MEHRA ENGINEERING CORPORATION,NEW DELHI vs. ASSESSING OFFICER A.O, NEW DELHI

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ITA 983/DEL/2021Status: DisposedITAT Delhi25 February 2022AY 2019-20205 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, following the Delhi High Court's judgment in CIT vs. AIMIL Limited, held that belated payment of employee's EPF and ESI contributions, even if made after the due date under the respective acts but before the due date for filing the income tax return, should not be treated as disallowable expenditure.

What were the facts?

The assessee made a delayed deposit of employee contributions towards EPF and ESI, but within the due date for filing the income tax return. The Assessing Officer disallowed this amount as expenditure. The CIT(A) confirmed the disallowance.

What were the issues?

Whether delayed deposit of employee's contribution to EPF and ESI, made before the due date of filing the income tax return, is disallowable as expenditure.

Which sections of the Income-tax Act were involved?

Section 36(1)(va),Section 139(1)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI “SMC” BENCH: NEW DELHI

Before: SHRI KUL BHARAT

For Appellant: Shri Pradeep Chandra Agarwal, CA
For Respondent: Shri Anil Kumar Sharma, Sr.DR
Hearing: 16.02.2022Pronounced: 25.02.2022

[Assessment Year : 2019-20] Mehra Engineering Corporation, vs Assessing Officer A.O, G-15, Jangpura Extension, New Delhi. New Delhi-110014. PAN-AAJFM9096P APPELLANT RESPONDENT Appellant by Shri Pradeep Chandra Agarwal, CA Respondent by Shri Anil Kumar Sharma, Sr.DR Date of Hearing 16.02.2022 Date of Pronouncement 25.02.2022 ORDER

PER KUL BHARAT, JM :

1.

This appeal filed by the assessee for the assessment year 2019-20 is directed against the order of Ld. CIT(A), National Faceless Appeal Centre (“NFAC”) dated 30.07.2021.

2.

The assessee has raised following grounds of appeal:-

1. “That the Ld. Assessing officer has made addition to the income by Rs.194,091/- on account of disallowance under Section 36(1 )(va) for non-deposit of EPF and ESI as per the due date of the EPF act, 1956 and ESI Act, 1948 without considering the Judicial Pronouncement of High court of Delhi in case of AIMIL LIMITED and the facts of the case which are in similar lines to the facts mentioned in the case of the Judgment of the Delhi High court and the Page | 1

appeal is allowed by the CIT(A) In our favor against Appeal no-18/1098/1-20/101 date of order-21.09.2020 for AY-2018-2019 wherein fact of the case was same that is deposit of EPF and ESI was made after due date prescribed under relevant of the EPF act, 1956 and ESI Act, 1948 but deposited within due date of filing of income tax return u/s 139( 1) of the I.T, Act, 1961.”

3.

Facts giving rise to the present appeal are that the assessee company filed its return of income for Financial Year 2018-19 on 11.10.2019 declaring total income of Rs.9,67,790/-. Total tax liability was Rs.3,11,412/- which was discharged by way of TDS & TCS of Rs.34,693/- and Rs.18,398/- and payment of advance tax of Rs.2,90,000/-. A refund of Rs.31,680/- was claimed by the assessee. The Central Processing Unit sought clarification regarding allowability of expenditure related to PF and ESI contribution made by the employee of assessee’s company. The assessee had replied online regarding clarification and justification for allowance of such payment dated 10.01.2020 sought by CPC vide its notice No.CPC/1920/G22/1971585368 dated 03.01.2020 on the subject but CPC rejected assessee’s submissions and passed intimation order u/s 143(1) of the Act dated 29.02.2020 thereby making adjustment and an addition of income of Rs.1,94,091/- even all such dues were deposited on or before due date prescribed u/s 139(1) of the Act. Thus, the Assessing Officer made the assessment by passing intimation order u/s 143(1) of the Act dated 29.02.2020 at an income of Rs.11,61,880/- disallowing the contribution received by the assessee due to non-deposit of employees contribution within the timeline specified in the EPF and Miscellaneous Provision Act, 1952 and non deposit of the employees contribution within the timeline specified in the Employees State Insurance Act, 1948 amounting to Rs.1,94,091/-.

4.

Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who confirmed the addition.

5.

Now, the assessee is in appeal before this Tribunal.

6.

Ld. Sr. DR vehemently submitted that law is clear in this respect and he relied upon the decision of Ld.CIT(A).

7.

I have heard the Ld. Representatives of both parties and perused the material available on record and gone through the orders of the authority below. The issue in this appeal is related to disallowance of expenditure on account of delay in deposit of employees contribution related to EPF & ESI. The issue is squarely covered by the judgement of Hon’ble Jurisdictional High Court of Delhi in the case of PCIT vs Pro Interactive Service (India) Pvt.Ltd. in [Del.] order dated 10.09.2018 held as under:-

“In view of the judgement 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 (EPD) and Employee’s State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x) of the Act.”

Therefore, respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court in the above-mentioned binding precedent, I hereby direct the Assessing Officer to delete the disallowance. Thus, grounds raised by the assessee are allowed.

8.

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

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