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Facts
The assessee challenged the disallowance of employee contributions to PF & ESI for AY 2017-18. It was contended that some delays in deposit were due to public holidays (Sunday/Independence Day), while a significant portion of contributions for January 2017 were paid within the due date, and a smaller part with a 14-day delay. The assessee also argued that the due date for deposit should be reckoned from the month of salary disbursement.
Held
The Tribunal noted similar issues had been restored to the Assessing Officer (AO) by various Benches in previous cases. Following this precedent, the Tribunal restored the matter to the AO with a direction to verify the assessee's contentions regarding the delays due to holidays and timely payments, and to decide the issue in accordance with law after providing due opportunity.
Key Issues
Whether disallowance of employee contributions to PF & ESI is justified when deposits are delayed due to holidays or made within a short delay, and how the due date for such deposits should be reckoned under the Income Tax Act.
Sections Cited
36(1)(va), 2(24)(x), 43B
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Income Tax Appellate Tribunal, DELHI BENCH “B” NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI AVDHESH KUMAR MISHRA
Assessee by Sh. K.V.S.R. Krishna, CA Revenue by Sh. Sanjay Tripathi, Sr. DR सुनवाईक�तारीख/ Date of hearing: 07.05.2024 21.06.2024 उ�ोषणाक�तारीख/Pronouncement on आदेश /O R D E R PER C.N. PRASAD, J.M.
This appeal is filed by the Assessee against the order of the Ld.CIT(Appeals)-NFAC, Delhi dated 23.10.2023 for the AY 2017-18 in sustaining the disallowance made in respect of employees contribution to PF & ESI u/s 36(1)(va) read with section 2(24)(x) of the Act.
I.T.A.No.3315/Del/2023
Ld. Counsel for the assessee referring to the written submissions contends that the contributions for the month of April, 2016 were deposited on 16.05.2016 with one day delay. Ld. Counsel submits that since the due date i.e. 15.05.2016 happened to be Sunday the contributions were deposited on 16.05.2016. Similarly, it is submitted that the contributions for the month of July, 2016 were deposited on 16.08.2016 with one day delay. Ld. Counsel submits that the due date i.e. 15.08.2016 happened to be Independence Day and closed holiday the contributions were deposited on 16.08.2016. Ld. Counsel placing reliance on the decision of the Tribunal in assessee’s group cases in dated 14.09.2023 submitted that the Tribunal held that in the circumstances there is no delay in deposit of the contributions. Copy of the order is placed on record.
Ld. Counsel for the assessee further submits that in so far as the contributions for the month of January, 2017 is concerned submits that the assessee has deposited the contributions on various dates as under:
S.No. Employee Month/ Due Date Date of Delay Remarks Share Year Deposit PF Cont. 1. 6,13,009 15.02.2017 15.02.2017 No delay CA Certificate Jan, 2017 1,94,088 15.02.2017 01.03.2017 14 days Delay 14,93,404 15.02.2017 15.02.2017 No delay CA 2
I.T.A.No.3315/Del/2023
Certificate 15,79,849 15.02.2017 15.02.2017 No delay CA Certificate 37,372 15.02.2017 01.03.2017 14 days Delay 39,17,722 Referring to the above table, the Ld. Counsel submits that out of total contributions of Rs.39,17,722/-, contributions to the extent of Rs.36,86,262/- were in fact paid within the due date i.e. 15.02.2017 and the balance contributions of Rs.2,31,460/- were remitted with a delay of 14 days. Therefore, it is the submission of the Ld. Counsel for the assessee that in so far as the contributions of Rs.36,86,262/- which were paid within the due date the same shall not be subject matter of disallowance u/s 36(1)(va) r.w.s. 43B of the Act.
Ld. DR submits that the matter may be restored to the file of the AO for verification.
Heard rival submission. In so far as the contributions for the month of April, 2016 and July, 2016 where there is a delay of one day are concerned, we find that the Tribunal in dated 14.09.2023 held that the contributions paid with a delay of one day on account of the due date being Sunday the same is to be allowed. Therefore, following the order of the Tribunal, we direct the AO to verify the contention of the I.T.A.No.3315/Del/2023 assessee that the contributions for the months of April, 2016 and July, 2016 were made with a delay of one day as the due date fell on Sunday and Independence Day being closed holiday. If the contention of the assessee is proved true the same shall be allowed as deduction subject to verification.
Ld. Counsel for the assessee further submits that in so far as the contributions which were deposited beyond 15th of next month, the due date for deposit of PF & ESI shall be reckoned from the month in which disbursement of salary was made. In other words, the Ld. Counsel submits that for computing the period of delay “month” to be taken should be the month in which salary/wages are disbursed by the assessee as held by the Kolkata Bench of the Tribunal in the case of Kanoi Paper Industries Ltd. vs. ACIT (75 TTJ 448).
Ld. Counsel submits that Delhi Bench of the Tribunal following the decision of the Kolkata Bench restored the appeals in the following cases to examine the contentions of the assessee:
“IN in the ITAT [DELHI BENCH “H” NEW DELHI] for A.Y. 2018-19 in the case of ACIT vs. M/s. VVDN technologies Pvt. Ltd.
2. In ITAs No. 7 & 8/DEL/2023 Jun 12,2023 (2023) 68 CCH 0520 Del Trib, (2023) 201 ITD 0154 (Delhi-Trib) in the case
I.T.A.No.3315/Del/2023 of SENTINEL CONSULTANTS P. LTD. vs. ACIT IN THE ITAT DELHI BENCH “G” in the case of DIGNUS SERVICES vs. INCOME TAX OFFICER IN THE ITAT DELHI BENCH ‘B’” 8. Ld. DR fairly submitted that Delhi Bench of the Tribunal in various decisions restored the issue to the file of the AO to examine the contentions of the assessee.
Heard rival submissions, perused the orders of the authorities below. We find identical issue came up for adjudication in the case of ACIT Vs. M/s VVDN Technologies Pvt. Ltd. in and the Tribunal by order dated 04.07.2023 restored the issue to the file of the AO to decide the issue keeping in view the directions of the Mumbai Tribunal in the case of Master Polishers Vs. ACIT in ITA No.252/Mum/2023 dated 26.04.2023. We also observe that similar view has been taken by the Mumbai Bench in the case of Sentinel Consultants P. Ltd. Vs. ACIT (201 ITD 154). Considering the rival submissions, this issue is restored to the file of the AO with a direction to examine the contentions of the assessee as stated above and to decide in accordance with law after providing adequate opportunity to the assessee.
I.T.A.No.3315/Del/2023
With these observations, we restore this appeal to the file of the AO to decide the issues keeping in view our above observations and the contentions of the assessee and pass order accordingly.
In the result, appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the open court on 21/06/2024