Introduction: The case of “Radial International vs DCIT” was heard by the ITAT Delhi and revolves around the disallowance of payment of Provident Fund (PF) amounting to Rs.89,644/- deposited after the due date. The central issue is whether the payment made on the next working day, when the due date falls on a national holiday, should be accepted and not subject to disallowance under section 36(1)(va) of the Income-tax Act, 1961.
Analysis: In this case, the assessee appealed against the order of the AO/CPC disallowing the PF payment due to its deposit after the due date. The ld. CIT (A) upheld the disallowance, citing a Supreme Court order and referring to the case of M/s. Checkmate Services Pvt. Ltd. The appellant presented the argument that the PF payment was deposited on the next working day as the last due date was a national holiday. This argument was supported by a similar ITAT order in a previous case.
The ITAT analyzed the situation and agreed with the appellant’s submissions. It noted that if the last due date for depositing payment falls on a holiday and the payment is made on the next working day, it should be allowed. The ITAT referred to the provisions of the General Clauses Act, 1897, and decided to remit the issue back to the AO for re-examination. The ITAT’s decision aligned with their earlier order in a similar case, indicating consistency in their approach.
Conclusion: The ITAT Delhi’s decision in the “Radial International vs DCIT” case demonstrates the importance of considering the specific circumstances when assessing disallowances. The ITAT’s directive for re-examination reflects the need to account for factors like holidays affecting payment due dates. This case emphasizes the principle of fairness in taxation by allowing payments made on the next working day after a holiday and encourages a consistent approach in line with previous decisions.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is directed against the order of the ld. CIT (Appeals)-23, New Delhi dated 14.12.2022 pertaining to Assessment Year 2020-21.
2. The grounds of appeal taken by the assessee read as under :-
“1. That the order of Ld. Commissioner (Appeals) is contrary to the law and the facts of the appellant’s case.
2. That the AO (CPC) erred in disallowing the PF payment amounting to Rs.89,644/- deposited on or before the due date of filing of Income Tax Return during the year.
3. That the Ld. CIT (A) erred in holding that PF deposited immediately on the next working day (due date being national holiday) would be considered as delayed payment and attract disallowance u/s 36(1)(va) of the Act.”
3. Brief facts of the case are that in this case, AO/CPC under section 143(1) of the Income-tax Act, 1961 (for short ‘the Act’) disallowed payment of PF amounting to Rs.89,644/- which was deposited after the due date under the relevant Act. Upon assessee’s appeal, ld. CIT (A) confirmed the same by referring to Hon’ble Supreme Court order in the case of M/s. Checkmate Services Pvt. Ltd. (2022) 143 com 178 (SC).
4. Against the above order, assessee is in appeal before us. We have heard both the parties and perused the records.
5. Counsel of the assessee submitted that the last date for depositing of payment of PF was national holiday and in such a situation, the deposit was made on the next date and the same should be accepted. For this proposition, he referred to ITAT order dated 29.05.2023 in ITA No.1843/Del/2021 for AY 2018-19 where, in similar circumstances, ITAT has concluded as under :-
“ In view of the provisions of the General clauses Act, 1897, reproduced above, we feel it appropriate to restore the issue back to the file of AO for examining the payments made on day next to due date, being holiday on due date and allow the deduction accordingly. The grounds raised by the assessee are accordingly allowed partly for statistical purposes.
6. In the result, the appeal filed by assessee is allowed partly for statistical purposes.”
7. Upon careful consideration and after hearing both the parties, we agree with the submissions that if the last date for depositing of payment is a holiday and the payment is made on the next date, the same should be allowed, as has been decided in the abovesaid case of ITAT. We also feel it appropriate to remit the issue back to the file of AO for examining the payments made on day next to due date, being holiday on due date and allow the deduction accordingly.
8. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on this 18th day of July, 2023.