2016 (5) TMI 1590 - AT - Income Tax

Belated payment of employees contribution to PF and ESI in contravention of the provisions of section 36(1)(va) - HELD THAT - There is no dispute to the fact that the assessee in the instant case has deposited the employees contribution to PF and ESI before the due date of filing of the return of income although the same were deposited after the due date prescribed under the relevant Act. The Coordinate Benches of the Tribunal following the decisions of the Hon ble Bombay High Court in the case of Ghatge Patil Transports Ltd. 2014 (10) TMI 402 - BOMBAY HIGH COURT and in the case of CIT Vs. Hindustan Organics Chemical Ltd. 2014 (7) TMI 477 - BOMBAY HIGH COURT are consistently taking the view that employees contribution to PF and ESI, if paid on or before the due date of filing of the return of income, is an allowable deduction. 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, a fact submitted before the AO as well as CIT(A) and not controverted by the revenue, therefore, we are of the considered opinion that no disallowance on account of such delayed payment is called for. We accordingly set aside the order of the CIT(A) and direct the AO to delete the addition. Grounds raised by the assessee allowed.

Summary

Issues Involved:
Interpretation of provisions of section 36(1)(va) of the Income Tax Act, 1961 regarding belated payment of employees' contribution to PF and ESI.

Detailed Analysis:

1. Issue: Whether the belated payment of employees' contribution to PF and ESI is admissible as a deduction under section 36(1)(va) of the Income Tax Act, 1961.

Analysis: The Assessing Officer (AO) disallowed an amount of Rs.5,12,976/- as the employees' contribution was paid belatedly, contending that it falls under section 36(1)(va) and not section 43B. The assessee argued that the payments were made before the due date of filing the return u/s.139(1) and should be allowed as a deduction. Various judicial precedents, including decisions of the Supreme Court and Bombay High Court, were cited to support the assessee's position.

2. Issue: Whether the Commissioner of Income Tax (Appeals) (CIT(A)) correctly upheld the AO's disallowance of the amount.

Analysis: The CIT(A) upheld the AO's decision, stating that deductions for employees' contribution deposited beyond the due date prescribed under the PF and ESI Act cannot be allowed, even if paid within the financial year or before the due date of filing the return. The CIT(A) distinguished previous decisions and relied on the Special Bench of the Tribunal's decision in JCIT Vs. ITC Ltd. to justify the disallowance.

3. Issue: Whether the Tribunal correctly decided on the admissibility of the deduction for belated payment of employees' contribution to PF and ESI.

Analysis: The Tribunal considered the submissions, orders of the AO and CIT(A), and various judicial decisions. It noted that the employees' contribution was deposited before the due date of filing the return, as admitted by the assessee and not contested by the revenue. Relying on decisions of the Bombay High Court and consistent Tribunal views, the Tribunal held that no disallowance was warranted for delayed payment. Consequently, the Tribunal directed the AO to delete the addition, allowing the assessee's appeal.

In conclusion, the Tribunal's decision favored the assessee, emphasizing that timely deposit of employees' contribution to PF and ESI before the due date of filing the return qualifies for deduction under the Income Tax Act, 1961.