ESPIRE INFOLABS PRIVATE LIMITED,NEW DELHI V. DEPUTY COMMISSIONER OF INCOME TAX, CPC, CPC

ITA 5622/DEL/2024

AI Insights

The case involves Espire Infolabs Private Limited appealing against the orders of the National Faceless Appeal Centre (NFAC), Delhi, which pertained to the assessment years 2018-19 and 2019-20. The primary contention was regarding the disallowance made under section 36(1)(va) of the Income Tax Act, 1961, concerning the late deposit of employees' contributions to PF/ESI. The Tribunal admitted additional grounds raised by the assessee, which questioned the methodology used by the AO and CIT(A) in determining the due date for the deposit of these contributions. The Tribunal noted that similar issues had been addressed in previous cases and decided to remit the matter back to the AO for a fresh examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314703 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2019-2020
• Other Referred Cases: National Thermal Power Ltd. Vs. CIT, Jute Corporation of India Ltd. vs. CIT, Checkmate Services Pvt. Ltd. vs. CIT, Bajaj Travels vs. DCIT, Sentinel Consultants Pvt. Ltd. Vs. ACIT, Weather Comfort Engineers Private Limited vs. ACIT-CPC, Kanoi Paper and Industries Ltd. vs. ACIT, B. L. Kashyap & Sons Ltd., VVDN Technologies Pvt. Ltd., Pr.CIT vs. Khyati Realtors (P) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: PRIYANSH JAIN
• Keywords: Opportunity of being heard; Capital expenditure
• Section: 37; 244A; 37(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER, AND SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA NO. 5621/Del/2024 (AY 2018-19) And ITA NO. 5622/Del/2024 (AY 2019-20) ESPIRE INFOLABS PRIVATE LIMITED, A-41, MOHAN COOPERATIVE ESTATE, ESPIRE CAMPUS, MATHURA ROAD, NEW DELHI – 44 (PAN: AABCE2107L) VS. DCIT, CPC, BENGALURU (APPELLANT) (RESPONDENT) Appellant by : Sh. Priyansh Jain, CA Respondent by : Sh. Rajesh Kumar Dhanesta, Sr. DR Date of hearing : 07.05.2025 Date of pronouncement : 07.05.2025 ORDER PER SHAMIM YAHYA, AM : These appeals by the assessee have been directed against the orders of the NFAC, Delhi dated 19.05.2024 pertaining to assessment years 2018-19 & 2019-20. Since common grounds have been raised in both the appeals, except the difference in figures, hence, we are dealing with the facts of assessment year 2018-19, being the lead case, wherein the following grounds have been raised. 2 | P a g e 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and in facts in confirming the action of Ld. DCIT, Centralized Processing Center, Bangalore (\"Ld. AO\") in making addition u/s 36(1)(va) of the Act in intimation order passed u/s 143(1)(a), which is bad in law, beyond jurisdiction and void-ab-initio. 2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and in facts in confirming the action of Ld. AO in making disallowance of Rs. 1,37,72,321/- u/s 36(1)(va) of the Act without appreciating the facts of the case. 3. That in any case and in the view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making disallowance of Rs. 1,37,72,321/- u/s 36(1)(va) of the Act and not accepting the claim of the appellant, is bad in law and against the facts and circumstances of the case. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B, 234D and 244A of Income Tax Act, 1961. 5. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other. 2. The Ld. Counsel for the assessee submits that assessee has filed additional legal grounds of appeal with a prayer to admit the additional grounds. He placed reliance on the decision of the Hon’ble Supreme Court in the case of National Thermal Power Ltd. Vs. CIT (229 ITR 383 and Jute Corporation of India Ltd. vs. CIT 187 ITR 688 (SC). 3 | P a g e 3. Heard rival contentions. The assessee has raised the following additional grounds in the appeal: 1. That having regard to the facts and circumstances of the case, AO/CIT(A) has erred in law and on facts in not deriving the due of deposit of EPF/ESI from actual date of disbursement of salary and thus making / confirming excess disallowance. 2. That having regard to the facts and circumstances of the case, AO / CIT(A) has erred in law and on facts in not considering the fact that ESI/EPF has been paid on multiple dates and only the last date of payment has been considered while passing/ confirming the assessment order. 4. The additional grounds raised by the assessee goes to the root of the matter, thus, respectfully following the decisions of the Hon’ble Supreme Court in the cases of NTPC Vs. CIT and Jute Corporation of India Ltd. Vs. CIT (supra) the additional grounds filed by the assessee are admitted. 5. In these cases, AO made disallowance u/s. 36(1)(va) of the Act on account of employee and employer contributions and other dues under PF and ESI Act paid beyond the date prescribed in the relevant Acts. 6. Upon assessee’s appeal Ld. CIT(A) referred the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT in Civil Appeal No. 2833 of 2016 and decided the issue against the assesse. 7. Against this order, assessee is in appeal before us. 8. Ld. Counsel for the assessee submitted that there is no dispute that Hon’ble Apex Court in the case of Checkmate Services P Ltd. (supra) has dealt with the issue and decided that the impugned dues paid after the relevant due dates in the respective Acts is not allowable. However, he referred several case laws of ITAT for the proposition that the accrual of liability towards payment of salary without actual disbursement would not fasten obligation for deposits of employees contribution in the labour Acts per se. 9. Per contra, ld. DR relied upon the orders of the authorities below. 