Income Tax, Issue Update

Gdx Facility & Management Services Pvt Ltd vs Dy. CIT

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The issue here is levy of tax on disallowance of employees contribution to Provident Fund and ESI in dispute under section 36(1)(va) regarding the payment thereof which has been deposited beyond due date, but paid before the filing of the return of income by the assessee. The Hon’ble Delhi High Court and Hon’ble Bombay High Court after considering, analyzing and interpreting the decision in the case of Alom Extrusion has held that it will apply both to employers and employee contribution and if the same is deposited before the due date of filing of return of income u/s 139(1), the deduction shall be allowed, even if the same is deposited beyond the time stipulated as due date.

Thus, Section 36(1)(va) is read down by most of the Constitutional Courts including our Jurisdictional High Court (barring Hon’ble Gujarat High Court and Hon’ble Kerala High Court) to make it workable as otherwise the tax-payer will lose the deduction if the employee contribution is not deposited within due date as prescribed, although the said contribution stood deposited by employer belatedly before the due date for filing of return of income u/s 139(1).

The present appeal has already been adjudicated and decided in favour of the assessee by the Hon’ble Supreme Court of India; Hon’ble High Courts including the Hon’ble Jurisdictional High Court, as mentioned in the written submissions dated 22.09.2020 filed by the assessee, especially the decision of the Hon’ble Supreme Court of India in the case of Alom Extrusion Limited by referring its earlier decision in the case of CIT vs JH Gotla (1985) 156 ITR 323 and Hon’ble Jurisdictional High Court decision in the case of CIT vs. AIMIL Limited (2010) 188 Taxman 265 (Delhi HC) (Supra). Therefore, addition in dispute was deleted and appeal was allowed.

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