2022 (5) TMI 443 - AT - Income Tax

Tribunal Overturns Disallowance of Expenditure for Delayed EPF & ESI Payments

Sethi Hospital Pvt. Ltd. Versus ITO, Ward-23 (1) New Delhi

The Tribunal allowed the appeal of the assessee against the disallowance of expenditure for the Assessment Year 2018-19 due to delays in depositing ... Disallowance of belated payment of employee's contribution towards ESI/PF - HELD THAT:- This issue is covered in favour of the assessee by the judgment CIT Vs. AIMIL Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT] as also the judgment in the case M/s Pro Interactive Services (India) Pvt. Ltd. [2018 (9) TMI 2009 - DELHI HIGH COURT] wherein held hat the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of employee's provident fund (EPD) and employee’s State Insurance Scheme (ESI) as deemed income of employer under section 2(24)(x) - Decided in favour of assessee. Issues involved:1. Disallowance of expenditure on account of delay in deposit of employees' contribution to PF & ESI for Assessment Year 2018-19.Detailed Analysis:- The appeal was filed against the order of Ld. CIT(A), National Faceless Appeal Centre for the assessment year 2018-19.- The assessee challenged the assessment order, claiming it to be bad in law and against natural justice.- The Ld. CIT(A) confirmed the addition made by the Assessing Officer under section 36(1)(va), which the assessee contended was against the facts, decided cases, and provisions of the Income Tax Act.- The Central Processing Centre (CPC) in Bengaluru adjusted the delay in deposit of employees' contribution to PF & ESI for the said assessment year.- The Ld. CIT(A) upheld the addition, leading the assessee to appeal before the Tribunal.- The issue revolved around the disallowance of expenditure due to the delay in depositing employees' contributions to EPF & ESI.- The Judicial Member referred to a judgment of the Delhi High Court in a similar case, emphasizing that the legislative intent was not to treat belated payments as deemed income of the employer under the Act.- Citing the binding precedent, the Judicial Member directed the Assessing Officer to delete the disallowance, thereby allowing the grounds raised by the assessee.- Consequently, the appeal of the assessee was allowed, and the order was pronounced in open court on 22nd April 2022.