WELGROW HOTELS CONCEPTS PVT LTD,NEW DELHI vs. ACIT CPC, BANGALORE

Although a number of grounds have been raised by the assessee, these all relate to the ex parte order of the CIT(A) in confirming the disallowance made by the CPC Bangalore in respect of employees’ contribution to PF and ESI of Rs.17,96,110/- and also not condoning the delay of 124 days in filing the appeal before him.

Facts of the case, in brief, are that the assessee is a private limited company engaged in the business of hotels, camping sites and other provision of short stay accommodation. It filed its return of income on 30th October, 2017 which was further revised on 11th September, 2019 declaring the taxable income at Rs.11,12,601/-. The return was processed by the CPC and intimation u/s 143(1)(a) of the Act was issued on 21st November, 2019 wherein the CPC considered the disallowance u/s 36(1)(va) at Rs.17,96,110/-. The assessee was served with a demand order dated 6th January, 2020 passed u/s 154 of the Act r.w.s. 143(1) wherein the taxable income was determined at Rs.29,08,711/- by disallowing an amount of Rs.17,96,110/- u/s 36(1)(va).

Since the assessee did not furnish any documentary evidence regarding the service of order/notice of demand and only date of service of order has been mentioned, the CIT(A) held that the assessee has not filed the appeal within the period of 30days and, therefore, it is barred by limitation. He, however, proceeded to decide the issue on merit. Relying on various decisions including the decision of the Hon’ble Delhi High Court in the case of CIT vs. Bharat Hotels Ltd., reported in 410 ITR 417, he held that since the assessee failed to deposit the employees’ contribution to PF and ESI before the due dates specified under the Act, therefore, the assessee is not entitled to claim deduction of the same. He accordingly upheld the action of the AO.

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

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 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.