2014 (8) TMI 960 - AT - Income Tax

Dis-allowance of contribution towards Employee s Provident Fund and ESI - disallowance made u/s.40(a)(ia) - Held that - It is an un-disputed fact that there has been delay in remittance of employees contribution of ESI and Provident Fund in both the AYs i.e., 2008-09 & 2009-10. It is equally un-disputed that the assessee has deposited the amount towards employees contribution of ESI and Provident Fund before the due date of filing of return. The Hon'ble Delhi High Court in the case of CIT Vs. Amil Ltd., reported as 2009 (12) TMI 38 - DELHI HIGH COURT has held that if the assessee had deposited employees contribution towards Provident Fund and ESI after due date as prescribed under the relevant Act but before the due date of filing of return under the Income Tax Act, no dis-allowance could be made in view of the provisions of section 43B as amended by the Finance Act, 2003. - Tribunal has been consistently following the view taken by the Hon'ble Delhi High Court. Accordingly, we hold that the assessee is entitled to claim expenditure on employee s contribution towards ESI and Provident Fund for both the AYs. The assessee had deducted tax at source on various dates starting from March, 2008 to July, 2008 for the period relevant to AY.2008-09 on payment of rent and labour charges. But the same was deposited with the department during the period starting from 11th March, 2008 to 23rd July, 2008 i.e., much before the due date of filing of return specified in section 139(1) of the Act. This fact has not been disputed by the Revenue. The co-ordinate bench of the Tribunal in the case of ACIT Vs. M/s.TRV Global Trading (2015 (4) TMI 84 - ITAT CHENNAI), after considering the decision of the Hon'ble Calcutta High Court in the case of CIT Vs. Virgin Creations (2011 (11) TMI 348 - CALCUTTA HIGH COURT ) and the decision of special bench of the Tribunal in the case of Bharti Shipyard Ltd., Vs. DCIT reported as 2011 (9) TMI 258 - ITAT MUMBAI upheld the findings of CIT(Appeals) in deleting dis-allowance made by Assessing Officer u/s.40(a)(ia). - No reason to defer with the view consistently being followed - Decided partly in favour of assessee.

Summary

Issues: Appeal against disallowance of contribution towards Employee's Provident Fund and ESI, appeal against disallowance made under section 40(a)(ia) for delayed deposit of TDS.

Analysis:
1. Appeal against disallowance of contribution towards Employee's Provident Fund and ESI:
The assessee filed appeals against the order of Commissioner of Income Tax(Appeals) confirming the disallowance of contribution towards Employee's Provident Fund and ESI for the Assessment Years 2008-09 and 2009-10. The Assessing Officer disallowed the claimed amounts under section 36(1)(va) due to delays in remitting the contributions. The CIT(Appeals) upheld the disallowance. However, the Tribunal referred to relevant case laws and held that if the contributions were deposited before the due date of filing the return, no disallowance could be made as per section 43B. Citing the decision of the Hon'ble Delhi High Court, the Tribunal allowed the assessee's appeals, stating that the disallowance was unsustainable.

2. Appeal against disallowance under section 40(a)(ia) for delayed deposit of TDS:
The Revenue appealed against the CIT(Appeals) decision to delete the disallowance made under section 40(a)(ia) for delayed remittance of TDS. The Assessing Officer had added amounts for non-compliance with TDS provisions. However, the Tribunal noted that the TDS amounts were deposited before the due date of filing the return specified in the Income Tax Act. Referring to the decisions of the Hon'ble Calcutta High Court and the Tribunal, the Tribunal upheld the CIT(Appeals) decision to delete the disallowance. The Tribunal dismissed the Revenue's appeal, stating that all TDS payments made before the due date of filing the return were outside the purview of section 40(a)(ia).

In conclusion, the Tribunal allowed the assessee's appeals regarding the disallowance of contributions towards Employee's Provident Fund and ESI, and dismissed the Revenue's appeal against the disallowance made under section 40(a)(ia) for delayed deposit of TDS.