Belated Deposit Of PF And ESI Contribution Of Employees Cannot Be Added To Employer's Taxable Income: ITAT Delhi

The Single Bench of Delhi ITAT, consisting of judicial member Kul Bharat, has ruled that belated payment of employees' contribution to the Provident Fund and State Insurance Scheme cannot be added to the employer's taxable income as deemed income, if the said deposits are made before the due date of filing the income tax return under the Income Tax Act, 1961. The Appellant/ Assessee Guardian India Solutions had filed its income tax return which was processed by the Centralized Processing Centre, Bangalore under Section 143(1) of the Income Tax Act, 1961. The employees' contribution to Provident Fund (PF) and Employee State Insurance (ESI) was disallowed as deduction under the Act on the ground that the Assessee Company had failed to deposit the employees' contribution within the time specified under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 and the Employees' State Insurance Act, 1948, even though the deposits were made before the due date of filing the income tax return under the Income Tax Act. The Assessee Guardian India had filed an appeal before the Commissioner of Income Tax (Appeals) (CIT (A)) who had held that the payment of employees' contribution made after the due date specified in the PF and ESI Act but before the due date specified for filing the income tax return should be disallowed as deduction under the Act. The Assessee Guardian India had filed an appeal before the ITAT against the order of the CIT (A). Guardian India had submitted before the ITAT that in view of the decision of the Delhi High Court in CIT versus AIMIL Limited (2009), the issue whether the employees' contribution to PF and ESI, deposited after the due date specified in the PF and ESI Act but before the due date of filing the income tax return, was eligible for deduction under the Income Tax Act or not was settled in favour of the Assessee. The ITAT observed that the Delhi High Court in the case of CIT versus AIMIL Limited had held that in view of the principle laid down by the Supreme Court in the case of CIT versus Vinay Cement (2007) an assessee could get the benefit of deduction under the Income Tax Act if the actual payment of employees' contribution to PF and ESI was made before the income tax return was filed under the Act. Also, the ITAT observed that in the case of PCIT versus Pro Interactive Services (India) Pvt. Ltd. (2018) the Delhi High Court had held that the legislative intent under the Income Tax Act was to ensure that the amount paid as employees' contribution was allowed as expenditure under the Act when the said payment was actually made. The Delhi High Court had ruled in that case that the legislative intent and objective under the Income Tax Act was not to treat the belated payment of employees' contribution to PF and ESI as deemed income of the employer under Section 2(24)(x) of the Act. The ITAT therefore allowed the appeal and deleted the additions made to the Assessee's income. Case Title: Guardian India Solutions Pvt. Ltd. Versus DCIT, CPC, Bangalore Counsel For The Appellant: P. Roy Choudhary, Adv. Counsel For The Respondent: Sanjiv Mahajan, Sr. Dr Click Here To View/Download Order

Belated Deposit Of PF And ESI Contribution Of Employees Cannot Be Added To Employer's Taxable Income: ITAT Delhi

Parina Katyal

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