Belated Deposit of PF And ESI Contribution Of Employees Cannot Be Added To Employer’s Taxable Income: ITAT Delhi

[16 March 2022] The Single Bench of Delhi ITAT, consisting of judicial member Kul Bharat, has ruled that belated payment of employees’ contribution to the Provident Fund and State Insurance Scheme cannot be added to the employer’s taxable income as deemed income, if the said deposits are made before the due date of filing the income tax return under the Income Tax Act, 1961.
The ITAT observed that the Delhi High Court in the case of CIT v. AIMIL Limited had held that in view of the principle laid down by the Supreme Court in the case of CIT v. Vinay Cement (2007) an assessee could get the benefit of deduction under the Income Tax Act if the actual payment of employees’ contribution to PF and ESI was made before the income tax return was filed under the Act. Also, the ITAT observed that in the case of PCIT v. Pro Interactive Services (India) Pvt. Ltd. (2018) the Delhi High Court had held that the legislative intent under the Income Tax Act was to ensure that the amount paid as employees’ contribution was allowed as expenditure under the Act when the said payment was actually made. The Delhi High Court had ruled in that case that the legislative intent and objective under the Income Tax Act was not to treat the belated payment of employees’ contribution to PF and ESI as deemed income of the employer under Section 2(24)(x) of the Act.