SUPER SNACKS PVT. LTD.,DELHI vs. CPC ITD, BENGALURU

This appeal was fixed for hearing today by issue of notice through RPAD. However, the postal authorities have returned the notice unserved with postal remark “left”. The assessee has also not taken any steps intimating the change of address if any. Therefore, I proceed to decide the appeal on the basis of material available on record and after hearing the ld. DR.

The only issue raised by the assessee in the grounds of appeal relating to the order of the Ld. CIT(A) in confirming the action of the Assessing Officer in sustaining the addition of Rs.4,51,593/- on account of disallowance of late payment of Provident Fund/ESI u/s 36(1)(va) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

Facts of the case, in brief, are that the assessee company e-filed the return of income for the Assessment Year 2019-20 on 27.09.2019 declaring the total loss of Rs.1,07,669/-. The said return was processed u/s 143(1) of the Act at a total income of Rs.3,43,924/- as against loss of Rs.1,07,669/- declared in the return of income by making an addition of Rs.4,51,593/- on account of disallowance of late payment of PF/ESI u/s 36(1)(va) of the Act.

In appeal, the ld. CIT(A) upheld the action of the Assessing Officer on the ground that although the assessee had made the payments of PF/ESI before the due date of filing of return of income, however, he has not deposited the same before the statutory due dates prescribed under PF and ESI Act.

Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.

I have heard the Ld. DR and perused the record. A perusal of the order of the Ld. CIT(A) shows that the amount of Rs.4,51,593/- was disallowed by the CPC in the intimation dated 06.07.2020 on account of late deposit of PF/ESI before the statutory due dates. I find the submission of the assessee that since the payments were made before the due date of filing of the return u/s 139(1) of the Act therefore, no such disallowance u/s 36(1)(va) should be made was rejected by the Ld. CIT(A). There is no dispute to the fact that the above payments have been deposited before the due date of filing of return of income u/s 139(1) of the Act. We find, the Hon’ble Delhi High Court in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd. (supra) has held that ‘the legislative intent was / is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. The Hon’ble High Court has further held that legislative intent and objective is not to treat belated payment of Employee's Provident Fund (EPD) and Employee's State Insurance Scheme (ESI) as deemed income of the employer under the Act. We find, following the above decision the coordinate Bench of the Tribunal in the case of CIT v. Dee Development Engineers Ltd. (supra) has decided the issue in favour of the assessee holding that no disallowance u/s 36(1)(v) r.w.s. Section 2(24)(x) can be made if the employees’ contribution to PF and ESI are deposited after the due date prescribed under the relevant Acts, but, paid before the due date of filing of return. Since the assessee, in the instant case has, admittedly, deposited the employees’ contribution to PF and ESI before the due date of filing of the return of income, therefore, respectfully following the decisions cited (supra), we hold that no disallowance u/s 36(1)(v) r.w.s.

In the result, the appeal filed by the assessee is allowed.