the “due date” under the said clause. This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.”
Therefore it is apparent that the above amendment do not apply to the assessment year 2014 – 15 in this appeal.
8. In view of this we allow the solitary ground of appeal raised by the assessee holding that the addition/disallowance made by the learned assessing officer of late deposit of employees contribution to the provident fund and ESI, as it is deposited before the due date of the filing of the return of an income but beyond the due date prescribed Under the respective provident fund and ESI laws is not sustainable in law. “
Ratio of this decision squarely applies to the facts of the assessee’s case. The decision relied on by the ld. CIT (Appeals) as has been considered by the Tribunal in this case and following the decision of the jurisdictional High Court in the case of CIT Vs. AIMIL Ltd. (supra) and the decision of Hon’ble Delhi High Court in the case of Pr. CIT Vs. Pro Interactive Service (India) Pvt. Ltd. (supra) and also ratio of the decision of the Hon’ble Supreme Court in the case of Vegetable Products Ltd. 82 ITR 192 (SC) the Tribunal decided the issue in favour of the assessee. Further I find that identical issue came up before this bench in the case of Flying Fabrication Vs. DCIT (192 ITD 638) wherein similar view has been taken. 6
I.T.A.No.1806/Del/2020
7. Following the above decisions, I direct the Assessing Officer to delete the disallowance made to contribution to EPF and ESI as the same were remitted before the due date of filing of return of income. Grounds raised by the assessee are allowed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on : 31/03/2022.