GAGAN SAXENA,NEW DELHI vs. ACIT CIRCLE-22(2), NEW DELHI

Although a number of grounds have been raised by the assessee, these all relate to the order of the CIT(A) in confirming the addition of Rs.9,34,630/- on account of late deposit of PF/ESI u/s 36(1)(va) r.w. section 2(24)(x) of the IT Act.

Facts of the case, in brief, are that the assessee is an individual and is engaged in the business of supply of manpower. He filed his return of income on 26th October, 2018 declaring the total income at Rs.18,25,292/-. The CPC, Bangalore vide intimation u/s 143(1) dated 17th May, 2019 has processed the said return at an income of Rs.27,66,590/- by making total addition/disallowance of Rs.9,34,630/- on account of late deposit of PF/ESI u/s 36(1)(va) r.w.s 2(24)(x) of the IT Act.

In appeal, the ld.CIT(A), following various decisions including the decision of the jurisdictional High Court in the case of CIT vs. Bharat Hotels Ltd. (2019) 410 ITR 417 (Del) sustained the addition made by the CPC, Bangalore holding that the assessee is not entitled for deduction u/s 36(1)(va) r.w.s 2(24)(x) of the IT Act due to failure on his part in depositing the employees’ contribution on or before the due date.

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

The ld. Counsel for the assessee submitted that a number of High Courts including the jurisdictional High Court and the coordinate Benches of the Tribunal have taken the view that where the employees’ contribution to PF and ESI have been deposited before the due date of filing of the return, no disallowance can be made u/s 36(1)(va) r.w.s. 2(24)(x) of the IT Act. He submitted that the Hon’ble Delhi High Court in the case of PCIT vs. Pro 2

Referring to the decision of the coordinate Bench of the Tribunal in the case of CIT v. Dee Development Engineers Ltd., ITA 4959/Del/2016, order dated 08.04.2021, he submitted that the Tribunal, following the above decision of the Hon’ble Delhi High Court in the case of Pro Interactive Service (India) Pvt. Ltd. (supra) has decided the issue in favour of assessee where the employees’ contribution to PF and ESI were deposited after the due date prescribed under the Employees Provident Fund and Employees’ State Insurance Act, 1948 but before the due date of filing of return. Relying on various other decisions as per his case law compilation, he submitted that under identical circumstances, the courts/coordinate Benches of the Tribunal have held that no disallowance u/s 36(1)(va) r.w.s 2(24)(x) can be made if the employees’ contribution to PF and ESI have been deposited prior to the due date of filing of the return of income.

The ld. DR, on the other hand, relied on the order of the CIT(A).

I have considered the rival arguments made by both the sides and perused the record. The only question to be decided in the grounds raised by the assessee is regarding the allowability of employees’ contribution to PF and ESI if deposited after the due date prescribed under the relevant Act, but, before the due date of filing of return of income u/s 139(1) of the Act. Admittedly, the assessee, in the instant case, has deposited the employees’ contribution to PF and ESI after the relevant date prescribed under the PF and ESI Act, but, before the due date of filing the return of income. I 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. I 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), I hold 4 that no disallowance u/s 36(1)(v) r.w.s. Section 2(24)(x) can be made in the instant case. Accordingly, the order of the CIT(A) is set aside and the grounds raised by the assessee are allowed.