Deduction allowed where employer paid PF and ESI within return filing and statutory grace periods under sections 43B, 36(1)(va)

ITAT KOLKATA - AT upheld the CIT(A)'s deletion of a disallowance under sections 43B and 36(1)(va) concerning employer's non-deposit of employee PF and ESI contributions, finding payments were made within the return filing due dates and statutory grace periods. Relying on precedent from the SC and relevant HCs, the tribunal allowed the deduction and dismissed the revenue's appeal.

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Issues:
Appeal against CIT(A)'s order deleting addition on account of employees' contribution to ESI & PF by invoking provisions of section 36(1)(va) r.w.s. 2(24)(x) of the Income Tax Act, 1961.

Analysis:

1. Issue 1 - Addition on account of employees' contribution to ESI & PF:
The revenue appealed against CIT(A)'s deletion of the addition made by the AO on account of employees' contribution to ESI & PF. The AO disallowed these payments as they were not deposited within the due date to the appropriate authority. However, the CIT(A) deleted the addition based on decisions of the Hon'ble Karnataka High Court and the Hon'ble Apex Court. The revenue contended that a Coordinate Bench decision favored them, but the ITAT found that the payments were made within the due dates and grace period provided by the Acts. The ITAT cited the decision of the Hon'ble Delhi High Court in a similar case and upheld the CIT(A)'s order, dismissing the revenue's appeal.

2. Issue 2 - Applicability of section 43B and section 36(1)(va):
The revenue argued that section 43B should apply, as the employees' contribution is not allowed under this section on a payment basis. However, the ITAT found that the payments were made within the due dates, as per the provisions of section 36(1)(va) read with section 2(24)(x). Citing the decisions of the Hon'ble Delhi High Court and the Hon'ble Karnataka High Court, the ITAT allowed the claim of the assessee and upheld the CIT(A)'s decision to delete the disallowance made on account of employees' contribution to ESI and PF. The ITAT dismissed the revenue's appeal based on these findings.

In conclusion, the ITAT upheld the CIT(A)'s decision to delete the addition on account of employees' contribution to ESI & PF, citing relevant legal provisions and decisions from higher courts. The ITAT dismissed the revenue's appeal, emphasizing that the payments were made within the due dates as required by law.

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