BHARTIYA INTERNATIONAL LIMITED,NEW DELHI vs. DCIT CPC, BENGALURU

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ITA 768/DEL/2021Status: DisposedITAT Delhi23 March 2022AY 2018-194 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance was incorrect, following the Delhi High Court's decision in Pr.CIT vs. Pro Interactive Service (India) Pvt. Ltd. The amendments by the Finance Act, 2021, were prospective and not applicable to the assessment year in question.

What were the facts?

The assessee challenged the disallowance of Rs. 53,12,549/- for delayed payment of employee's contribution towards EPF and ESI. The assessee contended that the payment was made before the due date for filing the return of income.

What were the issues?

Whether delayed payment of employee's contribution to EPF/ESI, made before the due date of filing the return of income, is disallowable. Applicability of Finance Act, 2021 amendments to the assessment year 2018-19.

Which sections of the Income-tax Act were involved?

Section 36(1)(va),Section 43B,Section 2(24)(x),Section 139(1)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, DELHI BENCH “A” DELHI

Before: SHRI SAKTIJIT DEY & SHRI PRADIP KUMAR KEDIA

For Appellant: Shri Amit Goel, CA, Shri Nippun Mittal, CA
For Respondent: Shri Kanwaljit Singh, CIT-D.R

PER PRADIP KUMAR KEDIA, A.M.: The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [‘CIT(A)’ in short], dated 13.05.2021 arising from the intimation order dated 17.02.2020 passed under Section 143(1) of the Income Tax Act, 1961 (the Act) concerning AY 2018-19.

2.

As per its grounds of appeal, the assessee herein has challenged the disallowance of Rs.53,12,549/- on account of delayed payment of employee’s contribution towards EPF and ESI.

3.

When the matter was called for hearing, ld. counsel for the assessee, Shri Amit Goel, CA submitted that the impugned employee’s contribution towards PF and ESIC has been paid and deposited before the due date allowed u/s.139(1) although the assessee has remitted the payment belatedly and beyond the due dates specified in respects Acts. It was thus contended that where the assessee has complied with the obligation of payment towards employee’s contribution before the due date, the deductions are allowable u/s.36(1)(va) of the Act as held in several judicial pronouncements including the decision of Hon’ble Delhi High court in the case of Pr.CIT vs. Pro Interactive Service (India) Pvt. Ltd. vide order dated 10.09.2018 in ITA No.983/2018.

4.

Ld. DR for the Revenue relied upon the assessment order and the first appellate order.

5.

On perusal of the records, we observe that the Assessing Officer has made the impugned addition on the ground that the assessee has deposited employee’s contribution towards Provident Fund and ESI amounting to Rs.53,12,549/- after due date as prescribed under the relevant Act/ Rules in breach of Explanation 5 to Section 43B of the Act. The Assessing Officer accordingly resorted to the additions under Section 36(1)(va) read with Section 2(24)(x) of the Act.

6.

It is the case of the assessee before lower authorities that it has deposited the employee’s contribution in EPF and ESI before the due date of filing of return of income stipulated under Section 139(1) of the Act.

7.

We find that the identical issue has been decided in favour of the assessee by the Hon’ble Delhi High Court in the case of Pr.CIT vs. Pro Interactive Service (India) Pvt. Ltd. vide order dated 10.09.2018 in ITA No.983/2018. The extract of the judgment is reproduced as under:

1.

“In view of the judgment 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 (EPF) and Employee's State Insurance Scheme (ESI) as deemed income of the employer under Section 2(24)(x) of the Act. ”

8.

Respectfully following the binding precedents of Hon’ble Delhi High Court, we direct the Assessing Officer to allow the claim of the assessee and delete the addition. Hence, the grounds of appeal raised by the assessee are allowed.

9. While concluding so, we also take note of the plea of the assessee that delayed payment of employee’s contribution to PF/ESIC is not disallowable as the amendments to Section 36(1)(va) and Section 43B effected by Finance Act, 2021 were applicable prospectively in relation to Assessment Year 2021-22 and subsequent years. Therefore, the claim of deduction of contribution to Employee’s State Insurance Scheme (ESI) and Provident Fund u/s.36(1)(va) could not be denied to the assessee in Assessment Year 2018-19 in question on the basis of amendments made by Finance Act, 2021. For this proposition, we find support from the decision of the Co-ordinate Bench of Tribunal in the case of The Continental Restaurant and Café Company vs. ITO as reported in (2021) 91 ITR (Trib.)(S.N.) 60 (Bang.) and Adyar Ananda Bhavan Sweets India P. Ltd. vs. ACIT, and 403/Chny/2021 order dated 08.12.2021. Consequently, the action of revenue on this score is set aside and cancelled.

10.

In the result, the appeal of the assessee is allowed.

Order was pronounced in the open Court on 23/03/2022.

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