2021 (6) TMI 311 - AT - Income Tax

Disallowance of delayed deposit of contribution received by the employees towards provident funds and ESI fund - HELD THAT - It is an undisputed fact that there has been delay in the actual deposit of payment to the appropriate authority but at the same time it was also a fact that all the contributions received by the assessee from its employees have been deposited before the due date of filing of return of income. We further find that identical issue arose in the case of Dee Development Engineers Ltd. 2021 (4) TMI 393 - ITAT DELHI wherein the Co-ordinate Bench of Tribunal after considering the decision in the case of CIT vs. AIMIL Ltd. 2009 (12) TMI 38 - DELHI HIGH COURT decided the issue of the assessee stating we do not think that the legislative intent and objective is to treat belated payment of Employee s Provident Fund (EPD) and Employee s State Insurance Scheme (ESI) as deemed income of the employer under Section 2(24)(x) of the Act. CPC was not justified in disallowing the payment. We therefore direct the deletion of addition. Thus ground of the appeal of the assessee is allowed.

Summary

Issues:
1. Late deposit of employees' contribution towards EPF/ESI.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals)-I, New Delhi for Assessment Year 2018-19. The primary issue revolved around the addition of ?3,02,464 on account of late payment of Employees' contribution towards EPF/ESI. The Assessee contended that the contributions were deposited before the filing of the income tax return, thus no disallowance was warranted. The CIT(A) upheld the addition, citing precedents like the decision of the Hon'ble Gujarat High Court. The Assessee raised multiple grounds challenging the order, emphasizing that the contributions were deposited before the due date of filing the return. The AR reiterated these arguments, citing relevant case laws and a Co-ordinate bench decision in favor of the Assessee. The DR supported the CIT(A)'s order.

The Tribunal noted the delay in deposit but highlighted that all contributions were made before the due date of filing the return. Referring to a similar case of Dee Development Engineers Ltd., the Tribunal emphasized the importance of actual payment over belated payment, citing the legislative intent. The Tribunal dismissed the Revenue's arguments, as no distinguishing features were presented, and no evidence showed the Co-ordinate bench decision being overruled. Relying on the Dee Development Engineers Ltd. case, the Tribunal ruled in favor of the Assessee, directing the deletion of the addition. The appeal of the Assessee was allowed, and the order was pronounced on 31.05.2021.