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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRIANIL CHATURVEDI & SHRI N. K. CHOUDHRY
PER N.K. CHOUDHRY, J. M.: 1. The Assessee has preferred the instant appeal against the order dated 31.07.2020impugned herein passed by the Ld. Commissioner of Income Tax-12New Delhi [in short „Ld. Commissioner] u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟), whereby the ld. Commissioner sustained the disallowance to the tune of Rs. 5,58,690/- which was made by the Assessing officer for late deposit employees‟ contribution qua PF and ESI.
The issue involved in the instant appeal relates to the deposit of employees‟ contributions qua PF and ESI after the due date as prescribed in the relevant Act, however, before the due date of filing of return of income u/s.139(1) of the Act, which resulted into addition of Rs. 5,58,690/- made by the AO on account of disallowance on the ground that there has been delay in deposit of aforesaid amounts beyond the due date of deposit prescribed under the PF and ESIC Act.
The detailsof amount of Rs. 4,55,413/- deposited qua employees‟ contribution towards PF,are as under:-
Month Amount Due Date of Actual date of (Rs.) Deposit deposit April 2017 37484 15/05/2017 08/06/2017 May 2017 32052 15/06/2017 12/08/2017 June 2017 39202 15/07/2017 04/09/2017 July 2017 38071 15/08/2017 04/09/2017 August 2017 39900 15/09/2017 17/10/2017 Sept. 2017 39652 15/10/2017 17/10/2017 Oct. 2017 37238 15/11/2017 02/12/2017 Nov. 2017 37508 15/12/2017 23/01/2018 Dec. 2017 38603 15/01/2018 24/01/2018 Jan. 2018 39190 15/02/2018 03/04/2018 Feb. 2018 38962 15/03/2018 03/04/2018 March2018 37551 15/04/2018 28/05/2018 Total 455413
The details of amount of Rs. 1,03,277/- deposited qua employee‟s contribution towards ESI are as under:- Month Amount Due Date of Actual date of (Rs.) Deposit deposit April 2017 8600 21/05/2017 08/06/2017 May 2017 7205 21/06/2017 12/08/2017 June 2017 8364 15/07/2017 04/09/2017 July 2017 7543 15/08/2017 04/09/2017 August 2017 8793 15/09/2017 17/10/2017 Sep. 2017 8945 15/10/2017 17/10/2017 8122 15/11/2017 02/12/2017 Oct. 2017 Nov.2017 9156 15/12/2017 23/01/2018 Dec. 2017 9558 15/01/2018 24/01/2018 January 2018 9308 15/02/2018 03/04/2018 February 9268 15/03/2018 03/04/2018 2018 March 2018 8415 15/04/2018 28/05/2018 Total 103277
The said disallowance (455413+103277=5,58,690/-)was challenged by the Assessee before the Ld. Commissioner, who vide impugned order, sustained the same.
Being aggrieved, the Assessee is in appeal before us.
Having heard the parties and perused the material available on record. The Assessee raised the arguments against the impugned order, whereas the Ld. DR vehemently supported the same.
5.1 The Ld. CIT(A) while upholding the disallowance/addition qua employee‟s contributions towards PF and ESI, referred the provisions of section 36(1)(va), 2(24)(x) and 43B of the Act and held that if any of the deposit is outside the due date mandated under the statute then that amount shall never be allowed as deduction under section 36 (1) (va)even though it might have been deposited with a delay of just a one day. There is no provision in the Act under which this amount can be allowed as deduction in any year thereafter. The Ld. Commissioner while sustaining the addition also relied upon the judgment passed by the Hon‟ble Delhi High Court in the case of CIT Vs. M/s. Bharat Hotels Ltd., [2019] 410 ITR 417 (Del).
5.2 The Assessee claimed, because the employee‟s contribution qua PF and ESIwas deposited before the due date of filing of the return of income u/s 139 of the Act, hence no disallowance is warranted. In support of its contention the Assessee also relied upon various judgments rendered by Hon‟ble Apex Court, which includes Rajasthan State Beverages Ltd (2017) 84 Taxmann.com 185 (SC), CIT Vs. Alom Extrusion Ltd (2010) 1 SCC 489, CIT Vs. Vinay Cement Ltd 213 CTR 268 and by Hon‟ble Delhi High Court in the case of CIT Vs. AIMIL Ltd 321 ITR 508.
