2022 (7) TMI 1419 - AT - Income Tax

Disallowance towards late payment of employees contribution to provident fund and ESI - Contribution made admittedly after the due date as prescribed under the relevant statute but before the due date of filing of the return - HELD THAT - Cuttack Bench of the Tribunal in the case of Pashupati Ispat Pvt. Ltd. 2022 (4) TMI 1541 - ITAT CUTTACK after discussing in detail and following the plethora of case laws has held that it is not disputed that the payment of employees contribution to PF and ESI was made before filing of the return u/s.139(1) of the Act and accordingly deleted the addition made by the AO and confirmed by the CIT(A) on account of delay in depositing the employees contribution to PF ESI. We are of the opinion that the payments of the employees contribution to PF ESI having been made before the due date of filing of the return though admittedly after the due date as prescribed under the relevant statute the same is liable to be allowed.

Summary

Issues involved:
Confirmation of disallowance of late payment of employees' contribution to provident fund and ESI.

Detailed Analysis:
The appeal was filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2019-2020. The primary issue in the appeal was the confirmation of the disallowance of Rs.2,16,046/- towards late payment of employees' contribution to provident fund and ESI. The revenue did not appear, and an adjournment application was rejected by the Bench due to the facts and circumstances of the case.

The assessee's representative argued that the amount had already been disallowed under section 43B of the Act and that the Assessing Officer (AO) had wrongly disallowed the same amount under section 36, leading to double taxation. The representative cited the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. to support the contention that since the payments were made before the due date of filing the return, no disallowance was warranted.

Upon reviewing the orders of the authorities and the documents submitted, it was observed that the assessee had voluntarily disallowed the contribution under section 43B, which was also disallowed by the AO under section 36. However, the Tribunal found that the payments were made before the due date of filing the return but after the statutory due date. Referring to previous decisions, the Tribunal held that the amendments introduced by the Finance Act, 2021, were applicable from the assessment year 2021-22 onwards. The Tribunal also highlighted that employee's contribution is governed by different sections and cited relevant case laws where similar disallowances were deleted.

Based on the judicial pronouncements and factual findings, the Tribunal concluded that the disallowance of employees' contribution to provident fund and ESI should be reversed. Therefore, the order of the CIT(A) was set aside, and the AO was directed to delete the disallowance, ultimately allowing the appeal of the assessee.

In conclusion, the Tribunal ruled in favor of the assessee, emphasizing that the timely payment of employees' contribution to provident fund and ESI, even if made after the statutory due date, should not be subject to disallowance.