Employee’s Contribution To EPF Paid Beyond Due Date Cannot Be Disallowed: ITAT

The Income Tax Appellate Tribunal (ITAT), Chennai Bench ruled that the assessing officer erred in confirming disallowances towards employees’ contribution to PF and ESI.

The assessee company, M/s. Doosan Power Systems India Pvt. Ltd. incorporated in the year 2006 is a wholly-owned subsidiary of DHICL. It is engaged in the business of providing engineering design and related services to its overseas group companies. The assessee has been established as a Software Technology Park (STP) in India. Under the project segment, the company is engaged in the business of building, installation, and maintenance engineering plants with a specialization in thermal and coal power plants. Under the Engineering Design Services ( EDS) segment, the company is engaged in rendering engineering design, drawings, and consultancy services in relation to power projects executed by its AEs.

The Assessing Officer has disallowed employees contribution towards PF & ESI on the ground that the same has been remitted beyond the due date specified under respective Acts.

The issue raised was in respect of the employees contribution to PF & ESI.

The assessee at the time of hearing submitted that the issue is squarely covered by the decision of Hon’ble Supreme Court in the case of CIT Vs. Vinay Cements Ltd. and also the decision of Madras High Court in the case of CIT Vs. M/s.Industrial Security Intelligence India Pvt. Ltd.

The department, on the other hand, fairly accepted that the issue is covered in favour of the assessee by the decision of Hon’ble Supreme Court. Further, as a matter of fact, she has strongly supported the order of the Assessing Officer.

The coram of V. Durga Rao and G.Manjunatha held that employees contribution to PF and ESI is deductible, even if such payment is remitted beyond due date specified under respective Acts, but made on or before due date of furnishing return of income filed under section 139(1) of the Act. Therefore, the ITAT held that Assessing Officer as well as DRP erred in confirming disallowances towards employees contribution to PF & ESI. Hence, the tribunal directed the Assessing Officer to delete addition made towards disallowance of employees contribution to PF and ESI.

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