ITAT deletes disallowance made by AO on account of delayed payment of contribution to PF, ESI and Professional Tax [Read Order]

ITAT- AO - PF - ESI - Professional Tax - Taxscan

The Income Tax Appellate Tribunal (ITAT), Delhi Bench deleted the disallowance made by AO on account of delayed payment of contribution to Provident Fund, Employees’ State Insurance and Professional Tax.

The assessee, Planman HR (P) Ltd. is a company engaged in the business of human resources development. It filed its return of income declaring loss of Rs.75,71,378/-. During the course of assessment proceedings, the AO observed that the assessee company has claimed expenses on account of interest on late payment of service tax of Rs.54,31,041/-. According to the AO, such interest on late payment of service tax cannot be allowed as a deduction. Rejecting the various explanations given by the assessee, the AO made addition of the same to the total income of the assessee.

The CIT(A) deleted the disallowance holding that the interest on late payment of service tax is compensatory in nature in view of the decision of the Delhi Bench of the Tribunal in the case of DCIT vs. Messee Dusseldorf India (P) Ltd. (2010) 129 TTJ 81 T (Del).

However, the Revenue heavily relied on the order of the AO.

The coram of Accountant Member, R.K.Panda and Judicial Member, Suchitra Kamble found that the AO, in the instant case, made addition of Rs.80,90,53,240/- on account of late payment of ESI and PF and professional tax on the ground that the assessee has violated the provisions of section 36(1)(va) r.w.s. 2(24)(x) of the Income Tax Act.

The ITAT found that the CIT(A) deleted the addition, the reasons of which have already been reproduced in the preceding paragraph and the Tribunal did not find any infirmity in the order of the CIT(A) on this issue. The Delhi High Court in assessee’s own case for the immediately preceding assessment year, has dismissed the appeal filed by the Revenue.

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