2021 (7) TMI 277 - AT - Income Tax

Disallowance on account of late payment of employee's contribution towards EPF and ESI - HELD THAT - As considering the judgment of the Hon'ble Delhi High Court in the case of the CIT vs. AIMIL Ltd. 2009 (12) TMI 38 - DELHI HIGH COURT has decided the issue in favour of the assessee. As decided in Pro Interactive Service (India) Pvt. Ltd 2018 (9) TMI 2009 - DELHI HIGH COURT in view of the judgment of the Division Bench of Delhi High Court in Commissioner of Income Tax v. AIMIL Limited, 2009 (12) TMI 38 - DELHI HIGH COURT the issue is covered against the Revenue and, therefore, no substantial question of law arises for consideration in this appeal. The legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee's Provident Fund (EPD) and Employee's State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x) of the Act.- Decided in favour of assessee.

Summary

Issues:
1. Disallowance of employee's contribution towards EPF and ESI.
2. Interpretation of legal provisions regarding late payment of contributions.
3. Application of judicial precedents in determining tax liability.

Detailed Analysis:
1. The appeal was filed against the order disallowing ?3,01,631 for late payment of employee's EPF and ESI contributions. The counsel for the assessee argued that the disallowance was unjustified and cited a recent judgment of the Delhi High Court in favor of the assessee. The counsel distinguished another judgment, asserting that it was not applicable to the current case. The Tribunal considered these arguments and previous judgments to decide in favor of the assessee.

2. The primary issue was the disallowance of the contribution towards EPF and ESI due to late payment. The counsel relied on recent judgments to support the assessee's claim, while the Departmental Representative opposed these arguments. The Tribunal examined the contentions, including the legislative intent behind the legal provisions, and ruled in favor of the assessee based on judicial precedents and interpretations of the law.

3. The CIT(A) initially rejected the claim of the assessee based on a specific judgment. However, the Tribunal referenced a later judgment by the Delhi High Court, which favored the assessee's position. The Tribunal emphasized the legislative intent behind the provisions related to EPF and ESI contributions, concluding that belated payments should not be treated as deemed income of the employer. Consequently, the Tribunal directed the Assessing Officer to delete the addition, allowing the grounds raised by the assessee in the appeal.

In conclusion, the Tribunal's decision favored the assessee, emphasizing the importance of judicial precedents and legislative intent in interpreting tax laws related to employee contributions towards EPF and ESI. The ruling highlighted the need to consider recent judgments and the underlying purpose of the legal provisions to determine tax liability accurately.