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Mr. Vansh Jain, 58, Friends Colony East, New Delhi Vs. The DCIT, CPC [Assessing Officer, Ward-28(1), Civic Centre, New Delhi
October, 13th 2021

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES “SMC-1” : DELHI
[THROUGH VIDEO CONFERENCING]

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER

ITA.No.1853/Del./2020
Assessment Year 2018-2019

Mr. Vansh Jain, The DCIT, CPC [Assessing
58, Friends Colony East,
New Delhi – 110 025. Officer, Ward-28(1), Civic
PAN AZAPJ3828L
vs. Centre, New Delhi]
(Appellant) PIN 110 002.

(Respondent)

For Assessee : Shri Nem Singh, Advocate.
For Revenue : Shri Rajesh Kumar Dhanesta, Sr. DR

Date of Hearing : 29.07.2021
Date of Pronouncement : 13.10.2021

ORDER

This appeal filed by the Assessee is directed
against the Order dated 07.09.2020 of the Ld. CIT(A)-10,
New Delhi, relating to the A.Y. 2018-2019.

2. Although a number of grounds have been raised

by the assessee, however, these all relate to the order of the

Ld. CIT(A) in confirming the disallowance of Rs.3,26,330/-

made by the A.O, CPC passed order under section
2

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

143(1)/154 in respect of delayed payment of employees’

contribution to PF & ESI.

3. Facts of the case in brief are that the assessee is

an individual and deals in the business of export of ready-

made garments and related job works for garment export

manufacturer. He filed his return of income on 31.10.2018

declaring total income of Rs.20,17,920/-. The CPC

processed the return vide intimation under section 143(1)

dated 02.05.2019 and computed the income at

Rs.23,44,250/-, wherein adjustment for a sum of

Rs.3,26,330/- was made on account of delayed payment of

employees’ contribution to PF & ESI. The assessee filed

rectification application under section 154 stating that

contribution to the PF & ESI has already been paid into the

relevant fund account well before the due date specified for

furnishing of return of income under sub-section (1) of

section 139 of the I.T. Act, 1961, and, therefore, no

adjustment is required to be made under section 36(l)(va)

read with section 43B of the I.T. Act, 1961. Further as per

the tax audit report, there is no adverse comment or opinion

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

of the Auditors and, therefore, the CPC has wrongly invoked

the provisions of section 143(1)(a)(iv) of the I.T. Act, 1961. It

is a mistake apparent from the record, therefore, the same

should be rectified. But the DCIT, CPC rejected the claim of

assessee and dismissed the 154 rectification application.

3.1. Aggrieved by order of the DCIT, CPC, the assessee

filed an appeal before the Ld. CIT(A). Before the Ld. CIT(A) it

was submitted that assessee has deposited the employees’

contribution to PF & ESI amounting to Rs.3,26,329/- before

the due date of filing of the income tax return. Relying on

the decision of the Hon’ble Delhi High Court in the case of

CIT vs., AIMIL Ltd., [2010] 321 ITR 508 (Del.) and various

other decisions, it was argued that the disallowance made

by the CPC is not in accordance with Law.

3.2. However, the Ld. CIT(A) was not satisfied with the

arguments advanced by the assessee, Relying on various

decisions including the decision of Hon’ble Delhi High Court

in the case of CIT vs., M/s. Bharat Hotels Ltd., [2019] 410

ITR 417 (Del.) he held that the assessee is not entitled to

deduction under section 36(1)(va) of the I.T. Act, 1961, in
4

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

respect of delayed payment of employees’ contribution
towards PF & ESI before the due date of filing of the income
tax return amounting to Rs.3,26,329/-. He further held that
assessee is keeping government money in his possession
which is against the spirit of the Law. Further there will be
no sanctity for any due date if the same is allowed till any
other date. He accordingly dismissed the appeal filed by the
assessee.

4. Aggrieved with such order of the Ld. CIT(A), the

assessee is in appeal before the Tribunal.

5. Learned Counsel for the Assessee submitted that

in the Finance Bill 2021, amendments were made in

Sections 36 and 43B vide Clauses 8 and 9 and in the

Memorandum of Explanation according to which the

amendments will take effect from 01.04.2021 and will

accordingly apply to A.Y. 2021-2022 and subsequent

assessment years. He submitted that Section 1 (2)(a) of

Finance Act, 2021 specifically mentions that Sections 2 to

88 shall come into force on the First Day of April, 2021.

However, as per Finance Act, 2021, Section 9 relates to
5

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

amendment to Section 36 and Section 11 relates to
amendment to Section 43B. Referring to various decisions,
he submitted that after considering the various decisions
relied on by the Ld. CIT-DR, the Coordinate Benches of the
Tribunal are consistently taking the view that employees’
contribution to PF & ESI, if paid before the due date of filing
of the income tax return under section 139(1), is an
allowable deduction and no disallowance can be made.

1. Order of the ITAT, Hyderabad in the case of
Crescent Roadways Pvt. Ltd., vs., DCIT vide
ITA.No.1952/ Hyd/2018 dated 01.07.2021.

