Consider Next Working Day for ESIC/EPF Contribution Deposit When Due Date Expires on Sunday or Holiday

In the case of G.D. Foods and Manufacturing (India) (P) Ltd. v. Assistant Director of Income-tax (Central Circle) [2023] 152 323 (ITAT Delhi), the assessee had made a payment towards the employee’s contribution for EPF and ESI. However, the Assessing Officer disallowed an amount of Rs 19,37,001/- under section 36(1)(va) of the Act due to the late payment of employee contributions beyond the specified due date in the respective Acts.

It was observed that the due date for depositing the contributions of ESIC and EPF coincided with a Sunday and a gazetted holiday. The assessee made the payment on the very next working day following the holiday. Considering the circumstances where the due date fell on a non-working day, the delay of one day in payment deserved to be condoned as per Section 10 of the General Clauses Act.

Furthermore, it was noted that the assessee had no intention of failing to deposit the contributions of ESI and EPF within the required time. The fact that the payment was made promptly on the next working day after the holiday demonstrated the bona fide intention of the assessee. Thus, it was argued that the authorities erred in disallowing the deposit made with a one-day delay when the due date fell on either a Sunday or a gazetted holiday.

In light of these arguments, it was concluded that the delay in depositing the contributions should be considered as a valid exception. The assessee’s actions indicated good faith and compliance with the statutory requirements. Therefore, the disallowance made by the authorities was deemed incorrect.

This decision supports the assessee’s contention that when the due date for depositing ESIC and EPF contributions falls on a Sunday or a gazetted holiday, the next working day should be considered for calculating the deadline. This interpretation ensures that businesses are not penalized for circumstances beyond their control, such as non-working days specified by the government.

It is essential for taxpayers to be aware of this ruling and take appropriate measures to ensure timely compliance with their obligations. By considering the next working day when the due date coincides with a holiday, businesses can avoid unnecessary penalties or disallowances.

Overall, the G.D. Foods and Manufacturing (India) (P) Ltd. case highlights the importance of interpreting tax laws in a practical and reasonable manner, taking into account the specific circumstances faced by taxpayers. It provides reassurance that genuine efforts made by taxpayers to comply with their obligations will be recognized and given due consideration by the authorities.

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