2021 (8) TMI 33 - AT - Income Tax

Addition on account of employee s contribution to ESI and EPF - CPC while processing the return of the assessee disallowed the claim of employee s contribution towards ESI and EPF on account of delay in depositing the amount as per the respective statutes - HELD THAT - Respectfully following the binding precedents like case of Pr.CIT vs Pro Interactive Service (India) Pvt.Ltd 2018 (9) TMI 2009 - DELHI HIGH COURT and Dee Development Engineers Ltd 2021 (4) TMI 393 - ITAT DELHI therefore, direct the AO to allow the claim of the assessee and delete the addition. Thus, grounds of appeal raised by the assessee are allowed.

Summary

Issues:
1. Disallowance of employee's contribution to ESI and EPF.

Analysis:
The appeal was filed against the order of Ld. CIT(A) confirming the addition of ?1,33,816 on account of employee's contribution to ESI and EPF. The CPC disallowed the claim due to a delay in depositing the amount as per the statutes. The assessee argued that the decision in the case of CIT vs Bharat Hotels Ltd. was not applicable, citing precedents like DCIT vs Dee Development Engineers Ltd. The Hon'ble Delhi High Court in the case of Pr.CIT vs Pro Interactive Service (India) Pvt.Ltd. held that belated payment of EPF and ESI should not be treated as deemed income of the employer under the Income Tax Act. The Tribunal followed this judgment and directed the Assessing Officer to allow the claim and delete the addition, ultimately allowing the appeal.

The Division Benches of the Tribunal and the Hon'ble Delhi High Court's decisions were crucial in determining the outcome of the case. The Tribunal emphasized that all contributions were deposited before the due date of filing the income tax return, which was a significant factor in favor of the assessee. The legislative intent was highlighted to ensure that the amount paid is allowed as an expenditure only when payment is actually made, supporting the assessee's argument against the disallowance.

The Tribunal's decision was based on the principle that when two judgments provide different views, the one in favor of the assessee should apply. The Revenue failed to demonstrate any distinguishing features or provide material to challenge the decision in favor of the assessee. As a result, the Tribunal directed the deletion of the addition and allowed the grounds of appeal raised by the assessee. The binding precedents and legal interpretations played a crucial role in determining the outcome of the case, ultimately resulting in the allowance of the appeal and relief for the assessee.