2021 (10) TMI 514 - AT - Income Tax

Disallowance u/s 36(1)(va) - delayed payment of ESI/EPF - deduction on account of employees contribution to PF on the ground that it is not paid within the due date - As argued most of the payments were made within the extended period of 5 days - whether CIT(A) has erred on facts and in law in not allowing the deduction on account of employees contribution to PF on the ground that it is not paid within the due date as provided u/s 36(1)(va) of the IT Act, even though it was paid before due date of the filing of return of income? - HELD THAT - CIT(A) while deciding the issue in favour of the assessee has given a finding that though there was delay in deposit of ESI EPF contribution but the same were deposited with the appropriate authorities before the due date of filing of return of income. We find that Hon ble Delhi High Court in the case of CIT vs. AIMIL Limited 2009 (12) TMI 38 - DELHI HIGH COURT held that if the employees‟ contribution is not deposited by the due date prescribed under the relevant Acts 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 ESI Act. Therefore, the Act permits 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 - Decided in favour of assessee.

Summary

Issues involved:
1. Disallowance of deduction on account of employees' contribution to PF under sections 36(1)(va) and 43B of the IT Act.

Detailed Analysis:

Issue 1: Disallowance of deduction on account of employees' contribution to PF under section 36(1)(va) of the IT Act:
The assessee, a company engaged in transportation and providing warehouse facilities, filed its return for A.Y. 2013-14. The AO disallowed deductions for delayed payments of employee contributions to PF & ESI, citing the Kerala High Court decision in CIT vs. Merchem Ltd. The CIT(A) upheld the disallowance. The assessee contended that all sums were deposited before the return filing date, relying on the Delhi High Court's decision in CIT vs. AIMIL Ltd. The ITAT noted that the Delhi High Court held that if the actual payment is made before filing the return, the assessee can get the benefit. Additionally, the ITAT referred to the Delhi High Court's decision in SPL Industries vs. CIT, emphasizing the distinction between employer and employee contributions. The ITAT found no fallacy in the CIT(A)'s decision, and as the Revenue failed to provide contrary binding decisions, the ITAT allowed the assessee's appeal.

Conclusion:
The ITAT allowed the appeal, emphasizing that the delayed payments were made before the return filing date, in line with the principles laid down by the Delhi High Court decisions. The ITAT found no grounds to interfere with the CIT(A)'s order, ultimately ruling in favor of the assessee.