2013 (4) TMI 778 - AT - Income Tax

Entitlement for deduction for the amount pertaining to employees contribution towards Provident Fund and ESI - Held that - The assessee is entitled for relief if actual payment is made before due date of filing the return. Admittedly, even the consequential order dated 31.12.2009 contains a finding of fact that the amount had been deposited before filing of the return . Therefore we hold that CIT(A) has rightly interfered in the finding of the Assessing Officer. - Decided against revenue

Summary

Issues:
- CIT(A) allowing deduction disallowed by Assessing Officer for employees' contribution towards Provident Fund and ESI.
- Interpretation of Sec. 43(B) of the Income Tax Act regarding the timing of contributions.
- Validity of the CIT(A)'s decision based on tribunal's order.

Analysis:
1. The appeal before the ITAT Chennai stemmed from the CIT(A)'s order in response to the Revenue's contention regarding the allowance of deduction disallowed by the Assessing Officer for employees' contribution towards Provident Fund and ESI. The Revenue argued that the CIT(A) erred in accepting the assessee's appeal based on the tribunal's decision from a previous litigation round.

2. The assessee, a garment export company, supported the CIT(A)'s decision and cited case law to bolster its position. The Assessing Officer had disallowed contributions under Sec. 43(B) of the Act, leading to subsequent appeals and orders. The tribunal's decision in the first round of litigation favored the assessee's entitlement to the deductions, subject to verification by the Assessing Officer.

3. Following the tribunal's directive, the Assessing Officer issued a consequential order allowing a portion of the disallowed amount but rejecting the rest, prompting the assessee to seek rectification under section 154 for the remaining sum. The Assessing Officer, in the rectification order, denied relief for the employees' contribution, citing untimely payment.

4. The CIT(A) overturned the Assessing Officer's decision, relying on the tribunal's order and the legal precedent. During the ITAT Chennai proceedings, the Revenue contended that the employees' contribution should not be eligible for relief due to delayed payment. However, the ITAT Chennai, referring to the Delhi High Court's ruling, affirmed the CIT(A)'s decision, emphasizing that timely actual payment before the return filing deadline warranted the relief.

5. Consequently, the ITAT Chennai dismissed the Revenue's appeal, upholding the CIT(A)'s decision as legally sound and in alignment with the provisions of the Income Tax Act. The judgment clarified the applicability of Sec. 43(B) and the importance of timely contributions for claiming deductions, settling the dispute in favor of the assessee based on established legal principles.

End of Analysis