2015 (10) TMI 1458 - AT - Income Tax

Delayed payment of employees contribution to PF & ESI - CIT(A) deleted the addition holding that they were paid before the due date of filing of the return of income - Held that - As decided in case of VBC Industries Ltd Vs. DCIT 2015 (6) TMI 1 - ITAT HYDERABAD keeping in view the proposition of law and following the decision of CIT Vs. Nipso Polyfabriks Ltd. (2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT) we hold that employees contribution to PF & ESI remitted before the due date of filing of return u/s 139(1), will be allowable as deduction - Decided in favour of assessee.

Summary

Issues:
Disallowance of deduction on account of employees' contribution to PF & ESI due to delayed payments.

Analysis:
The appeal by the department challenged the CIT(A)'s order regarding the disallowance of deduction on account of employees' contribution to PF & ESI. The AO disallowed the deduction as the payments were not made within the due date under the relevant statute, quantifying the disallowance at a significant amount. The assessee argued that since the contributions were remitted before the due date of filing the return under section 139(1) of the Act, they should be allowed as deductions under section 43B(b) of the Act. The CIT(A) considered the relevant statutory provisions and case laws cited by the assessee, ultimately deleting the addition based on the timely remittance of contributions before the due date for filing the return.

During the appeal hearing, the CIT(A) referred to case laws and decided in favor of the assessee, stating that the contributions were eligible for deduction as they were paid before the due date for filing the return of income. The ITAT, Hyderabad Bench also considered a similar issue in a previous case and allowed the assessee's claim based on the principle laid down by different high courts. The tribunal emphasized that the timely remittance of employees' contribution to PF & ESI before the due date of filing the return under section 139(1) makes them allowable as deductions under section 43B. The tribunal upheld the CIT(A)'s decision, dismissing the department's appeal and affirming the deletion of the disallowance made by the AO.

In conclusion, the judgment clarified that employees' contributions to PF & ESI, if remitted before the due date for filing the return under section 139(1), are eligible for deduction. The decision was supported by relevant statutory provisions, case laws, and the principle of favoring the view beneficial to the assessee in case of conflicting opinions from different high courts. The department's appeal was ultimately dismissed, upholding the allowance of deductions for timely remittance of contributions.