Delayed PF/ESI Employee Contributions Cannot be Allowed for Deduction Even if Paid Before Return Filing: ITAT

The Income Tax Appellate Tribunal (ITAT), Ahmedabad, upheld a Supreme Court ruling that said that the employees’ contribution to PF/ESI paid after the due date under the respective act is not allowable as a deduction, even if paid before filing the Income Tax Return (ITR).

There were several grounds raised by the assessee before the ITAT. The assessee company, Rasna Pvt. Ltd., had earned dividends on shares and mutual funds and interest from bonds. The company had already disallowed Rs 6,81,036 in its tax return. However, the assessing officer calculated a much higher disallowance of Rs 33,81,941 under section 14A read with rule 8D.

The Tribunal noted that in earlier years, similar cases of the same company were decided by disallowing a lump sum amount of Rs 7 lakhs after considering the nature of investments held by the assessee in bonds and securities. Therefore, citing the previous cases, the Tribunal decided on a total disallowance of Rs 13 lakh after considering that the company had already disallowed some amount, and only the remaining amount would be added.

Another issue was regarding the delayed PF and ESI contributions. The company deposited employees’ PF and ESI contributions after the due date but before filing the income tax return.

The Tribunal referred to a Supreme Court ruling that clearly states that if such payments are made after the due date under PF/ESI laws, they cannot be allowed as a deduction, even if they were paid before filing the return. So, the Tribunal upheld this disallowance.

There was another issue regarding a typo in depreciation. The Tribunal corrected it and allowed the claim.