2019 (7) TMI 183 - AT - Income Tax

Disallowing employees contribution towards provident fund (PF) and employees contribution towards ESI as per provisions of section 2(24)(x) and 36(i)(va) - HELD THAT - Assessee has been decided by the Hon'ble Supreme Court in case of CIT vs. Vinay Cement Ltd. 2007 (3) TMI 346 - SC ORDER . It is pertinent to note that if the employees' contribution is not deposited by the due date prescribed under the relevant statutes and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the Employees State Insurance Act. Therefore, these Acts permit the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income Tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Supreme Court in case of Vinay Cement (supra). We find that on the issue in dispute the CIT(A) has followed the finding of the Hon'ble jurisdictional High Court, which is binding on the Tribunal or the CIT(A) functioning under the jurisdiction of the Hon'ble Delhi High Court. In view of the above, we do not find any error in the order of the CIT(A) and accordingly, we uphold the same. Ground No. 1 of the appeal of the Revenue is dismissed.

Summary

Issues:
1. Disallowance of PF and ESIC contributions under section 36(1)(va) and section 2(24)(x) of the Income Tax Act, 1961.
2. Disallowance of leave encashment under section 43B of the Income Tax Act, 1961.

Analysis:
1. The appeal was filed by the Revenue against the CIT(A)'s order for Assessment Year 2013-14. The Assessing Officer disallowed PF and ESIC contributions totaling &8377; 42,85,638 under section 36(1)(va) and section 2(24)(x) of the Income Tax Act, 1961. The CIT(A) partly allowed the appeal of the assessee. The Revenue contended that the CIT(A) erred in deleting these additions. However, the Tribunal upheld the CIT(A)'s decision, citing the Supreme Court's ruling in the case of CIT vs. Vinay Cement Ltd. The Tribunal noted that the Acts permit the employer to make delayed deposits with consequences. As the actual payment was made before filing the return, the benefit was allowed. The Tribunal found no error in the CIT(A)'s order and dismissed Ground No. 1 of the Revenue's appeal.

2. Regarding the disallowance of leave encashment under section 43B, the CIT(A) carefully considered the Assessing Officer's observations and the appellant's submissions. The CIT(A) analyzed the computation of income and found discrepancies in the provision for leave encashment. The CIT(A) directed the Assessing Officer to verify certain amounts and concluded that the disallowance of &8377; 34,99,178 was deleted as the leave encashment had been paid on an actual payment basis. The Tribunal agreed with the CIT(A)'s detailed findings and dismissed the Revenue's appeal on this ground as well.

In conclusion, the Tribunal upheld the CIT(A)'s decision on both issues, dismissing the Revenue's appeal in its entirety. The detailed analysis and application of relevant legal provisions ensured a thorough examination of the disputed matters, resulting in a well-reasoned judgment pronounced on 2nd July 2019.