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Income Tax Appellate Tribunal, DELHI “SMC-2” BENCH: NEW DELHI
Before: SHRI KUL BHARAT
ORDER PER KUL BHARAT, JM :
This appeal filed by the assessee for the assessment year 2018-19 is directed against the order of Ld. CIT(A)-9, New Delhi dated 15.09.2020.
The assessee has raised following grounds of appeal:-
1. “That both the lower authorities were not justified in making and confirming the assessment order u/s 143(1) since the same was not in accordance with the Provisions of the income Tax Act, 1961 and is illegal on account of various grounds.
2. That the assessment order passed by Ld.AO is bad in law since the same was passed without following the Principles of Natural Justice and without providing the proper opportunity. 3. That under the facts and circumstances of the case, an addition of Rs.8,79,512/- made by the Ld.AO u/s 36(1)(va) of the Income Tax Act, 1961 and subsequently confirmed by the CIT(A) deserves to be deleted.
4. That the appellant craves leave to add, amend , alter or withdraw any ground of appeal at the time of hearing with the permission of the Hon’ble ITAT, Delhi Bench.”
2. The only effective ground in this appeal is against the sustaining of addition of Rs.8,79,512/- on account of late payment of contribution of Provident Fund and ESI u/s 36(1)(va) of the Income Tax Act, 1961 (“the Act”).
Facts giving rise to the present appeal are that the assessee e-filed its return of income declaring profit of Rs.33,77,790/- on 23.10.2018 alongwith audit report u/s 44AB of the Act which was processed u/s 143(1) of the Act on 16.10.2019 thereby, made addition of Rs.8,79,512/- on account of disallowance of amount debited to P&L A/c. While processing the return of income, the claim of the assessee regarding payment of contribution of employees in respect of Provident Fund and ESI was disallowed on account of delay in payment as per respective Acts. However, the payment was made before the date of filing of return of income.
Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who confirmed the addition.
Now, the assessee is in appeal before this Tribunal.
Ld. Counsel for the assessee submitted that the issues raised in this appeal are squarely covered in favour of the assessee. He placed reliance on the decisions of Hon’ble Delhi High Court rendered in the case of PCIT vs Pro Interactive Service (India) Pvt.Ltd. in [Del.] order dated 10.09.2018 and in the case of CIT vs AIMIL Ltd. 321 ITR 508 and stated that Page | 2 that these binding precedents have been followed by the various Benches of the Tribunal.
Per contra, Ld. Sr. DR vehemently opposed these submissions and submitted that law is clear in this respect and he relied upon the decision of Ld.CIT(A). He further relied upon the decision of Hon’ble Delhi High Court in the case of CIT vs Bharat Hotels Ltd. [2019] 103 Taxmann.com 295 (Delhi) wherein the Hon’ble High Court has decided the issue in favour of the Revenue by observing as under:-
“Having regard to the specific provisions of the Employees‟ 8. Provident Funds Act and ESI Act as well as the concerned notifications which granted a grace period of 5 days (which appears to have been late withdrawn recently on 08.01.2016), we are of the opinion that the ITAT‟s decision in this case was not correct. The assessee undoubtedly was entitled to claim the benefit and properly treat such amounts as having been duly deposited, which were in fact deposited within the period prescribed (i.e. 15 + 5 days in the case of EPF and 21 days + any other grace period in terms of the extent notification). As far as the amounts employees‟ constituting deductions from salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns.”
I have heard the rival submissions and perused the material available on record and gone through the orders of the authorities below. Ld.CIT(A) has decided the issue by observing as under:-
5.3. “In view of the factual matrix of the case, the recent precedents of the jurisdictional High Court and ITAT relied in the above paras and also the provisions of Section 36(1)(va) in the Income Tax Act, 1961 which makes it amply clear that the employees contribution to ESI and PF be deposited before the relevant due dates, I am of the considered view that the appellant has failed to comply with the provisions as stipulated under the IT Act, 11961 i.e. the appellant has failed to deposit the employees contribution to ESI and PF before the due dates. Therefore, this ground i.e. ground No.1 is decided in negative to the appellant. Appellant fails in these grounds of appeal
6. Ground No.2 is general.”
9. I find merit in the contention of Ld. Counsel for the assessee that the issue is covered by the judgement of Hon’ble Delhi High Court rendered in the case of AIMIL Ltd. (supra) wherein it has been held:-
“We may only add that if the employees’ contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income Tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Supreme Court in Vinay Cement (supra).” 10. Further, Ld. Counsel for the assessee placed reliance on the judgement of Hon’ble Delhi High Court rendered 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 precedents, I hereby direct the Assessing Officer to delete the disallowance. Thus, grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Above decision was pronounced on conclusion of Virtual Hearing in the presence of both the parties on 23rd November, 2021.