2021 (10) TMI 1294 - AT - Income Tax

Delayed Employees contribution towards EPF and ESI - addition u/s 36(1)(va) - AR has pointed to the statement of the deposits made during the year and from that table he has pointed out that though there has been delay in deposit of the PF/ESIC Contributions but all the amounts have been deposited with the appropriate authorities before filing of return of income by the assessee - Scope of amendment - HELD THAT - Various Benches of the Tribunal at Delhi and other Tribunal have held that the delayed deposits of PF ESIC but before the date of filing of return is an allowable expenditure and for which reliance was placed on the decision of Hon ble Delhi High Court in the case of AIMIL Ltd. 2009 (12) TMI 38 - DELHI HIGH COURT As far as reliance by Learned DR on the amendment brought out by Finance Act 2021 is concerned notes on clauses to the Finance Bill 2021 clearly states that the amendment will take effect from 1st April 2021 and will apply in relation to the assessment year 2021-22 and subsequent assessment year. In such a situation we are of the view that the amendment does not apply to the assessment year under consideration. As far as the reliance of Revenue on the decision of Vedvan Consultants Pvt. Ltd. 2021 (8) TMI 1219 - ITAT DELHI as find that the various division Benches of the Delhi other Tribunal have held the delayed deposits of PF/ESIC Contributions to be allowable if the same are deposited with the appropriate authorities before filing of return of income by the assessee. It is settled law that when two judgments are available giving different views then the judgment which is in favour of the assessee shall apply as held in case of Vegetable Products Ltd. 1973 (1) TMI 1 - SUPREME COURT . Therefore following the decision rendered by Hon ble Apex Court in the case of M/s. Vegetable Products Ltd. (supra) and AIMIL Ltd. (supra) of the view that no disallowance was warranted in the present case - therefore direct the AO to delete the addition. Thus the assessee s ground is allowed.

Summary

Issues:
1. Disallowance of employees' contributions towards PF/ESIC under section 36(1)(va) of the Income Tax Act.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) related to the Assessment Year 2019-20. The assessee, an individual engaged in the business of Manpower Supply Contractor, had declared a total income of ?20,61,810/- in the return filed for the A.Y. 2019-20. However, the intimation issued under section 143(1) of the Act determined the total income at ?18,13,404/- after disallowing ?6,94,463/- on account of delayed deposit of employees' contributions towards PF/ESIC. The assessee challenged this disallowance before the CIT(A) and subsequently before the ITAT Delhi.

The primary contention raised by the assessee was regarding the disallowance made under section 36(1)(va) of the Act. The assessee argued that although there was a delay in depositing the PF/ESIC contributions, all the amounts were deposited with the authorities before filing the return of income. The assessee relied on various decisions to support the claim that no disallowance should be made in such circumstances. The Revenue, on the other hand, supported the lower authorities' order and cited a specific decision of the Delhi Tribunal to justify the disallowance.

After considering the arguments from both sides, the ITAT Delhi analyzed the issue of delayed deposit of PF/ESIC contributions. The ITAT noted that delayed deposits before the filing of the income tax return have been considered as allowable expenditure by various Tribunals and High Courts. Additionally, the ITAT highlighted that the Finance Act 2021 amendment, which clarified the applicability of Section 43B, was not relevant to the assessment year under consideration. The ITAT also emphasized the principle that when two judgments offer different views, the one favorable to the assessee should be applied, citing the decision in the case of Vegetable Products Ltd. The ITAT, therefore, concluded that no disallowance was justified in the present case and directed the Assessing Officer to delete the addition, allowing the assessee's appeal.

In conclusion, the ITAT Delhi allowed the appeal of the assessee, emphasizing that the delayed deposits of PF/ESIC contributions, made before the filing of the income tax return, should be considered as allowable expenditure, in line with established judicial precedents and principles of taxation law.