Case Law Details
Krystal Integrated Services Pvt Ltd Vs DCIT (ITAT Mumbai)
Introduction: The Income Tax Appellate Tribunal (ITAT) Mumbai recently ruled on a case involving Krystal Integrated Services Pvt Ltd and the Deputy Commissioner of Income Tax (DCIT). The central issue in both appeals was the disallowance of delayed remittance of employees’ contribution under the Employees’ State Insurance (ESI) Act. The appeals for the assessment years 2017-18 and 2018-19 were heard together and decided in a common order.
1. Background of the Case: Krystal Integrated Services Pvt Ltd, engaged in facility management, security agency, housekeeping, and other services, faced disallowance of Rs. 8,39,53,960 for A.Y. 2017-18 and Rs. 5,18,55,125 for A.Y. 2018-19 due to delays in remitting employees’ contribution to the ESI.
2. Genuine Reasons for Delay: The company’s delays were attributed to its clientele, which primarily comprised government entities. Invoices were processed based on government internal processes, leading to a considerable time lag in recovering dues, affecting the company’s cash flow. The delay was not intentional, and payments were made when funds became available.
3. Legal Framework: The discussion revolved around Section 36(1)(va) of the Income Tax Act, which deals with deductions for employee contributions to provident funds and other funds. It was emphasized that the intention behind this section was to penalize those who retained employee contributions for improper use. The delay in Krystal’s case was attributed to a time lag in recovering dues from government entities, not to misutilization of funds.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