10. Upon careful consideration, we note that ITAT in the case Bajaj Travels vs. DCIT vide order dated 30.5.2024 in ITA No. 336/Del/2014 (AY 2018-19) has held as under:-- 4 | P a g e “7. In support of his submissions, Ld. AR has relied on the orders passed by the Co-ordinate Benches of ITAT, which read as under: a. Order dated 13.10.2023 in the case of Ms. Magna Automation Ltd in ITA No. – 1109/Del/2023 b. Order dated 17.11.2023 in the case of M/s Benson Movers Pvt. Ltd in ITA No. – 2710/Del/2022 c. Order dated 11.10.2023 in the case of Prakul Luthra in ITA No. 385/Del/2023 8. In the case of M/s Benson Movers Pvt. Ltd. (supra), the Tribunal restored the issue to the file of the Assessing Officer (hereinafter referred to as ‘AO’), true extract of para 5 and 6 of above order for ready reference as under: “5. In so far as employees contributions towards PF & ESI it is noticed that the issue as to whether the due date under PF/ESI Acts should be as per the calendar month for which the salary is payable or from the month in which the salary is paid to the employee by the employer came up for adjudication in the case of Sentinel Consultants Pvt. Ltd. Vs. ACIT (supra) and the Tribunal restored the issue to the file of the AO with the following observations:- \"9. We have carefully considered the rival submissions and perused the material available on record. The disallowance of employees' contribution to PF/ESIC for breach of condition under Section 36(1)(va) is in controversy. 9.1 We notice at the outset that an opportunity was given via electronic platform of the deptt. for the proposed adjustments and in the absence of e-response, the adjustments were carried out the CPC-Bangluru and intimation was issued enhancing the assessed income in the captioned assessment years. The CIT(A) in the first appeal has sustained the adjustments towards belated deposits of employees' contribution to PF/ESIC in the light of the judgment rendered by the Hon'ble Supreme Court in Checkmate Pvt. Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC). The contention of the Assessee 5 | P a g e that such additions cannot be made under the umbrella of S. 143(1) is covered against the assessee the decision of the co-ordinate bench in the case of Weather Comfort Engineers Private Limited vs. ACIT-CPC ITA No. 959/Del/2021 order dated 15/02/2023. The action of CPC and CIT(A) thus cannot be faulted where some opportunity was admittedly given for e- response. 9.2 We now turn to alternate plea on behalf of the assessee for grant of deduction under general provisions for deduction of expenditure under S. 37 of the Act. We do not see any merit in such plea that the belated deposit of employees contributions to PF/ESIC governed under Section 36(1) (va) is also simultaneously amenable to deduction under Section 37(1) of the Act. In terms of the provision, Section 37(1) permits deduction of expenditure which is not in the nature of expenditure prescribed in Sections 30 to 36 of the Act and also not being in the nature of capital expenditure or personal expenses of the assessee. Thus, in view of such mandate of law, the deduction of expenditure under the general clause of Section 37(1) would not extend to expenditure specially covered within the ambit of Section 36(1)(va) of the Act. The Hon'ble Supreme Court in the case of Checkmate Pvt. Ltd. (supra) itself explains this position in Para 32 of the Judgment. Such view also draws support from the observations made in recent judgment of the Hon'ble Supreme Court in the case of Pr.CIT vs. Khyati Realtors (P) Ltd. (2022) 141 taxmann.com 461 (SC). The alternate plea is thus without any merit. 9.3 We also take note of yet another plea made out on behalf the assessee towards methodology of calculation of default under the relevant PF/ESIC Act. The Ld. Counsel contends that the month during which the 6 | P a g e disbursement of salary is actually made would be relevant for the purposes of determination of due date of deposit under the respective statute. The accrual of liability towards payment of salary without actual disbursement would not fasten obligation for deposits of employees contribution in the labour Acts per se. as observed by the co-ordinate bench in Kanoi Paper and Industries Ltd. vs. ACIT (2002) 75 TTJ 448 (Call). This aspect has not been found to be examined by the Assessing Officer or CIT (A). Hence without expressing any opinion on merits on this aspect, we deem it expedient to restore the matter to the file of designated AO. It shall be open to the assessee to place factual matrix before the AO and take such plea for evaluation of the AO. The AO shall examine this aspect and fresh order in accordance with law after giving proper opportunity.\" 6. We find similar view has been taken by the co-ordinate benches in the cases of B. L. Kashyap & Sons Ltd. (supra) and VVDN Technologies Pvt. Ltd. (supra). The Id. Counsel submits that in view of these decisions the matter may be restored to the Assessing Officer to ascertain the due date for remittance of the PF/ESI contributions of employees. Considering the decisions of the co- ordinate benches referred to above we restore this issue to the file of the Assessing Officer to decide in the light of the observations made by the Tribunal in the case of Kanoi Paper & Industries Ltd. Vs. ACIT (supra). Needless to say that the Assessing Officer shall provide adequate opportunity of being heard to the assessee and the assessee is at liberty to provide all the necessary information in support of its contention.” 7 | P a g e 11. Thus, respectfully following the above precedent, we remit back the issues to the file of the AO to examine and decide the same in view of the observations of the Coordinate Bench, as referred above. 12. In the result, both the appeals filed by the assessee are allowed for statistical purposes. Order pronounced in the open court on 07.05.2025. Sd/- (SUDHIR PAREEK) Sd/- (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER SRBHATNAGAR Copy forwarded to:- 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT Assistant Registrar "