Payments of PF and ESI made before filing of income tax return cannot be disallowed

Vaishali Phama Ltd. Vs DCIT (ITAT Mumbai)

ITAT Mumbai held that disallowance on account of delayed payments of PF and ESI contribution unjustified as payment made well before the due date of filing of income tax return u/s. 139(1).

Facts- The grievance in the appeal is that the first appellate authority was not justified in upholding the adjustment, made by the Centralized Processing Centre (CPC) Bengaluru while processing income tax returns u/s. 143(1) based on certain inputs from the tax audit reports of the assessee in question, in respect of the disallowance on account of delay in making the payment towards the employees’ contribution for the provident fund and ESI dues, under section 36(1)(va) r.w.s. 2(24)(x) of the Act, particularly when there are judgments of Hon’ble jurisdictional High Court permitting such a deduction.

Conclusion- The coordinate bench, in the case of Kalpesh Synthetics Pvt Ltd Vs DCIT has held that the disallowance does not come into play when the payment is made well before the due date of filing the income tax return u/s. 139(1) of the Income Tax Act.

Held that we see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the same, we uphold the plea of the assessee and direct AO to delete the impugned disallowances on account of delayed payments of PF and ESI contributions.

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