2021 (2) TMI 527 - AT - Income Tax

Allowance of Employees' Contribution as Deduction under IT Act Upheld by ITAT

The Appellate Tribunal ITAT Delhi allowed the assessee's appeal against the disallowance of employees' contribution under section 36(i)(va) and section ... Employees contribution disallowed applying the provisions of section 36(i)(va) and section 43B - AO rejected the contention of the assessee and stated that due date means the date for deposit of the above contribution is the dates mentioned in the respective PF and State Insurance Act - HELD THAT:- In this case is that whether the amount of employee’s contribution deposited beyond the due date prescribed in the respective provident fund laws is allowable to the assessee as a reduction or not. In case of CIT Vs. Aimil Ltd 2009 (12) TMI 38 - DELHI HIGH COURT wherein, it has been held that the payment of even employees contribution before the due date of filing of return of income is allowable as deduction to the assessee despite all the facts that such contribution has not been deposited within the due date prescribed under the respective Provident Fund Laws. In view of this, we find that disallowance made by the lower authorities is not sustainable in law. Assessee is allowed and the ld AO is directed to delete the disallowances - Decided in favour of assessee. Issues: Disallowance of employees' contribution under section 36(i)(va) and section 43B of the Act.Analysis:1. The appeal was filed by the assessee against the order disallowing the employees' contribution of Rs. 4,03,239 under section 36(i)(va) and section 43B of the Act for Assessment Year 2014-15.2. The assessee, a company, did not comply with the provisions of section 36(i)(va) and section 2(24)(X) of the Act regarding payment of employees' contribution towards provident fund and state insurance within the prescribed due dates.3. The Assessing Officer (AO) disallowed the sum of Rs. 4,03,239 as the contributions were not deposited within the dates prescribed by the respective Provident Fund Act, resulting in an assessment order determining the total income at Rs. 1,06,32,820.4. The assessee's appeal before the CIT(A) was dismissed based on precedents from the Hon'ble Gujarat High Court and Hon'ble Kerala High Court.5. Despite the assessee's absence, the issue was decided based on the available information.6. The Tribunal considered whether the employees' contribution deposited beyond the due date prescribed in the provident fund laws is allowable as a deduction to the assessee. Citing the decision in CIT Vs. Amil Ltd, it was held that even if the contribution is paid before the due date of filing the return of income, it is allowable as a deduction, rendering the disallowance by lower authorities unsustainable.7. Consequently, the appeal was allowed, directing the AO to delete the disallowance of Rs. 4,03,239.Judgment Summary:The Appellate Tribunal ITAT Delhi allowed the assessee's appeal against the disallowance of employees' contribution under section 36(i)(va) and section 43B of the Act for Assessment Year 2014-15. The Tribunal held that the disallowance made by the lower authorities was not sustainable in law, citing precedents and emphasizing that even if the contribution is paid before the due date of filing the return of income, it is allowable as a deduction. As a result, the Tribunal directed the AO to delete the disallowance of Rs. 4,03,239.