5.3 On the contrary Ld. DR refuted the claim of the Assessee and relied upon various judgments of the Hon‟ble High Courts against the contention and claim of the Assessee, such as in the case of CIT Vs M/s. Bharat Hotels Ltd., [2019] 410 ITR 417 (Delhi) , Gujarat State Road Transport Corporation Ltd. {Tax Appeal no. 637 of 2013 reported in [2014] 41 taxmann.com 100(Gujarat), CIT VsMerchem Ltd. (2015) 378 ITR 443(Kerala) and Unifac Management Services(India) P. Ltd. (2018) 100 taxmann.com 2414(Madras).
5.4 Admittedly there is plethora of judgments in favour of the Assessee‟s contention and of the Revenue. The controversy with regard to divergent views of different High Courts, has been settled by the Hon'ble Apex Court in the case of CIT Vs. M/s. Vegetables Products Ltd. (88 ITR 192) by laying down the dictum ‘if two reasonable constructions of a taxing provision are possible that construction which favours the Assessee must be adopted.
5.5 Admittedly the issue under controversy travelled upto the Hon‟ble Apex Court in the cases of Rajasthan State Beverages Ltd (supra), CIT Vs. Alom Extrusion Ltd (supra) and CIT Vs. Vinay Cement Ltd (supra) and the Hon‟ble Apex Court clearly held the amount claimed on payment of PF and ESI if deposited on or before due date of filing of return, then the same cannot be disallowed u/s 43B or u/s 36(1)(va) of the Act.
5.6 Even Hon‟ble Punjab and Haryana High Court in the case of CIT Vs. M/s Hemla Embroidery Mills (P) Ltd. (366 ITR 167) (P&H HC) and in the case of CIT Vs. M/s Mark Auto Industries Ltd. (358 ITR 43) (P&H HC) has clearly held that the Assessee is entitled to claim deduction of employee‟s share of ESI & PF u/s.43B of the Act, if the same has been deposited prior to the filing of return of income u/s.139(1) of the Act.
5.7 Jurisdictional High Court as well, in the case of CIT Vs. AIMIL Ltd (supra) affirmed the action of the ITAT, in deleting the addition made by the Assessing Officer under Section 36(1)(va) of the Act, on account of employees‟ contributions qua Provident Fund and ESI, deposited before the due date of filing of return.
5.8 The Ld. Commissioner while sustaining the addition also relied upon the judgment delivered by the jurisdictional High Court in the case of CIT Vs M/s. Bharat Hotels Ltd., [2019] 410 ITR 417 (Delhi) which infact was delivered later on and without considering the precedent on identical issue in the case of CIT Vs. AIMIL Ltd (supra) and it is also a fact that the judgment delivered by the jurisdictional High Court in the case of PCIT vs., Pro Interactive Service (India) Pvt. Ltd., (ITA.No.983/2018 order dated 10.09.2018) is a latest one , wherein the decision of the Hon‟ble High Court in the case of CIT Versus AIMIL Ltd., (supra), has been followed by holding as under :- “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 (EPD) and Employee's State Insurance Scheme (ESI) as deemed income of the employer under Section 2(24)(x) of the Act. Appeal is dismissed.” 5.9 From the aforesaid Judgments of the Hon‟ble High Courts, it is clear that the Hon‟ble Courts have not drawn any distinction between the employee‟s and employer‟s share qua PF & ESI contributions, hence, the determination of the Ld. CIT(A) to the effect “if any of the deposit is outside the due date mandated under the statute then that amount shall never be allowed as deduction under section 36 (1) (va) even though it might have been deposited with a delay of just a one day”,is un-sustainable.
5.10 In view of the above discussions, the disallowance to the tune of Rs. 5,58,690/- made by the AO for the assessment year under consideration and confirmed by the CIT(A) is not sustainable, hence, the same stands deleted. Page | 6