DILESHWAR NATH,NEW DELHI vs. ITD, CPC, BENGALURU

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘SMC’ NEW DLEHI

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER

ITA No. 1282/Del/2021 Assessment Year: 2018-19

Dileshwar Nath, Flat No. 183, vs. ITD, CPC, Sector-9, Pocket 01, Dwarka, Bengaluru. New Delhi. PAN : ABBPN1431E (Appellant) (Respondent)

Appellant by : Sh. Hemand Jain, Advocate Respondent by: Sh. Om Prakash, Sr. DR

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 31.07.2021 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. 154 deny by CPC where by it processed the return of income of appellant for AY 2018-19 at Rs.37,81,649/-. 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.17,63,271/- on account of late payment of employee contribution to ESI/EPF.”

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.17,63,271/- 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 17.05.2019 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.

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.

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.

perused the record. It is an undisputed fact that the assessee in the instant

case has deposited the employee’s contribution to PF & ESI before the due

date of filing of return, although the same has been paid after the dates

specified in the relevant Act.

following decisions :

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. 29. Therefore, we are clearly of the view that law laid down by High Courts of Karnataka, Rajasthan, Punjab & Haryana, Delhi, Bombay and Himachal Pradesh have rightly applied Section 43B in respect to both contributions i.e. employer and employee. ... 30. In view of above all the questions formulated above are answered against Revenue and in favour of Assessee. 31. Appeal is therefore allowed.... • CIT vs. AIMIL LIMITED, (2010) 188 Taxman 265 (Del.) "If the employee’s contribution is not deposited by the due date prescribed under the relevant acts and is deposited late, the employer not only pays interest on delayed payments but can incur penalties also, for which specific provisions are made in the provident fund act. Therefore, the act permits the employer to make the deposit with some delay, subject to aforesaid consequences. Insofar as the Income Tax Act is concerned, the assessee can set the benefit if the actual payment is made before due date of ft line the return under section 139(1)". PR. C1T vs. PRO INTERACTIVE SERVICE (INDIA) PVT. LTD., 983/2018, DATED 10.09.2018 (DEL) "In view of the judgement of the Division Bench of Delhi High Court in Commissioner of Income-Tax versus AIMIL Ltd., [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(24)(x) of the Act."

decisions and various other decisions, are holding that if the assessee has

deposited the employees’ share of contribution to PF & ESI before the due

date of filing of return u/s. 139(1) of the Act, then no disallowance u/s.

36(1)(va) can be made. It has further been held that the amendment to the

provisions of section 43B and 36(1)(va) of the Act by the Finance Act, 2021

has to be construed as prospective and applicable for the period after

01.04.2021. It is held that this provision imposes a liability on the assessee

and therefore, cannot be construed as applicable with retrospective effect

since the legislature has not specifically said so. Since the assessee in the

instant case has admittedly deposited the employee’s contribution to PF &

ESI before the due date of filing of return of income, therefore, I am of the

considered opinion that the ld. CIT(A) is not justified in sustaining the

disallowance made by the CPC. I, therefore, direct the Assessing Officer to

delete the disallowance in the hands of the assessee.

Sd/-

(R.K. PANDA) Accountant Member Dated: 29/03/2022 ‘aks’