2022 (5) TMI 193 - AT - Income Tax

Disallowance of belated payment of employee s contribution towards ESI/PF - HELD THAT - This issue is covered in favour of the assessee by the judgment CIT Vs. AIMIL Ltd. 2009 (12) TMI 38 - DELHI HIGH COURT as also the judgment in the case M/s Pro Interactive Services (India) Pvt. Ltd. 2018 (9) TMI 2009 - DELHI HIGH COURT wherein held hat the amount paid is allowed as an expenditure only when payment is actually made. 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 employer under section 2(24)(x) - Decided in favour of assessee.

Summary

Issues:
- Disallowance of belated payment of employee's contribution towards ESI/PF for assessment years 2017-18 & 2018-19.

Analysis:
1. Assessment Year 2017-18:
- The appellant contested the disallowance of Rs.22,11,593/- for belated ESI/PF payments. The appellant argued that payments were made before the due date of filing returns as per Income Tax Act, citing relevant judicial precedents.
- The appellant relied on the decisions of the Hon'ble Delhi High Court in support of their case. The CIT(A) upheld the disallowance, citing non-jurisdictional High Court decisions, which the appellant argued should not prevail over jurisdictional High Court rulings.
- The appellant also contested the retrospective application of amendments introduced by the Finance Act, 2021, claiming they should not apply to previous assessment years.
- The Tribunal ruled in favor of the appellant, citing the binding precedents of the Hon'ble Delhi High Court. The disallowance was directed to be deleted for Assessment Year 2017-18.

2. Assessment Year 2018-19:
- The appellant raised similar grounds for Assessment Year 2018-19, contesting the disallowance of Rs.24,09,960/- for belated ESI/PF payments.
- The arguments and judicial precedents cited were consistent with those presented for the previous assessment year.
- The Tribunal, adopting a consistent view, directed the Assessing Officer to delete the disallowance for Assessment Year 2018-19 as well.

In both cases, the Tribunal relied on the judgments of the Hon'ble Delhi High Court to rule in favor of the appellant, emphasizing that belated ESI/PF payments should not be treated as deemed income of the employer. The Tribunal found merit in the appellant's contentions regarding the due date of payments and the retrospective application of statutory amendments, ultimately allowing the appeals and directing the deletion of the disallowances for both assessment years.