2021 (12) TMI 798 - AT - Income Tax

Delayed payment of employees contribution to PF ESI - Addition on the ground that this was not paid within prescribed due date and deposited late in the light of provision of Section 2(24)(x) read with section 36(1)(va) relying upon the information given by the Auditor in Form 3CD - HELD THAT - Since in the instant case the assessee admittedly has deposited the employees contribution to PF ESI before the due date of filing of the income tax return, therefore as relying on INSTA EXHIBITIONS PVT. LTD, C/O. CHACHAN LATH 2021 (8) TMI 1235 - ITAT DELHI AND PRO INTERACTIVE SERVICE (INDIA) PVT. LTD. 2018 (9) TMI 2009 - DELHI HIGH COURT CIT(A) is not justified in sustaining the adjustment made by the A.O-CPC on account of belated payment of employees contribution to PF ESI. - Decided in favour of assessee.

Summary

Issues:
Disallowance of employees' contribution to PF & ESI for delayed payment under Section 36(1)(va) of the IT Act, 1961.

Analysis:
The appeal concerns the disallowance of ?9,59,624 by the AO-CPC for delayed payment of employees' contribution to PF & ESI. The AO's adjustment was based on the information provided by the Auditor in Form 3CD. The assessee argued that the contribution was deposited before the due date of filing the income tax return, citing legal precedents. However, the CIT(A) upheld the disallowance, referring to decisions like CIT vs., M/s. Bharat Hotels Ltd. The ITAT considered the arguments, noting that the AO calculated the income at ?16,58,230 against the returned income of ?6,98,610 due to the disallowance. The ITAT observed that consistent Tribunal decisions allowed deductions for such contributions if paid before the due date of filing the return under section 139(1).

The ITAT referred to various legal judgments, including the case of PCIT vs., Pro Interactive Service (India) Pvt. Ltd., which emphasized that the legislative intent was to allow expenditure only when the payment was actually made. The Coordinate Bench decisions supported the deduction of belated contributions if paid before the due date of filing the return. The ITAT also highlighted the amendment in Section 36(1)(va) introduced by the Finance Act, 2021, clarifying that the provisions of Section 43B do not apply for determining the due date of such contributions.

In conclusion, the ITAT allowed the appeal, setting aside the CIT(A)'s order and directing the AO to delete the disallowance of ?9,59,624. The decision was based on the consistent Tribunal rulings and legal interpretations emphasizing the deductibility of employees' contributions to PF & ESI if paid before the due date of filing the income tax return. The ITAT's detailed analysis and reliance on legal precedents provided a strong basis for allowing the appeal and overturning the disallowance.