2021 (9) TMI 223 - AT - Income Tax

Delayed payment of employees contribution to PF ESI - addition confirmed ignoring that they were paid before the due date of filing of the return of income - Held that - As decided in Nipso Polyfabriks Ltd. 2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT if the employer does not deposit such contributions within the time prescribed by the respective Acts, the employer may face criminal case and become liable to pay fine or penalty, but that cannot be the reason to deny the benefit of section 43B of the Act, which contemplates that the assessee can take the benefit of such contributions if the same are paid before furnishing the return of income - thus we hold that employees contribution to PF ESI remitted before the due date of filing of return u/s 139(1), will be allowable as deduction - Decided in favour of assessee.

Summary

Issues:
Challenge to order of Ld. CIT(A) dismissing appeal against assessment order u/s. 143 of the Income Tax Act, 1961 for assessment year 2019-20. Disallowance of employees' contribution to provident fund and ESI due to delayed deposit.

Analysis:
The appellant challenged the Ld. CIT(A)'s order, contending that it was against the law. The appellant raised effective grounds, including issues with notice under section 143(2) and disallowance of expenses. The appellant argued that the contribution to provident fund and ESI, though deposited before the return filing date, was wrongly disallowed. The appellant cited various judgments to support their case.

The appellant's counsel argued that the Ld. CIT(A)'s order contradicted established legal principles. They emphasized that the contribution was deposited before the return filing date, citing relevant case law. The Departmental Representative supported the Ld. CIT(A)'s decision, stating that the disallowance was justified due to the delayed deposit of contributions.

The Tribunal examined the case, noting that the contribution was made before the return filing date, which was undisputed by the revenue. Citing relevant case law, the Tribunal found in favor of the appellant. They referenced the judgment in CIT vs. M/s. Nipso Polyfabriks Ltd., highlighting that timely payment of contributions is crucial. The Tribunal also mentioned a similar case where the High Court ruled in favor of the appellant.

Given the precedents and legal principles, the Tribunal concluded that the appellant's case aligned with established law. They overturned the Ld. CIT(A)'s decision and directed the AO to delete the disallowed addition under section 36(1)(va) of the Act. Consequently, the appeal filed by the assessee was allowed, with the order pronounced on 25th Aug, 2021.