2021 (5) TMI 993 - AT - Income Tax

Addition being the amount of PF and ESI u/s 36(1)(va) - Delayed employees contribution of PF and ESI - as per assessee amount remitted to the concerned accounts before the due date of filing the return of income - HELD THAT - As decided in ELICO LIMITED case 2020 (11) TMI 698 - ITAT HYDERABAD no disallowance could be made in respect of employees contribution of PF and ESI if the same are deposited before the due date of filing the return of income. Accordingly, we set aside the order of Ld.CIT(A) and delete the addition made by the AO. The appeal of the assessee on this ground is allowed.

Summary

Issues:
Appeal against CIT (A)'s order for A.Y 2018-19 - Disallowance of employees' PF/ESI contributions and penalty expenses - Interpretation of Section 36(1)(va) and Section 43B(b) - Differing High Court decisions - Applicability of CIT vs. Vegetable Products Ltd. judgment - Allowability of deductions for belated payments.

Analysis:
The appellant, an individual and proprietor, filed an appeal against the CIT (A)'s order for A.Y 2018-19. The Assessing Officer made additions to the gross total income, including disallowing employees' PF/ESI contributions and penalty expenses. The CIT (A) confirmed the addition of employees' PF/ESI contributions but directed the deletion of the penalty expense addition. The appellant raised grounds challenging the disallowance of employees' share of PF/ESI payments based on High Court decisions, arguing for deductions under Section 36(1)(va) and Section 43B(b). The appellant emphasized the need to consider differing High Court decisions and adopt a view favoring the assessee based on the CIT vs. Vegetable Products Ltd. judgment.

In a similar case, the Tribunal in Elico Ltd vs. ACIT addressed the issue of additions related to employees' PF and ESI contributions made beyond due dates but before the filing deadline. The AO disallowed these amounts, but the CIT (A) upheld the disallowance, citing non-remittance before due dates specified under the Act. The appellant argued that remittances were made before the due date of filing the return, seeking deletion of the additions. The Tribunal noted that if PF and ESI contributions are remitted before the due date of filing the return, deductions should be allowed, as per precedents like KLR Industries Ltd. vs. DCIT and Pr.CIT vs. Rajastan Beverages Corporation Ltd. The Tribunal set aside the CIT (A)'s order and deleted the additions, aligning with the consistent view that no disallowance is warranted if contributions are deposited before the return filing due date.

In consideration of the above, the judge set aside the CIT (A)'s order and deleted the Assessing Officer's addition concerning employees' PF/ESI contributions. The appeal was allowed, following the principles established in relevant judgments and consistent Tribunal decisions. The order was pronounced in open court on 19th May 2021.