ESI EPF Deduction allowed if paid before due date of Filing Income Tax Return

The facts of the case shows that the assessee made a company engaged in the business of transportation of solid waste management. For Assessment Year 2017-18, it filed its return of income at Rs.4,38,53,460/-. The above return was processed and the order of intimation under section 143(1) of the income tax Act, 1961 (the Act) was passed on 18th December, 2018, by Central Processing Centre, Bangalore disallowing the employees contribution of Rs.2,94,92,315/- under section 36 (1) (va) of the Act due to late remittance.

The assessee preferred before the National Faceless Centre, wherein the above disallowance was confirmed. The learned CIT(A) referred to the relevant statutory provisions and CBDT circular no. 22 of 2015 dated 17th December, 2015, and also the amendment by the Finance Act, 2021, which clarified the above position.

Further, the decision of the Hon’ble Kerala High Court in case of CIT vs. M/s. Merchem ltd. in ITA No. 402 of 2009 dated 29 January 2010 was also followed. Hence, the disallowance made by CPC was confirmed by the learned CIT (A).

ITAT held the appeal in favour of the assessee and it reversed the orders of the lower authorities and direct the learned Assessing Officer to delete the disallowance of late deposit of employees’ contribution of provident fund as same has been deposited before the due date of filing of return of income.

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