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Income Tax Appellate Tribunal, DELHI “SMC” BENCH: NEW DELHI
Before: SHRI C. N. PRASAD
ORDER PER C. N. PRASAD, JM :
This appeal is filed by the assessee against the order of the Ld.CIT (A), National Faceless Appeal Centre, in sustained the disallowance made on account of belated payment of Provident Fund and ESI Contributions while processing the return u/s 143(1) by Central Processing Centre, CPC, Bengaluru. The assessee has raised following grounds of appeal:-
1. Ld. CIT(A) has erred in law and on merits of the case was not justified in confirming the addition of Rs 1,59,922/- made by A.O (CPC) on account of late deposit of employee contribution towards PF/ESI, even it is paid before due date of filing of 1TR in view of Section 43B of the Income Tax Act, 1961 and ignored
various judicial pronouncement cited by the assessee.
2. C1T(A) has erred in law in confirming the disallowance of employee contribution to PF/ESI in the light of amendment in sections 36(va) as well as in section 43B by inserting corresponding Explanations through Finance Act, 2021. Although the impugned employee PF / ESI now comes under the provision of section 36(va) only, but the memorandum explaining Finance Bill, 2021 says that these amendments will take effect from 01.04.2021 and will accordingly apply to AY 2021-22 and subsequent Assessment Years. Thus the legislature itself has condoned the impugned default before 01.04.2021.
ITAT bench of Delhi in the case of Insta Exhibitions Private Limited vs ACIT /DEL/2017 (and ITA no 4959/DEL/2016) wherein it was held that belated payments of ESI and PF cannot be treated as deemed income u/s 2(24). Further it was held that ‘notes on clauses introducing Finance Bill holds that amendment is effective from A.Y 2021-22’ and thus deleted the addition on this account.
The Ld. Counsel for the assessee at the outset submits that CPC while processing the return u/s 143(1) of the Act disallowed Employee Contribution of ESI of Rs. 17, 530/- and Employee Contribution of Provident Fund of Rs. 1,42,392/-, aggregating to Rs. 1,59,922/- on the ground that they were remitted beyond the time specified in the respective statute. Ld. Counsel for the assessee submits that the assessee has remitted these contributions before due date of filing of return of income. Ld. Counsel submits that the assessee due date under ESI & PF for remittance of these contributions was 15/1/2019 however, the assessee paid within a week of this date i.e. on 22/1/2019. The Ld. Counsel submits that the issue in appeal is squarely covered by the decisions of the Delhi High Court in the case of CIT Vs. AIMIL Ltd. [321 ITR 508] and CIT Vs. P. M Electricals Ltd. [313 ITR 1610]. The Ld. Counsel referring to these decisions submits that, it has been held by Hon’ble High Court that if the employer as well as the Employee Contribution towards ESI & PF is paid before the due date of filing of return no disallowance can be made by the Assessing Officer. The Ld. Counsel also placed reliance on the decision of the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusion Ltd. [319 ITR 306] for the said propositions.
3. On the other hand, the Ld. DR supported the orders of the authorities below.
We have heard the rival submissions and perused the order of the Ld.CIT(A) and the decisions relied on. It is not in dispute that the Contributions to Provident Fund and the ESI were remitted by the assessee before due date for filing of return. The Hon’ble Delhi High Court in the case of CIT vs. AIMIL Ltd. (Supra) held that if the Provident Fund and ESI Contributions were remitted before due date of filing of return of income such contributions cannot be disallowed u/s 43B of the Act. Respectfully, following the said decision the Assessing Officer is directed to delete the disallowance made towards PF & ESI Contributions and recompute the income accordingly.
In result, the appeal of the assessee is allowed.