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2022 (2) TMI 872 - AT - Income TaxLate payment of employees contribution to PF and ESI - Payment after the due date prescribed but, paid on or before the due date of filing of the income-tax return/s 139(1) - HELD THAT - Identical issue had come up before the Tribunal in the case of M/s Adama Solution P. Ltd 2021 (10) TMI 621 - ITAT DELHI assessee admittedly has deposited the employees' contribution to PF ESI before the due date of filing of the income tax return, therefore, 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 and ESI. Since the assessee, in the instant case, has, admittedly, deposited the employees contribution to PF and ESI before the due date of filing of the return, therefore, we hold that the CIT(A) is not justified in sustaining the addition made by the AO on account of late payment of employees contribution to PF and ESI under section 36(1)(va) - Accordingly, the order of the CIT(A) is set aside and the grounds raised by the assessee are allowed.
Issues Involved:
1. Validity of the order passed under section 154 of the Income Tax Act, 1961. 2. Legality of the addition of ?23,55,432/- under Section 36(1)(va) of the Income Tax Act, 1961. 3. Consideration of judicial pronouncements and their applicability. 4. Arbitrariness and legality of the appellate order. Issue-wise Detailed Analysis: 1. Validity of the Order Passed Under Section 154 of the Income Tax Act, 1961: The assessee challenged the CIT(A)'s decision to uphold the AO's order passed under section 154 of the Income Tax Act, 1961. The AO had processed the return under section 143(1) and made an addition of ?23,55,432/- due to the late deposit of employees’ contributions to ESI and PF. The assessee's rectification application to delete this addition was rejected by the CPC. 2. Legality of the Addition of ?23,55,432/- Under Section 36(1)(va) of the Income Tax Act, 1961: The CIT(A) upheld the addition made by the AO, citing that the deposits of employees' contributions towards PF and EPF were made beyond the due date stipulated under the respective statutory acts. The CIT(A) referred to several judicial decisions and emphasized that under Section 36(1)(va), deductions are allowed only if contributions are credited to the employees' accounts by the due date. The CIT(A) noted that any deposit outside this due date cannot be allowed as a deduction in any year thereafter. 3. Consideration of Judicial Pronouncements and Their Applicability: The CIT(A) referenced the Delhi High Court decision in CIT vs. Bharat Hotels Limited, which stated that amounts deposited beyond the stipulated period could not be claimed as deductions. The CIT(A) dismissed the assessee's reliance on earlier decisions like CIT vs. AIMIL Ltd., highlighting that the Bharat Hotels decision was more recent and therefore took precedence. 4. Arbitrariness and Legality of the Appellate Order: The assessee argued that the appellate order was arbitrary, illegal, and violated contemporary jurisprudence principles. The Tribunal examined whether the late payment of employees' contributions to PF and ESI, if paid on or before the due date of filing the income-tax return under section 139(1), could still be allowed as a deduction. The Tribunal referenced multiple decisions, including those of the Delhi High Court and coordinate benches, which supported the view that such contributions paid before the due date of filing the return should be allowed as deductions. Tribunal's Judgment: The Tribunal found that the assessee had deposited the employees' contributions to PF and ESI before the due date of filing the income-tax return. It cited the case of M/s Adama Solution P. Ltd. vs. ADIT, among others, where similar circumstances led to the deletion of such additions. The Tribunal concluded that the CIT(A) was not justified in sustaining the addition made by the AO. Therefore, it set aside the CIT(A)'s order and directed the AO to delete the disallowance. Conclusion: The appeal filed by the assessee was allowed, with the Tribunal ruling that the late payment of employees' contributions to PF and ESI, if made before the due date of filing the return, should be allowed as a deduction under section 36(1)(va) of the Income Tax Act, 1961.
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