2022 (4) TMI 1622 - AT - Income Tax

Addition u/s 36(1)(va) - Disallowance on account of delay in deposit of employee s contribution towards provident fund and ESI fund - HELD THAT -Delayed deposits of PF ESIC before the date of filing of return is an allowable expenditure and for which reliance was placed on the decision of AIMIL Ltd. 2009 (12) TMI 38 - DELHI HIGH COURT As far as reliance by DR on the amendment brought out by Finance Act 2021 is concerned, notes on clauses to the Finance Bill 2021 clearly states that the amendment will take effect from 1st April 2021 and will apply in relation to the A.Y. 2021-22 and subsequent assessment year. The amendment brought out by Finance Act 2021 does not apply to the assessment year under consideration. As far as the reliance of Revenue on the decision of Vedvan Consultants Pvt. Ltd. 2021 (8) TMI 1219 - ITAT DELHI find that the various division Benches of the Delhi other Tribunal have held the delayed deposits of PF/ESIC Contributions to be allowable expenditure if the same are deposited with the appropriate authorities before filing of return of income by the assessee. It is settled law that when two judgments are available giving different views, then the judgment which is in favour of the assessee shall apply as held in case of Vegetable Products Ltd. 1973 (1) TMI 1 - SUPREME COURT by the Hon ble Supreme Court. Therefore, no disallowance u/s 36(1)(va) of the Act is warranted in the present case. Appeal of the assessee is allowed.

Summary

Issues:
1. Disallowance of employee's contribution towards EPF/ESI.
2. Validity of the order passed by the Assessing Officer/CPC under Section 143(1)(a).
3. Charging of interest under sections 234A, 234B, and 234C of the Income Tax Act, 1961.

Analysis:
1. The appeal was against the order of the Commissioner of Income Tax (Appeals) related to the disallowance of Rs. 42,57,824/- on account of alleged late payment of Employees' contribution towards EPF/ESI under Section 36(1)(va) of the Act. The Assessee contended that all contributions were deposited before the filing of the return of income and relied on relevant case laws to support their argument. The tribunal found that delayed deposits of PF & ESIC before the filing of the return are allowable expenditures based on precedents and the decision of the Hon'ble Delhi High Court in a similar case. The tribunal noted that the amendment brought out by the Finance Act 2021 did not apply to the assessment year under consideration. Following the legal principles, the tribunal directed the Assessing Officer to delete the addition, allowing the Assessee's appeal.

2. The Assessee raised concerns regarding the validity of the order passed by the Assessing Officer/CPC under Section 143(1)(a). The tribunal considered the arguments presented by both parties and found that the disallowance under Section 36(1)(va) was not warranted in the present case. The tribunal directed the Assessing Officer to delete the addition, indicating that the Assessee's grounds were valid and allowed the appeal.

3. The Assessee contested the charging of interest under sections 234A, 234B, and 234C of the Income Tax Act, 1961. However, the tribunal's decision focused on the disallowance of the employee's contribution towards EPF/ESI and the validity of the order passed by the Assessing Officer/CPC under Section 143(1)(a). As the tribunal allowed the Assessee's appeal on the primary issue, the matter of charging interest under the mentioned sections was not extensively discussed in the judgment.

In conclusion, the tribunal ruled in favor of the Assessee, directing the Assessing Officer to delete the addition made under Section 36(1)(va) of the Act. The tribunal's decision was based on legal precedents and the principles of natural justice, highlighting the importance of timely deposits of PF & ESIC contributions before the filing of the return of income.