BHOLESHWAR CHOPRA,DELHI vs. WARD 1-1(3), DELHI

Date of hearing: 30.03.2022 Date of order : 30.03.2022

ORDER This appeal by the assessee is directed against the order passed by learned CIT(A), National Faceless Appeal Centre, Delhi dated 01.10.2021 for the assessment year 2018-19.

“1. The Ld. CIT(A) grossly erred both on facts and in law in confirming the intimation u/s. 143(1) sent by CPC where by it processed the return of income of appellant for AY 2018-19 at Rs.21,45,452/-.

2. The Ld. CIT(A) grossly erred in facts and in law in misreading the provisions of section 36(1)(va) r.w. section 2(24)(x) r.w. section 43B r.w. various legal decisions, as applicable for AY 2018-19, and upholding the disallowance of Rs.5,80,686/- on account of late payment of employee contribution to ESIC/EPF. The appellant further craves leave to add, amend, alter, delete, rescind, forgo or withdraw any of the above grounds of appeal either before or during the course of the appellate proceedings.”

2.1 As can be culled out from the records and grounds of appeal, the solitary issue involved in this appeal is regarding disallowance of Rs.5,80,686/- u/s. 36(1)(va) of the Act on account of delay in depositing the employees’ contribution to ESI and PF. The Central Processing Centre (“CPC”), Bengaluru vide intimation dated 26.04.2019 u/s 143(1) r.w. section 154 of the Income Tax Act, 1961 (“the Act”) for Assessment Year 2018-19, has made adjustment of taxes after considering the disallowance of expenditure on account of delay in deposit of employees contribution to PF & ESI. The disallowance so made stood confirmed by the ld. CIT(A), National Faceless Appeal Centre, Delhi vide impugned order on the premise that since the assessee did not deposit the employees’ contribution to PF and ESI before the due date, the assessee is not entitled to claim deduction u/s. 36(1)(va) of the Act. Aggrieved by this order, the assessee is in appeal before the Tribunal.

3. Ld. AR of the assessee submits that since the assessee has paid employees’ contribution to PF and ESI before the due date of filing of return u/s. 139(1) of the Act, the same cannot be held as disallowable deduction. Reliance is placed on a series of decisions.

4. On the other hand, ld. Sr. DR contended that once the assessee failed to deposit employees’ contribution to PF & ESI before due date as prescribed in the ESI & PF Act, the decision of ld. CIT(A) does not call for any interference.

Sagun Foundry (P) Ltd., vs. CIT, 145 DTR 265 (All) has held in favour of the assessee and adjudged that; “By way of First Proviso Section 43-B, an incentive/relaxation was sought to be given in respect of tax, duty, cess or fee by explicitly stating that if such tax duty cess or fee is paid before the date of filing of the return under Act 1961, Assessee would then be entitled to deduction. This relaxation/incentive was restricted only to tax, duty, cess and fee. It did not apply to contributions to labour welfare funds. The reason appears to be that the employer should not sit on the collected contributions and deprive workmen of the rightful benefits under social welfare legislations by delaying payment of contributions to the welfare funds. “27. ... In the result when contribution had been paid, prior to filing of return under Section 139(1), Assessee/employer would be entitled for deduction.... ” 28. .... we find that irrespective of the fact that deduction in respect of sum payable by employer contribution was involved, but Court did not restrict observations, findings and declaration of law to that context hut looking to the objective and purpose of insertion of Section 43B applied it to both the contributions. It also observed clearly that Section 43B is with a non-obstante clause and therefore override even if, anything otherwise is contained in Section 36 or any provision of Act 1961.