2018 (8) TMI 1185 - AT - Income Tax

Disallowance u/s u/s 36(1)(va) r.w.s. 2(24)(x) - failure to deposit EPF & ESI before the due date of filing of income tax return (ITR) - Held that - we are inclined to restore the issue on hand to the file of AO for fresh adjudication and in accordance to the provision of law as well as after considering the order of this Tribunal in the case of Suzlon Energy Ltd. 2018 (8) TMI 447 - ITAT AHMEDABAD - Decided in favor of assessee for statistical purposes.

Summary

Issues involved:
1. Disallowance of employee's contribution to PF/ESI under section 36(1)(va) of the Income Tax Act, 1961.

Detailed Analysis:
The appeal was filed by the Assessee against the order of the Commissioner of Income Tax(Appeals)-7, Ahmedabad, regarding the disallowance of ?33,95,734 under section 36(1)(va) of the Income Tax Act, 1961. The Assessee contended that the liability was discharged within the prescribed time limit as per section 43B, and cited a decision by the ITAT, Calcutta bench in support of their case. The issue raised was whether the disallowance was justified under section 36(1)(va) of the Act.

The Assessee, a Hindu Undivided Family (HUF) engaged in the business of supplying labor, failed to deposit the employee's contribution to PF/ESI within the specified due date. The Assessing Officer (AO) relied on a judgment of the Gujarat High Court and disallowed the amount, which was added to the total income of the Assessee. The CIT(A) confirmed the AO's order, leading the Assessee to file a second appeal before the ITAT.

During the proceedings, the Assessee's representative argued that the due date for depositing the employee's contribution should be considered from the month in which the salary was paid, not when it became due. Citing a case involving Suzlon Energy Ltd., it was contended that the relevant date for such deposits is the month of actual payment of wages/salaries. The ITAT had previously directed the AO to delete a similar disallowance based on the date of actual payment.

The ITAT considered the delay in the payment of employee's contribution to PF/ESI and the relevant provisions of the Income Tax Act. While the Assessee did not challenge the Gujarat High Court's decision, the ITAT decided to restore the issue to the AO for fresh adjudication based on the payment date. The decision was influenced by the precedent set by the Suzlon Energy Ltd. case, emphasizing the importance of the actual payment date in determining the disallowance under section 36(1)(va) of the Act.

In conclusion, the ITAT allowed the Assessee's appeal for statistical purposes, directing a fresh adjudication by the AO in accordance with the law and previous tribunal orders. The decision was made to align with the interpretation of the due date for depositing employee's contributions as per the actual payment date, as supported by relevant case law and tribunal judgments.