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2022 (2) TMI 1231 - AT - Income TaxDelayed payment of employee s contribution towards EPF and ESI - case of the assessee before lower authorities that it has deposited the employee s contribution in EPF and ESI before the due date of filing of return of income stipulated u/s 139(1) - HELD THAT - As decided in PRO INTERACTIVE SERVICE (INDIA) PVT. LTD. 2018 (9) TMI 2009 - DELHI HIGH COURT issue covered in favour of assessee. Amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee s Provident Fund (EPF) and Employee s State Insurance Scheme (ESI) as deemed income of the employer under Section 2(24)(x) . Scope of amendment - The claim of deduction of contribution to Employee s State Insurance Scheme (ESI) and Provident Fund u/s.36(1)(va) could not he denied to the assessee in Assessment Year 2017-18 in quest ion on the basis of amendments made by Finance Act, 2021. For this proposition. we find support from the decision of the Co-ordinate Bench of Tribunal in the case of The Continental Restaurant and Cafe Company vs. ITO 2021 (10) TMI 843 - ITAT BANGALORE AND M/S. ADYAR ANANDA BHAVAN SWEETS INDIA P LTD. 2021 (12) TMI 558 - ITAT CHENNAI - Decided in favour of assessee.
Issues:
Challenge of disallowance of employee's contribution towards EPF and ESI. Analysis: The appeal was filed against the order of the Commissioner of Income Tax concerning the disallowance of Rs.2,32,41,551/- on account of delayed payment of employee's contribution towards EPF and ESI for the Assessment Year 2017-18. The assessee contended that the contributions were paid and deposited before the due date allowed under Section 139(1) of the Income Tax Act, even though they were remitted belatedly. The Assessing Officer made the addition under Section 36(1)(va) read with Section 2(24)(x) of the Act, citing breach of Explanation 5 to Section 43B. However, the assessee argued that deductions should be allowed under Section 36(1)(va) based on judicial pronouncements, including a decision of the Hon'ble Delhi High Court. The Tribunal observed that the issue had been decided in favor of the assessee by the Hon'ble Delhi High Court in a previous case, and directed the Assessing Officer to allow the claim and delete the addition. The Tribunal noted that the legislative intent was to ensure that the amount paid is allowed as an expenditure only when payment is actually made, and not to treat belated payments of EPF and ESI as deemed income of the employer under Section 2(24)(x) of the Act. Relying on the binding precedents of the Hon'ble Delhi High Court, the Tribunal allowed the grounds of appeal raised by the assessee. Additionally, the Tribunal considered the plea that delayed payment of employee's contribution to PF/ESIC should not be disallowable as the amendments made by the Finance Act, 2021 were applicable prospectively from Assessment Year 2021-22 onwards. The Tribunal cited decisions of the Co-ordinate Bench of Tribunal in support of this proposition and set aside the action of the revenue on this score. In conclusion, the Tribunal allowed the appeal of the assessee, directing the Assessing Officer to delete the addition made on account of delayed payment of employee's contribution towards EPF and ESI. The decision was pronounced in open court on 14/02/2022.
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