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2022 (6) TMI 332 - AT - Income TaxDisallowance of the employees contribution towards EPF ESI - HELD THAT - We find that the issue relating to employees contribution towards EPF and ESI is covered in favour of the assessee by the judgment of the Hon ble Jurisdictional High Court in the case of CIT Vs. AIMIL Ltd. 2009 (12) TMI 38 - DELHI HIGH COURT 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 employer under section 2(24)(x) - Decided in favour of assessee.
Issues: Appeal against order of CIT(A) for assessment year 2018-19 - Disallowance of EPF and ESI contribution - Violation of principle of natural justice.
Analysis: 1. Disallowance of EPF and ESI Contribution: The appeal primarily revolves around the disallowance of employees' contribution towards EPF and ESI by the Centralized Processing Center, Bengaluru. The adjustment led to the assessment of the assessee's income at Rs. 31,09,590/-, higher than the returned income of Rs. 9,91,370/-. The assessee contended that the contributions were deposited before the due date for filing the return, citing relevant case laws to support their position. The learned counsel emphasized the judgment of the Hon'ble Delhi High Court and other cases where similar issues were decided in favor of the assessee. 2. Arguments and Rulings: The learned DR opposed the submissions, relying on the decisions of the authorities below. However, the Tribunal found merit in the assessee's arguments. Referring to the judgments of the Hon'ble Jurisdictional High Court in cases like CIT Vs. AIMIL Ltd. and M/s Pro Interactive Services (India) Pvt. Ltd., the Tribunal concluded that the issue of employees' contribution towards EPF and ESI was in favor of the assessee. The Tribunal highlighted the provisions allowing employers to make delayed deposits, subject to penalties, and emphasized the importance of actual payment before filing the return, as per established legal principles. 3. Judicial Precedence: The Tribunal specifically cited the rulings of the Hon'ble Jurisdictional High Court in support of its decision. Quoting the judgments in detail, the Tribunal reiterated the legal position that belated payment of EPF and ESI contributions should not be treated as deemed income of the employer under the Income-tax Act. By following the binding precedent and established legislative intent, the Tribunal decided to delete the addition made by the authorities below. Consequently, the grounds raised in the appeal were allowed, and the assessee's appeal was upheld, pronouncing the order in open court on 20th May 2022. In summary, the judgment by the Appellate Tribunal ITAT Delhi favored the assessee, ruling in favor of the deletion of the disallowance of EPF and ESI contributions. The decision was based on established legal principles, judicial precedents, and legislative intent, emphasizing the importance of actual payment before filing the return.
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