Case Law Details

Case Name : Ajashy Engineering Sales Pvt. Ltd. Vs ITO (ITAT Delhi)
Appeal Number : ITA No. 1515/Del/2021
Date of Judgement/Order : 26/09/2022
Related Assessment Year : 2018-19

Ajashy Engineering Sales Pvt. Ltd. Vs ITO (ITAT Delhi)

ITAT held that 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 the matter, the Revenue had not contended that the assessee has deposited the contribution after the filing of the return of income. In view of the above, respectfully following the decision of the Hon’ble High Court of Delhi in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd. ITA no. 983/2018 dated 10.09.2018, we allow the ground raised by the assessee and direct the AO to delete the addition.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal filed by the assessee is directed against the order dated 06.09.2021 passed by the Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi relating to Assessment Year 2018-19.

2. Brief facts of the case as culled out from the material on record are as under :-

3. Assessee is a company and filed its return of income for A.Y. 2018-19 dated 20.10.2018 declaring total income of Rs.48,72,860/-. In the intimation issued u/s 143(1) of the Act by CPC, Bangalore dated 15.11.2019, the total income was determined at Rs.56,17,360/-. Aggrieved by the intimation issued u/s 143(1) of the Act, assessee carried the matter before CIT(A) who vide order dated 06.09.2021 in Appeal No.CIT(A), Gurgaon-1/12075/2019-20 dismissed the appeal of the assessee. Aggrieved by the order of CIT(A), assessee is now in appeal and has raised the following grounds:

1. “That on the facts and circumstances of the case, the order dated as 15.11.2019 passed by the Deputy Commissioner of Income Tax, CPC-Bangalore [hereinafter for the sake of brevity referred to as “The Ld. AO”] under section 143(1) of the Income-tax Act, 1961 [hereinafter for the sake of brevity referred to as “The Act”] and as upheld by the Ld. Commissioner of Income-tax (Appeals)-NFAC [hereinafter for the sake of brevity referred to as “The CIT(A)”] is bad at law and void ab initio.

2. That on the facts and in circumstances of the case, the Ld CIT(A) erred in upholding the addition to the tune of Rs.5,19,551/- on account of employee’s contribution of PF under Section 36(1)(va) of the Act and the same is not sustainable on various legal and factual ground.

3. That on the facts and in circumstances of the case, the Ld CIT(A) erred in upholding the addition to the tune of Rs.1,97,162/- on account of employee’s contribution of ESI under section 36(1)(va) of the Act and the same is not sustainable on various legal and factual ground.

4. That on the facts and in circumstances of the case, the Ld CIT(A) erred in upholding the addition to the tune of Rs.8,940/- on account of employee’s contribution of labour welfare fund under section 36(1)(va) of the Act and the same is not sustainable on various legal and factual ground.

5. That on the facts and in circumstances of the case, the Ld CIT(A) erred in law and holding that explanation 2 to u/s 36(i)(va) of the Act is applicable on all pending cases when provided that is applicable w.e.f A.Y. 2021-22 by holding:

“that it is also observed that the above insertions and certificatory in nature. Therefore, in all pending cases, late payment of employee’s contribution cannot be allowed as deduction.”

6. That on the facts and circumstances of the case, the Ld CIT(A) erred in law in holding in Para 6.12 of the Appellate order that :

“by furnishing the dates of payment of employees’ contribution to PF, auditor has clearly submitted the figure to be disallowed.”

7.1 All the above-mentioned grounds are independent and without prejudice to other; and

7.2 That the appellant craves the right to add, alter, amend and delete the ground(s) of appeal during the course of hearing.”

4. On the date of hearing none appeared on behalf of the assessee nor any adjournment application was filed despite the fact that the notice of hearing was issued to the assessee. Since the issue raised in appeal is a covered issue, we proceed to dispose of the appeal ex parte qua the assessee, after considering the submissions of Learned DR and the material on record.

5. The intimation issued u/s 143(1) reveals that addition of Rs.7,32,553/- has been made in the intimation issued by CPC, Bangalore u/s 36(1)(va) of the Act for the reason that the contribution received towards PF/ESIC by the assessee from its employees was not deposited before the due date. Before CIT(A), it was inter alia submitted that though there has been delay in deposit of PF/ESIC Contributions but all the contributions received by the assessee from its employees have been deposited with the appropriate authorities before the filing of return of income by the assessee. Before CIT(A), it was further submitted that since the amounts have been deposited before the filing of return of income, no disallowance is called for and for aforesaid proposition, various decisions of Delhi High Court were relied upon. CIT(A) did not agree with the contentions of assessee. He upheld the order of AO. Aggrieved by the order of CIT(A), assessee is now in appeal.

6. Before us, Learned DR supported the order of lower authorities and also placed reliance on the decision of Delhi Tribunal in the case of Vedvan Consultants Pvt. Ltd. vs DCIT in ITA No.1312/Del/2020 order dated 26.08.2021. He also submitted that the amendment brought out by Finance Act 2021 would be applicable to the present case as by the amendment it has been clarified that provisions of Section 43B of the Act shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of its employees to which the provisions of sub clause (x) of Clause (24) of Section 2 applies.

7. We have heard the Learned DR and perused the material available on record. The issue is no more res-integra. The issue has already been settled in favour of the assessee by various judicial pronouncements by the Tribunal. The Hon’ble Jurisdictional High Court of Delhi in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd. ITA no. 983/2018 dated 10.09.2018 has already taken a view in favour of the assessee by holding as under:

“In view of the judgement of the Division Bench of Delhi High Court in Commissioner of Income Tax versus AIMIL Limited, (2010) 321 ITR 508 (Del.) the issue is covered against the Revenue and, therefore, no substantial question of law arises for consideration in this appeal.

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 the employer under section 2(23)(x) of the Act.”

8. As far as reliance by Learned DR on the amendment brought out by Finance Act 2021 is concerned, “notes on clauses” to the Finance Bill 2021 clearly states that the amendment will take effect from 1st April 2021 and will apply in relation to the assessment year 2021-22 and subsequent assessment year. In such a situation, we are of the view that the amendment brought out by Finance Act 2021 does not apply to the assessment year under consideration.

9. Before us, Revenue has not placed any material on record to demonstrate that the decision of Hon’ble Delhi High Court cited hereinabove has been overruled/stayed/set aside by higher judicial forum. In view of the aforesaid facts, 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 the matter, the Revenue had not contended that the assessee has deposited the contribution after the filing of the return of income. In view of the above, respectfully following the decision of the Hon’ble High Court cited hereinabove, we allow the ground raised by the assessee and direct the AO to delete the addition.

In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 26.09.2022

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