2022 (10) TMI 792 - AT - Income Tax

Disallowance of employee s contribution of PF/ESI on account of delay in deposits - HELD THAT - We are of the view that the AO was not justified in denying the deduction claimed by the assessee on account of late deposit of PF/ESI/EPF, albeit before filing the return of income. Admittedly, in all the above-stated matters, the Revenue had not contended that the assessee has deposited the contribution after the filing of the return of income. Allowability of expenses attributable to employee provident fund and employee state insurance scheme on the assurance that the employee s contributions towards PF ESI have been deposited before the due date of filing of return of income. However, the Revenue shall be at liberty to seek restoration of the appeal where it is found as a matter of fact that the assessee has failed to deposit the employee s contribution before the due date of filing of return of income stipulated u/s 139(1) of the Act in accordance with law. In view of the above and respectfully following the decision Pro Interactive Service (India) Pvt.Ltd. 2018 (9) TMI 2009 - DELHI HIGH COURT . we allow the appeals filed by the captioned assessees.

Summary

Issues:
Disallowance of employee's contribution of PF/ESI on account of delay in deposits as per the respective Acts.

Analysis:
The appeals were filed by multiple assessees against orders passed by appellate authorities for various assessment years regarding the disallowance of employee's contribution of PF/ESI due to delayed deposits. The issue was common across all appeals, so they were consolidated for efficiency. The lead case involved grounds challenging the Assessment Order and disallowance of contributions under ESI and EPF. The appellant argued that the contributions were paid before filing the Income Tax Return and Tax Audit Report. The dispute centered on the retrospective application of the amendment provisions of section 36(1) and 43B through Finance Act 2021.

The AR for the assessee contended that despite delays in depositing PF/ESIC contributions, all amounts were deposited before filing the income tax return, citing relevant legal precedents. The Senior DR supported the lower authorities' orders and referenced the applicability of the Finance Act 2021 amendment to the case. The Tribunal noted that the issue had been settled in favor of the assessee by various judicial pronouncements and cited a judgment of the Hon'ble Jurisdictional High Court of Delhi in support.

Regarding the Finance Act 2021 amendment, the Tribunal clarified that it would not apply to the assessment year under consideration. The Revenue failed to provide evidence that the previous order had been overruled, leading the Tribunal to conclude that the AO was unjustified in denying the deduction for late deposits of PF/ESI/EPF made before filing the return of income. The appeals were allowed based on the assurance that employee contributions were deposited before the due date of filing the return of income, with the caveat that the Revenue could seek restoration if the contributions were found to be deposited late.

In conclusion, all appeals by the assessees were allowed, following the decision of the Hon'ble Jurisdictional High Court of Delhi. The Tribunal emphasized the importance of timely deposits while ensuring the deductibility of expenses related to employee provident fund and employee state insurance scheme.