Recently, the ITAT Delhi Deleted an order holding Employees’ Provident Fund Organisation (EPFO) at fault for failing to deduct tax at source in respect of settlement or withdrawals of accumulated balances of members.
The bench was deciding an appeal filed by the EPFO against the income tax authorities challenging the income tax demand, on ground of non-deduction of tax at source.
Rule 9 and 10 of Part A of Schedule IV of the Income Tax Act deal with tax on accumulated balance and deduction at source of tax payable on accumulated balance respectively. The assessee contended that any payment received under the scheme of EPF Act, 1952 is covered under Section 10(11) of the Income Tax Act.
Accepting the contentions of the assessee, the bench observed that “we find considerable force in the submission of counsel for the EPFO that Assessing Officer (AO) was not justified in estimating 50 per cent of the withdrawals as being employees who had rendered less than five years of continuous service thereby coming within the ambit of Rule 9 and 10 of Part A of Schedule IV of the Income Tax Act”.
Section 10(11) of the Income Tax Act deals with the Employer’s contribution, which were exempted from deduction as it is not considered as employees income. “We, therefore, set aside the order of CIT(A) and restore the matter to the file of AO with a direction that assessee (EPFO) will furnish the required details before the AO in respect of withdrawals made by employees within five years of rendering continuous service with his employer.” It said.
Read the full text of the Order below.
