BALAJI HR SERVICES,FARIDABAD vs. ITO WARD 1(5), FARIDABAD

Date of hearing: 29.03.2022 Date of order : 29.03.2022

ORDER This appeal by the assessee is directed against the order passed by learned CIT(A), National Faceless Appeal Centre, Delhi dated 30.07.2021 for the assessment year 2018-19.

“1. The Id CIT(A) erred in confirming the addition of Rs374226 made by the Id Assessing Officer representing delay in remittance of employee contribution towards ESI u/s 143(1) of the Income Tax Act 1961,ignoring the fact that such addition was not attracted under the said section.

2. The Id CIT(A) erred in confirming the addition of Rs1236780 made by the Id Assessing Officer representing delay in remittance of employee contribution towards PF u/s 143(1) of the Income Tax Act 1961,ignoring the fact that such addition was not attracted under the said section.

3. The Id CIT(A) erred in confirming the addition of Rs374226 made by the Id Assessing Officer representing delay in remittance of employee contribution towards ESI in contravention to the applicable law and the decisions of the jurisdictional courts.

4. The Id CIT(A) erred in confirming the addition of Rs1236780 made by the Id Assessing Officer representing delay in remittance of employee contribution towards PF in contravention to the applicable law and the decisions of the jurisdictional courts.

5. The Id CIT(A) erred in confirming the addition of Rs374226 made by the Id Assessing Officer representing delay in remittance of employee contribution towards ESI relying on the amendment in section 43 B and 36(1)(va) of the Income Tax Act 1961 brought in vide Finance Act 2021. 6. The Id CIT(A) erred in confirming the addition of Rs 1236780 made by the Id Assessing Officer representing delay in remittance of employee contribution towards PF relying on the amendment in section 43 B and 36(1)(va) of the Income Tax Act 1961 brought in vide Finance Act 2021. 7. The Id Assessing Officer erred in rejecting the principle if two views are possible, one in favour of the assessee should be adopted keeping in view the facts and circumstances of the case and he ought to have deleted the addition of Rs.374226 and 1236780 respectively for late deposit of employees contribution to ESI & PF. 8. The appellant craves leave to add, amend, delete and modify any grounds of appeal before/during the hearing of the appeal and all the above grounds are without prejudice to each other.”

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.3,74,226/- and Rs.12,36,780/- u/s. 36(1)(va) of the Act on account of delay in depositing the employees’ contribution to ESI and PF respectively.

The Central Processing Centre (“CPC”), Bengaluru vide intimation dated 17.10.2019 u/s. 143(1) 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.

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.