Prime Comfort Porducts Pvt. Ltd., New Delhi V. ACIT, Circle-19(1), New Delhi

ITA 530/DEL/2023

AI Insights

The case involves Prime Comfort Products Pvt. Ltd., which appealed against the order of the National Faceless Appeal Centre (NFAC) concerning the disallowance of a deduction of Rs. 21,13,137 for delayed payment of employees' contributions to Provident Fund (PF) and Employees State Insurance (ESI). The Centralized Processing Centre (CPC) initially disallowed the deduction, which was upheld by the first appellate authority. The tribunal considered various legal provisions and precedents, ultimately deciding that the disallowance could be contested under Section 143(1) of the Income Tax Act, and the deduction might be allowable if the payments were made within the prescribed deadlines.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300776 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-04-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 26-02-2023
• Other Referred Cases: M/s. P.R. Packaging Services \\u2013 ITA No.2376/Mum/2022, BBG Metal Syndicate Pvt. Ltd. vs DCIT \\u2013 ITA No.112/CTK/2022, Checkmate Services P. Ltd. \\u2013 CIT-I [2022] 143 taxmann.com 178 (SC), Savleen Kour Vs. ITO \\u2013 ITA No.2249/Del/2022
• Laws Referred To: Section 36(1)(va) of the Income Tax Act, Section 2(24)(x) of the Income Tax Act, Section 143(1) of the Income Tax Act, Section 37(1) of the Income Tax Act
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Section: 37(1); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘SMC’ NEW DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No. 530/Del/2023 Assessment Year: 2020-21 Prime Comfort Products Pvt. Ltd., C/o. M/s. Raj Kumar & Associates, L- 7A(LGF), South Extension Part-II, New Delhi-1100 49 Vs. ACIT, Circle 19(1), New Delhi. PAN :AAFCP2306Q (Appellant) (Respondent) ORDER This is an appeal by the assessee against order dated 06.02.2023 passed by National Faceless Appeal Centre (NFAC) for the assessment year 2020-21. 2. The dispute in the present appeal is confined to disallowance of deduction claimed of Rs.21,13,137, being delayed payment of Appellant by Shri Raj Kumar, CA Respondent by Shri Om Parkash, Sr. DR Date of hearing 10.04.2023 Date of pronouncement 26.04.2023 2 ITA No.530/Del./2023 Employees Contribution to Provident Fund (PF) and Employees State Insurance (ESI). 3. Briefly, the facts are, while processing the return of income filed by the assessee for the impugned assessment year, the Centralized Processing Centre (CPC) noticed that, though, the assessee had not deposited employees contribution to PF/ESI, however, the assessee had claimed deduction of such payment. 4. Being of the view that the deduction claimed is not allowable under Section 36(1)(va) read with section 2(24)(x) of the Act, the CPC made an adjustment to the income of the assessee by disallowing the deduction claimed. Though, assessee contested the aforesaid disallowance by filing an appeal before the first appellate authority. However, the first appellate authority upheld the disallowance. 5. Before us, learned counsel appearing for the assessee submitted that the disallowance cannot be made by way of adjustment under Section 143(1) of the Act as it is not covered under Section 143(1)(a)(iv) of the Act. In this context, he relied upon a decision of the Co-ordinate Bench in case of M/s. P.R. Packaging Services – ITA No.2376/Mum/2022 dated 07.12.2022. He submitted, since, the 3 ITA No.530/Del./2023 employees contribution to PF and ESI is not in the nature of expenditure, the auditor has not reported it as disallowable expenditure in the tax audit report. 6. Without prejudice, he submitted, the deduction is otherwise allowable under Section 37(1) of the Act. For such proposition, he relied upon the decision of Co-ordinate Bench in case of BBG Metal Syndicate Pvt. Ltd. vs DCIT – ITA No.112/CTK/2022 dated 17.11.2022. Finally, he submitted, the due date for payment of employees contribution to PF and ESI should be calculated with reference to the due date for repayment of salary. 7. I have considered rival submissions and perused material on record. 8. In so far as assessee’s claim that deduction on account of payment of employees contribution to PF and ESI has to be allowed in case it is paid before the due date of filing of return, I am unable to accept such contention of the assessee in view of the binding ratio laid down by the Hon'ble Supreme Court in case of Checkmate Services P. Ltd. – CIT-I [2022] 143 taxmann.com 178 (SC), wherein, it has been held that unless employees contribution to PF and ESI are deposited 4 ITA No.530/Del./2023 within the due date prescribed under the relevant statute governing such payments, the amount in question has to be treated as income of the assessee in terms of section 36(1)(va) read with section 2(24)(x) of the Act. Therefore, the disallowance has to be upheld. In so far as the contention of learned counsel for the assessee that such adjustment is not contemplated under Section 143(1)(a) (iv) of the Act, I am unable to accept the contention in view of the decision of the Co-ordinate Bench, in case of Savleen Kour Vs. ITO – ITA No.2249/Del/2022 dated 09.01.2023. 9. As regards, the contention of the assessee that the deduction is otherwise allowable under Section 37(1) of the Act, I do not find merit in such submission. In case of BBG Metal Syndicate Pvt. Ltd. Vs. DCIT–(supra), the Co-ordinate Bench while considering such submission has not expressed any opinion and has simply restored the issue to the file of the Assessing Officer. Therefore, the decision cited cannot be regarded to be a precedent for laying down the ratio that the payment made can be allowed as deduction under Section 37(1) of the Act. In so far as, learned counsel’s contention that the due date should be calculated with reference to the due date for payment of salary, I 5 ITA No.530/Del./2023 direct the Assessing Officer to factually verify the date of payment of employees contribution to PF and ESI and in case they are found to have been paid within the due date prescribed under the PF and ESI Act or within the grace period, if any, under these Acts, then, deduction can be allowed 10. In the result, the appeal is allowed for statistical purposes. Order pronounced in the open court on 26th April, 2023. Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER Dated: 26 th April, 2023. Mohan Lal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi