2022 (9) TMI 1026 - AT - Income Tax

Allowability of employees contribution of ESIC and PF which was deposited beyond time mentioned in the respective Statutes but before filing income tax return u/s 139(1) - HELD THAT - As decided in GHATGE PATIL TRANSPORTS LTD. 2014 (10) TMI 402 - BOMBAY HIGH COURT the payment of employee s contribution beyond the due date mentioned in the relevant statute but before the due date of filling the return of income u/s 139(1) is allowable expenditure. - Decided in favour of assessee.

Summary

Issues Involved:
1. Allowability of employees' contribution of ESIC and PF deposited beyond the statutory time limit but before filing income tax return u/s 139(1) of the Act.

Comprehensive Analysis:
1. The appeal raised the issue of the allowability of expenditure of payment of contribution by the employer towards employees' welfare funds before filing the Income Tax Return u/s 139(1) for the previous year, as per the amendment made in the first proviso to section 43B vide Finance Act, 2003. The appellant contended that the addition of Rs.7,13,908/- confirmed by the CIT(A) as disallowance of expenditure u/s 36(1)(va) for delay in deposition of employees' contribution towards employees' welfare funds should be deleted based on relevant judgments of the Bombay High Court.

2. The question involved in the present appeal was the allowability of employees' contribution of ESIC and PF, which was deposited beyond the statutory time mentioned in the respective Statutes but before filing the income tax return u/s 139(1) of the Act. The DCIT (CPC), Bengaluru disallowed an amount of Rs.17,26,605/-, out of which Rs.7,13,908/- was for delayed payment of employees' contribution towards ESI/PF. The amounts were paid before the due date of filing the return.

3. The issue of whether any opportunity was provided before making the disallowance by the DCIT (CPC), Bengaluru was raised, as it was not clear from the plain reading of the order u/s 143(1). The appeal was filed before the CIT(A), who dismissed the appeal of the assessee. The Rajasthan High Court's decision in a similar case supported the allowability of PF & ESI payments if deposited on or before the due date of furnishing the return of income.

4. The judgment of the Jurisdictional High Court in the case of CIT vs Ghatge Patil Transports Ltd held that the payment of employee's contribution beyond the due date mentioned in the relevant statute but before the due date of filing the return of income u/s 139(1) is allowable expenditure. Following this precedent, the assessee's appeal was allowed, and the addition of Rs.7,13,908/- was deleted.

In conclusion, the judgment favored the assessee, allowing the appeal and deleting the disallowance of expenditure on employees' contribution towards ESIC and PF. The decision was based on relevant amendments and precedents set by the High Courts, ensuring the expenditure was considered allowable within the specified legal framework.