Abhishek Kumar Garg, New Delhi V. DCIT Circle-26(2), New Delhi

ITA 1700/DEL/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9599 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 14-10-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 2; 43B; 250; 139(1)

Judgement Text

1 ITA no. 1700/Del/2020 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”: NEW DELHI BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER ITA No. 1700/DEL/2020 Asstt. Yr: _2017-18 Abhishek Kumar Garg, D-180, Okhla Industrial Area, Phase-I, New Delhi-110020 PAN- AAFCV2287C Vs DCIT, CPC, Circle-26(2), New Delhi. APPELLANT RESPONDENT Assessee represented by None Department represented by Sh. Kanav Bali, Sr. DR Date of hearing 28.09.2022 Date of pronouncement 30.09.2022 O R D E R PER N.K. CHOUDHRY, JM: The assessee has preferred the instant appeal against the order dated 28.08.2020, passed by the Ld. Commissioner of Income tax (Appeals)-9, New Delhi, (in short “Ld. Commissioner”) u/s 250 of the Income Tax Act, 1961 (in short “the Act”), pertaining to the assessment year 2017-18. 2 ITA no. 1700/Del/2020 2. The assessee has raised as many as five grounds to challenge the disallowance of Rs. 54,95,529/-, made by the Assessing Officer u/s 36(1)(va) of the Act, on account of deposit of employees’ contribution qua PF/ESI [Rs. 48,46,565/- towards PF and Rs. 6,48,964/- towards ESI], after the due date as prescribed in the relevant Acts, however, before the due date of filing of return of income u/s 139(1) of the Act. The said disallowance has been affirmed by the Ld. Commissioner by relying upon the judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Bharat Hotels Ltd. (2019) 410 ITR 417 (Del.) and the order of the ITAT in the case of Eagle Trans Shipping & logistics (India)(P) Limited Vs. ACIT (2019) taxmann.com 426. 3. None put in appearance on behalf of the assessee at the hearing, despite the counsel of the assessee being informed by phone and through e.mail. Under these circumstances we proceed to dispose of the appeal, ex parte, qua the assessee, on merit. 4. Heard the learned DR and perused the material available on record. The Ld. DR supported the orders of authorities below and vehemently relied on the amendments brought in by the Finance Act, 2021 by inserting Explanation 2 in Section 36(1)(va) and 5 in section 43B of the Act of the Act. 3 ITA no. 1700/Del/2020 4.1 There is no dispute that in the instant case the assessee has deposited the employee’s contribution towards PF/ESI before the due date of filing of the return of income u/s 139(1) of the Act. Admittedly there are plethora of judgments in favour of the Assessee’s stand and that of the Revenue. The controversy with regard to divergent views of different High Courts, has been settled by the Hon'ble Apex Court in the case of CIT Vs. M/s. Vegetables Products Ltd. (88 ITR 192) by laying down the dictum ‘if two reasonable constructions of a taxing provision are possible that construction which favours the Assessee must be adopted.’ 4.2 The Hon’ble Punjab and Haryana High Court in the case of CIT Vs. M/s Hemla Embroidery Mills (P) Ltd. (366 ITR 167) (P&H HC) and in the case of CIT Vs. M/s Mark Auto Industries Ltd. (358 ITR 43) (P&H HC) has clearly held that the Assessee is entitled to claim deduction of employee’s share of ESI & PF u/s 43B of the Act, if the same has been deposited prior to the filing of return of income u/s.139(1) of the Act. 4.3. The Hon’ble Jurisdictional High Court of Delhi, as well, in the case of CIT Vs. AIMIL Ltd. 321 ITR 508, affirmed the action of the ITAT in deleting the addition relating to employees’ contribution deposited before the due date of filing of return, in respect of Provident Fund and ESI made by the Assessing Officer under Section 36(1)(va) of the Income Tax Act, 1961. 4 ITA no. 1700/Del/2020 4.4. The Jurisdictional High Court again in the case of PCIT vs., Pro Interactive Service (India) Pvt. Ltd., vide ITA.No.983/2018 order dated 10.09.2018 while following the decision in the case of CIT Versus AIMIL Ltd., (supra), has held that legislative intent was/is to ensure that the amount paid is allowed as expenditure only when payment is actually made. It was further held that it was not the legislative intent and objective to treat belated payment of Employees’ Provident Fund & Employees’ State Insurance Scheme as deemed income of the employer under section 2(24)(x) of the I.T. Act, 1961. 4.5. From the aforesaid Judgments of the Hon’ble High Courts, it is clear that the Hon’ble Courts have not drawn any distinction between the employee’s and employer’s share qua PF & ESI contributions. 4.6 As regards amendments brought in by the Finance Act, 2021, by inserting the Explanation 2 in Section 36(1)(va) and 5 in section 43B of the Act of the Act, the learned DR could not controvert the fact that various benches of the ITAT including Hyderabad Bench in the case of Value Momentum Software Services Pvt. Ltd. (ITA No.2197/Hyd/2017 decided on 19.05.2021), have clearly held that the amendment shall be applicable from 1st April, 2021 onwards . It is also relevant to note that the CBDT has also issued Memorandum of Explanation qua applicability of the amended provisions of Sections 36(1)(va) 5 ITA no. 1700/Del/2020 & 43B of the Act w.e.f. 1st April, 2021 and Assessment Year 2021-22 onwards, hence there is no doubt qua applicability of the amended provisions referred above, prospectively. 4.7 In view of the above discussions and respectfully following the ratio of decision of the Hon’ble Apex Court in the case of CIT Vs. M/s. Vegetables Products Ltd. (supra), the disallowances to the tune of Rs. 54,95,529/- on account of employees’ share of PF/ESI, made by the AO and affirmed by the Ld. Commissioner is not sustainable, hence, the same stands deleted. 5. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 30/9/22. Sd/- Sd/- (ANIL CHATURVEDI) (N.K. CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI