Late PF/ESIC Deposits Before Tax Return Filing Allowed as Expense

The ITAT Delhi allowed the appeal of the assessee, ruling that delayed deposits of PF/ESIC contributions, made before filing the income tax return, should be considered allowable expenditure. The ITAT emphasized established judicial precedents and taxation principles, directing the Assessing Officer to delete the disallowance under section 36(1)(va) of the Income Tax Act for the Assessment Year 2019-20.

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Issues:
1. Disallowance of employees' contributions towards PF/ESIC under section 36(1)(va) of the Income Tax Act.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) related to the Assessment Year 2019-20. The assessee, an individual engaged in the business of Manpower Supply Contractor, had declared a total income of Rs. 20,61,810/- in the return filed for the A.Y. 2019-20. However, the intimation issued under section 143(1) of the Act determined the total income at Rs. 18,13,404/- after disallowing Rs. 6,94,463/- on account of delayed deposit of employees' contributions towards PF/ESIC. The assessee challenged this disallowance before the CIT(A) and subsequently before the ITAT Delhi.

The primary contention raised by the assessee was regarding the disallowance made under section 36(1)(va) of the Act. The assessee argued that although there was a delay in depositing the PF/ESIC contributions, all the amounts were deposited with the authorities before filing the return of income. The assessee relied on various decisions to support the claim that no disallowance should be made in such circumstances. The Revenue, on the other hand, supported the lower authorities' order and cited a specific decision of the Delhi Tribunal to justify the disallowance.

After considering the arguments from both sides, the ITAT Delhi analyzed the issue of delayed deposit of PF/ESIC contributions. The ITAT noted that delayed deposits before the filing of the income tax return have been considered as allowable expenditure by various Tribunals and High Courts. Additionally, the ITAT highlighted that the Finance Act 2021 amendment, which clarified the applicability of Section 43B, was not relevant to the assessment year under consideration. The ITAT also emphasized the principle that when two judgments offer different views, the one favorable to the assessee should be applied, citing the decision in the case of Vegetable Products Ltd. The ITAT, therefore, concluded that no disallowance was justified in the present case and directed the Assessing Officer to delete the addition, allowing the assessee's appeal.

In conclusion, the ITAT Delhi allowed the appeal of the assessee, emphasizing that the delayed deposits of PF/ESIC contributions, made before the filing of the income tax return, should be considered as allowable expenditure, in line with established judicial precedents and principles of taxation law.

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