2. Order of the ITAT, Delhi in the case of DCIT vs.,
Dee Development Engineers Ltd., vide
ITA.No.4959/Del./2016 dated 08.04.2021.

3. Order of the ITAT, Delhi in the case of DCIT vs.,
Planman HR (P) Ltd., vide ITA.No.5152/
Del./2017 dated 15.07.2021.

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

4. Order of the ITAT, Chennai in the case of DCIT

vs., Talenpro India HR Pvt. Ltd., vide ITA.No.265/

Chennai/2019 dated 09.04.2021.

5. Order of the ITAT, Agra in the case of Mahadev
Cold Storage vs., Jurisdiction Assessing Officer
vide I.T.A. Nos. 20 & 21/Agra/2021 dated
14.06.2021.

6. Order of the ITAT, Chennai in the case of DCIT
vs., Repco Home Finance Pvt. Ltd., reported in
[2020] 183 ITD 782 ITAT-Chennai.

6. The Ld. D.R. on the other hand strongly

supported the order of the Ld. CIT(A) and submitted that

since the assessee has not made the deposits on account of

employees’ contribution to PF & ESI before the specified

dates as mentioned in the Statute, therefore, the Ld. CIT(A)

was fully justified in sustaining the addition made by the

CPC. He submitted that there are various decisions in

favour of the Revenue where the Honourable High Courts

have held that the Amendment by Finance Act, 2015 in
7

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

Section 43B is restricted only in respect of employers
contribution to PF & ESI and if the same is paid on or
before the due date of filing of the income tax return under
section 139(1), the same is an allowable deduction under
section 43B of the I.T. Act, 1961. However, the same
amendment would not be applicable for the belated
payment to employees’ contribution to PF & ESI. He
submitted that since the assessee has received the money
by taking it from the salary of the employees and kept the
same without making payment to the Government Account,
the concession given in Section 43B is not available with
respect to employees’ contribution. Referring to the
amendments in the provisions of Section 43B as well as
36(1)(va), he submitted that the Explanation-2 inserted by
Finance Act, 2021 clarifies that the definition of “Income”
as provided in Section 2(24)(x) remains unchanged and
provision of Section 43B does not apply and deemed to
never have been applied for the purpose of determining the
due date of payment of employees’ contribution to PF & ESI.
8

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

He accordingly submitted that the grounds raised by the

assessee should be dismissed.

7. I have considered the rival arguments made by

both the sides, perused the orders of the A.O. and the Ld.

CIT(A) and the paper book filed on behalf of the assessee. I

have also considered the various decisions cited before me. I

find the A.O. CPC in the instant case has computed the

income of the assessee at Rs.23,44,250/- as against the

returned income of Rs.20,17,920/- by making an

adjustment for a sum of Rs.3,26,330/- on account of

belated payment to employees’ contribution towards PF &

ESI by invoking the provisions of Section 143(1)(a)(iv) of the

I.T. Act, 1961. I find the rectification application filed by the

assessee under section 154 was dismissed by the DCIT,

CPC and on further appeal, the Ld. CIT(A) dismissed the

appeal filed by the assessee. It is the submission of the

Learned Counsel for the Assessee that payment for

employees’ contribution towards PF & ESI have been made

before the due date of filing of the income tax return under

section 139(1), therefore, in view of the consistent decisions
9

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

of the Coordinate Benches of the Tribunal, the same does
not call for any disallowance. It is also his submission that
after the decision of the Hon’ble Delhi High Court in the
case of CIT vs., M/s. Bharat Hotels Ltd., (supra), the Hon’ble
Delhi High Court in the case of PCIT vs., Pro Interactive
Service (India) Pvt. Ltd., vide ITA.No.983/2018 order dated
10.09.2018 has held that no disallowance is called for
where the assessee had paid the employees’ contribution to
PF & ESI before the due date of furnishing of return of
income under section 139(1) of the I.T. Act, 1961.

7.1. I find the Hon’ble Delhi High Court in the case of

Pro Interaction Service (India) Pvt. Ltd., (supra), following

the decision in the case of CIT vs., 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.
10

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

7.2. I find the Coordinate Bench of the Tribunal in the

case of Insta Exhibitions Pvt. Ltd., New Delhi vs., Addl. CIT,

Special Range-4, New Delhi vide ITA.No.6941/Del./2017

order dated 03.08.2021 while allowing such belated deposit

of employees’ contribution to PF & ESI as per the respective

Act, but, paid before the due date of filing of the income tax

return, deleted such disallowance by observing as under :

“8. We have carefully considered contentions of the
learned departmental representative and perused the
orders of the lower authorities. The facts shows that the
assessee has collected the sum of Rs. 12,16,260/-
being employee’s contribution under the provident fund
and with respect to ESI laws. The above contribution
was admittedly not deposited by the assessee within
the due date prescribed under the respective ESI and PF
statue however, same was deposited before the due
date of filing of return of income. Therefore, the ld AO as
well as the ld CIT(A) disallowed the same holding that
such contribution becomes the income of the assessee
under the provision of section 2(24)(x) of the Act and
11

