Disallowance can’t be made on Late deposit of ESI and EPF, if deposited before due date of Income Tax Return: ITAT [Read Order]

ESI - EPF - ITR - ITAT - Taxscan

The Income Tax Appellate Tribunal (ITAT), Agra Bench ruled that the disallowance can not be made on the Late deposit of Employees’ State Insurance (ESI) and Employees’ Provident Fund (EPF) if deposited before the due date of filing Income Tax Return (ITR).

The Assessee, Mahadev Cold Storage is engaged in the business of storage of potatoes in Cold storage and filed its return of Inctim, for AY 2018-19; declaring a net taxable income of Rs1167861/- having the income from Profit and Gains from Business and Profession, however, the, assessing officer DCIT while processing the return of Income has disallowed the expenditure, of Employees contribution to ESI and PF not credited to Employees account on or before the due date (Section 36(1) (va) being Rs. 254295 and having a tax impact of Rs. 81807.

The Assessing Officer made an addition of Rs.15,97,250/-on processing u/s. 143(1) on account of late deposit of employee contribution towards ESIC/EPF on account of late deposit of employee contribution towards ESIC/EPF. In view of the provisions of section 2(24)(x) read with section 36(I)(va) & section 43B of the Income Tax Act,1961, being a late deposit of employees contribution towards ESIC/EPF which has been duly deposited on or before the due date of filing of return of income as per the provisions under section 139(I) of The Income Tax Act 1961, employee contribution towards ESI and PF paid after the due date of the respective statue but before the filing of Income Tax return due date as per section 139 (1) are allowable expenses and cannot be disallowed under section 36 (l)(va). But the Assessing Officer without appreciating the legal position and facts of the case made the addition and the assessee preferred an appeal before the CIT (A) against the said order. And then the order has been passed by CIT(A), National Faceless Appeal Centre, Delhi. The CIT (A) NFAC also confirmed the addition of Rs.15,97,250/- and passed the order against the Assessee.

The assessee had submitted that the tax effect in the present case is well below the limit prescribed for filing the appeal before the High Court or before the Supreme Court. It was submitted that the reliance on the Non-jurisdictional High Court judgment had resulted in burdening the litigant unnecessarily, as no appeal can be filed before the High Court against the order of the tribunal, in case the appeal of the assessee is allowed. The net result would be the same. It was submitted that the doctrine of precedent requires this tribunal to follow the decision of the jurisdictional High Court. He had also drawn our attention to the newly inserted provision of the faceless assessment and faceless appeal.

The Coram of Accountant Member Dr. Mitha Lal Meena and Judicial Member Lalit Kumar while relying on the Allahabad High Court in the case of Sagun Foundry (P) Ltd. Vs CIT held to be binding on NFAC AND Income Tax, ruled that no disallowance on late deposit of ESI and PF in section 143(1)(a) if deposited before the due date of return u/s 139(1).

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