Deduction of PF and ESI paid after the due date due to national holiday: Report

The Delhi High Court has determined that payments for Employees' Provident Fund (EPF) and Employee State Insurance (ESI) made after the deadline because of a National Holiday remain eligible for the deduction, reported taxscan. Justice Rajiv Shakdher and Justice Girish Kathpalia, presiding over the bench, noted that because the due date coincided with a national holiday, the respondent or assessee had no choice but to deposit on the subsequent working day.

The respondent/assessee stated that the employee's contribution to the provident fund was deposited on August 16, 2018, which was the working day following a national holiday, namely, August 15, 2018. The deduction being sought should be granted because the respondent/assessee initiated the process of depositing the amount on August 14, 2018. The Assessing Officer (AO) had denied the deduction because the due date was August 15, 2018.

The assessee appealed with the tribunal, and the tribunal concluded that even if the contributions by employees to the provident fund and insurance were deposited after the deadline stipulated in the relevant statute, they could still be considered as allowable deductions for the employer or assessee.

The department argued that the respondent/assessee had deposited ₹1,56,12,404 for the employee's contribution to the provident fund on August 16, 2018. The AO correctly denied the deduction, citing the due date of August 15, 2018.

The court rejected the department's appeal and ruled that the contribution to the EPF was eligible for the allowance, as it was deposited promptly following a national holiday.