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

thereafter if the same is deposit within the due date
prescribed under the respective laws then same is
allowable as deduction u/s 36(1)(va) of the Act.
Coordinate bench in case of DCIT Vs Dee Development
Engineers in ITA No. 4959/DEL/2016 ( A.Y 2011-12)
has held as Under:-

“7. We have heard both the parties and perused
all the relevant material available on record. As
regards Ground No. 1, the assessee company has
not deposited the employees’ contribution within
the due date which is prescribed under the said
statute i.e. Provident Fund and ESIC. This issue is
dealt by the Hon’ble Delhi High Court in case of
CIT vs. M/s Bharat Hotels Ltd. 410 ITR 417
wherein the issue is decided in favour of the
revenue, without considering the decision of the
Hon’ble Delhi High Court in case of CIT vs. AIMIL
Ltd.(2010) 321 ITR 508 (Del.). But the Ld. AR relied
upon the decision of the Hon’ble Delhi High Court
in case of Pr. CIT vs. Pro Interactive Service (India)
12

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

Pvt. Ltd. ITA No. 983/2018 pronounced on
10.09.2018 wherein the Hon’ble High Court
decided the issue in favour of the assessee relying
upon the judgment of AIMIL Ltd. (supra). The
Hon’ble Delhi High Court held that the legislative
intent was/is to ensure that the amount paid is
allowed as expenditure only when payment is
actually made. We do not think that the legislative
intent and objective is to treat belated payment of
Employee’s Provident Fund (EPD) and Employee’s
State Insurance Scheme (ESI) as deemed income of
the employer under Section 2(24)(x) of the Act. It is
settled law that when two judgments are available
giving different views then the judgment which is
in favour of the assessee shall apply as held in
case of Vegetable Products Ltd. 82 ITR 192 by the
Hon’ble Supreme Court. Hence, in light of the latest
decision in case of Pro Interactive Service (India)
Pvt. Ltd., the issue is covered in favour of the
assessee. Hence, Ground No. 1 is dismissed.”
13

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

7. Further with respect to the argument of the learned
departmental representative that amendment made
with finance act 2021 wherein explanation 1 is added
u/s 36 (1) (va) of the act with effect from 1 April 2021, is
applicable to the present case, we referred to the “Notes
on clauses” at the time of introduction of the finance bill
2021 which says as Under:-

“Clause 8 of the Bill seeks to amend section 36 of
the Income tax Act, relating to other deductions.
Sub-section (1) of the said section provides for
allowing of deductions provided for in the clauses
thereof for computing the income referred to in
section 28 of the said Act. Clause (va) of the said
sub-section provides for allowance of deduction for
any sum received by the assessee from any of his
employees to which the provisions of sub-clause (x)
of clause (24) of section 2 apply, if such sum is
credited by the assessee to the employee's account
in the relevant fund or funds on or before the due
date. Explanation to the said clause provides that
14

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

for the purposes of this clause, "due date" means
the date by which the assessee is required as an
employer to credit an employee's contribution to
the employee's account in the relevant fund under
any Act, rule, order or notification issued
thereunder or under any standing order, award,
contract of service or otherwise. It is proposed to
insert Explanation 2 to clause (va) of sub-section
(1) of the said section so as to clarify that the
provisions of section 43B shall not apply and shall
be deemed never to have been applied for the
purposes of determining the “due date” under the
said clause.

This amendment will take effect from 1st April,
2021 and will, accordingly, apply in relation to the
assessment year 2021- 2022 and subsequent
assessment years.”

Therefore it is apparent that the above amendment
do not apply to the assessment year 2014–15 in
this appeal.
15

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

8. In view of this we allow the solitary ground of
appeal raised by the assessee holding that the
addition/disallowance made by the learned assessing
officer of late deposit of employees contribution to the
provident fund and ESI, as it is deposited before the due
date of the filing of the return of an income but beyond
the due date prescribed Under the respective provident
fund and ESI laws is not sustainable in law.

9. In the result, appeal of the assessee is allowed.”

7.1. Since in the instant case the assessee admittedly

has deposited the employees’ contribution to PF & ESI

before the due date of filing of the income tax return,

therefore, respectfully following the decisions cited (supra), I

hold that the Ld. CIT(A) is not justified in sustaining the

adjustment made by the A.O-CPC of Rs.3,26,330/- on

account of belated payment of employees’ contribution to PF

& ESI. I, therefore, set aside the order of the Ld. CIT(A) and

direct the A.O. to delete the disallowance. The grounds

raised by the assessee are accordingly allowed.
16

ITA.No.1853/Del./2020
Mr. Vansh Jain, New Delhi.

8. In the result, appeal of the Assessee is allowed.

Order pronounced in the open Court on 13.10.2021.

Sd/-
(R.K. PANDA)
ACCOUNTANT MEMBER

Delhi, Dated 13th October, 2021

VBP/-

Copy to

1. The appellant
2. The respondent
3. CIT(A) concerned
4. CIT concerned
5. D.R. ITAT ‘SMC-1’ Bench, Delhi
6. Guard File.

// By Order //

Assistant Registrar : ITAT Delhi Benches :
Delhi.

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