2017 (10) TMI 417 - AT - Income Tax

Disallowance of Employee s contribution of PF, ESI and Professional tax - delay in payment - Held that - We confirm the finding of the Ld. CIT(A) in deleting the above addition of ₹ 6,6896748/ on account of the employees contribution towards provident fund and ESI and professional tax. See CIT Vs. Amil Ltd 2009 (12) TMI 38 - DELHI HIGH COURT as held assessee can get the benefit if the actual payment is made before the return is filed - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of disallowance of Employee’s contribution to PF, ESI, and Professional Tax.

Issue-wise Detailed Analysis:

1. Deletion of disallowance of Employee’s contribution to PF, ESI, and Professional Tax:

The Revenue appealed against the order of the CIT(A) which deleted the disallowance of ?6,68,96,748/- related to Employee’s contribution towards PF, ESI, and Professional Tax for the Assessment Year 2012-13. The Assessing Officer (AO) had made this addition alleging non-compliance with sections 2(24)(x) and 36(1)(va) of the Income Tax Act, arguing that the payments were not made on or before the due date as prescribed under the respective laws.

The CIT(A) deleted the addition by following the decision of the jurisdictional High Court. The Revenue contended that the CIT(A) erred in doing so, as the decision of the jurisdictional High Court had not been accepted by the department on merits but due to administrative compulsions.

The Departmental Representative explained the provisions under which the disallowance was made, asserting that the employees' contribution is not allowable if not paid within the due date. On the other hand, the Assessee’s Representative argued that the issue is covered in favor of the assessee by the jurisdictional High Court's decision and the order of the coordinate bench in the assessee’s own case for the assessment year 2013-14.

The Tribunal considered the rival contentions and referred to the jurisdictional High Court's decision in CIT Vs. Amil Ltd., where it was held that if the payments towards provident fund and ESI are made before the due date of filing the return of income, no disallowance can be made. The Tribunal noted that the Hon’ble Supreme Court in Vinay Cement Ltd. had affirmed that the benefit under section 43B is available if the payment is made before the due date of filing the return.

Further, the Tribunal observed that the Delhi High Court in CIT v. P.M. Electronics Ltd. and CIT v. Dharmendra Sharma had held that the deletion of the 2nd proviso to section 43B by the Finance Act, 2003, is retrospective in nature, thereby allowing deductions for payments made before the filing of the tax return, even if they are made after the due date under the respective Acts.

The Tribunal concluded that the CIT(A)’s decision to delete the addition was in accordance with the jurisdictional High Court’s ruling and upheld the deletion of ?6,68,96,748/- on account of employees' contribution towards provident fund, ESI, and professional tax.

In the result, the appeal of the Revenue was dismissed.

Order pronounced in the open court on 13/09/2017.