2020 (11) TMI 900 - AT - Income Tax

Tribunal Allows Appeal: Employee Contributions to ESI and PF Deductible if Paid Before Return Filing Deadline.

M/s GDX FACILITY & MANAGEMENT SERVICES P. LTD. Versus DCIT, CIRCLE 10 (10), NEW DELHI

The Tribunal allowed the appeal of the assessee, deleting the disallowance of Rs. 14,50,188/- related to employees' contributions to ESI and PF deposited ... Disallowance of employees contribution to Provident Fund and ESI in dispute u/s 36(1)(va) - payment been deposited beyond due date prescribed under the relevant Act, but paid before the filing of the return of income by the assessee - HELD THAT:- We are of the considered view that the issue involved in the present appeal has already been adjudicated and decided in favour of the assessee by the Hon’ble Supreme Court of India; Hon’ble High Courts including the Hon’ble Jurisdictional High Court, as mentioned in the written submissions dated 22.09.2020 filed by the assessee, especially the decision of the Hon’ble Supreme Court of India in the case of Alom Extrusion Limited by referring its earlier decision in the case of CIT vs JH Gotla [1985 (8) TMI 5 - SUPREME COURT] and AIMIL Limited [2009 (12) TMI 38 - DELHI HIGH COURT]. Therefore, respectfully following the aforesaid precedents, we delete the addition in dispute by allowing the appeal of the assessee. Issues Involved:1. Disallowance of employees' contribution to ESI and PF deposited beyond the due date prescribed under relevant Acts but before the due date of filing the return.Issue-wise Detailed Analysis:1. Disallowance of Employees' Contribution to ESI and PF:The primary issue in this appeal is whether the disallowance of employees' contribution to ESI and PF, which were deposited beyond the due date prescribed under the relevant Acts but before the due date of filing the return, is justified.1(a) Argument by the Assessee:The assessee contended that both the DCIT and CIT(A) erred in disallowing the employees' contribution amounting to Rs. 14,50,188/- under section 36(1)(va) of the Income Tax Act, 1961. The payments, although delayed under the relevant Acts, were made before the due date of filing the return. The assessee cited the judgment of the Supreme Court in the case of Alom Extrusions Limited and various High Courts, including the jurisdictional High Court, which have ruled in favor of allowing such deductions.1(b) Legislative Intent and Judicial Precedents:The assessee argued that the legislative intent behind section 36(1)(va) and section 43B was to ensure timely deposit of contributions. However, amendments to section 43B allowed employers' contributions made before the due date of filing the return, even if delayed under the relevant Acts. The Supreme Court in Alom Extrusions Limited held this amendment to be retrospective. The assessee contended that similar treatment should be extended to employees' contributions, emphasizing that the payments were made within the financial year or before the due date of filing the return, thus not constituting income for the assessee.1(c) Supporting Case Laws:The assessee referred to several High Court judgments, including CIT vs. Aimil Limited (Delhi HC), CIT vs. Ghatge Patil Transports Ltd. (Bombay HC), and others, which supported the view that contributions made before the due date of filing the return should be allowed as deductions. The Chennai ITAT in Dy. CIT vs. Repco Home Finance (P.) Ltd. also supported this interpretation, emphasizing that the intention of the legislature should not lead to an absurd result.1(d) Revenue's Stand:The Senior Departmental Representative (DR) relied on the order passed by the CIT(A), which upheld the disallowance based on the delayed deposit under the relevant Acts.Tribunal's Findings:The Tribunal, after hearing both parties and perusing the written submissions, concluded that the issue had been adjudicated in favor of the assessee by the Supreme Court, various High Courts, and the jurisdictional High Court. The Tribunal referenced the Supreme Court's decision in Alom Extrusions Limited and the jurisdictional High Court's decision in CIT vs. AIMIL Limited, which allowed such deductions if the contributions were deposited before the due date of filing the return.Conclusion:The Tribunal, following the precedents set by higher courts, deleted the addition in dispute and allowed the appeal of the assessee. The decision was announced on 30th September 2020.Result:The appeal of the assessee is allowed, and the disallowance of Rs. 14,50,188/- is deleted.