Case Law Details
Aero Club Vs ACIT (Delhi High Court)
Introduction: In a recent judgment, the Delhi High Court addressed an essential question concerning the deduction of Provident Fund (PF) and Employee State Insurance (ESI) payments made after the due date due to a national holiday. The case, titled Aero Club vs. ACIT, has implications for businesses and taxpayers dealing with such contributions. This article provides a detailed analysis of the court’s decision and its significance.
Detailed Analysis:
1. Background: The case involved a dispute over the deductibility of PF and ESI payments. The appellant, Aero Club, contended that the payments were made on 16th August 2018, a day after India’s National Holiday (15th August). The central issue revolved around whether these delayed payments could be eligible for deduction.
2. The Question of Law: The Delhi High Court framed the following question of law for consideration:
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- Whether the Tribunal misdirected itself by not recognizing that the PF and ESI payments, due on a National Holiday (15th August 2018), and deposited on the next working day (16th August 2018), were amenable to deduction?
3. Precedent and Legal Interpretation: The court referred to its earlier decision in a similar case, Pr. Commissioner of Income Tax-7 vs. Pepsico India Holding Pvt. Ltd. In that case, it was held that payments made following a national holiday should be considered eligible for deduction. The court relied on Section 10 of the General Clauses Act, which supports such claims.
4. Decision and Implications: The Delhi High Court upheld the appellant’s argument, emphasizing that when the due date falls on a National Holiday, payments can be made on the following working day. This decision has favorable implications for businesses as it allows for the deduction of delayed PF and ESI payments in similar situations.
Conclusion: The Delhi High Court’s ruling in the Aero Club vs. ACIT case brings clarity to the issue of deductibility of Provident Fund and Employee State Insurance payments when they are made after the due date due to a national holiday. By affirming that such payments are amenable to deduction, the court ensures fairness in tax assessments and provides relief to taxpayers facing such circumstances.
This judgment reaffirms the principle of interpreting tax laws with a sense of practicality and accommodation for exceptional situations, such as national holidays. Businesses and taxpayers can rely on this precedent when dealing with similar disputes, thereby promoting a more equitable and reasonable tax environment.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. We have heard the learned counsel for the parties.
2. According to us, the appeal requires to be admitted qua one issue which, according to us, arises for consideration.
3. Resultantly, the appeal is admitted, and the following question of law is framed for consideration by the Court.
(i) Whether the Income Tax Appellate Tribunal [in short, “Tribunal”] misdirected itself on facts and in law in failing to notice that Rs. 44,28,453/-, the amount payable towards the provident fund and Rs. 72,131/-, the amount payable towards the ESI, fell due on a National Holiday i.e., 15.08.2018 and therefore the deposit made on the following date i.e., 16.08.2018 was amenable to deduction?
4. We had the occasion to deal with a similar question of law in ITA No. 12/2023, titled Pr. Commissioner of Income Tax-7 vs Pepsico India Holding Pvt. Ltd. The observations made by us therein, being apposite, are extracted hereafter:
“5. Mr Deepak Chopra, learned counsel, who appears on behalf of the respondent/assessee, says that in this particular matter, since the deposit of the employee’s contribution towards the provident fund was made on 16.08.2018, following a National Holiday i.e., 15.08.2018, the deduction claimed would have to be allowed, as steps had been taken by the respondent/assessee towards the deposit of the said amount on 14.08.2018.
6. Mr Puneet Rai, learned senior standing counsel, who appears on behalf of the appellant/revenue, says that since the respondent/assessee had deposited the employee’s contribution towards the provident fund amounting to Rs. 1,56,12,404/- on 16.08.2018, the Assessing Officer (AO) had rightly disallowed the deduction, as the due date was 15.08.2018.
7. According to us, this submission advanced by Mr Rai cannot be accepted. Since the due date fell on a date which was a National Holiday, the deposit could have been made by the respondent/assessee only on the date which followed the National Holiday.
8. Mr Chopra, as noticed on 12.01.2023, was right that Section 10 of the General Clauses Act would help the respondent/assessee to tide over the objections raised on behalf of the appellant/revenue.
9. Therefore, the second question of law, as framed via the order dated 12.01.2023, which is extracted hereinabove, is answered against the appellant/revenue and in favour of the respondent/assessee.
10. Accordingly, the appeal is closed, in the aforesaid terms.”
5. In view of what is stated hereinabove, the question of law, as framed, is answered in favour of the appellant/assessee and against the respondent/revenue.
6. Accordingly, the appeal is dismissed in the aforesaid terms.
