2021 (11) TMI 1068 - AT - Income Tax

Late payment of Provident Fund u/s 36(1) (va) r.w.s.2(24) - delay in depositing the employees contribution to Provident Fund by the employer assessee when seen with reference to due date of accrual of salary - HELD THAT - We observe that the decision of the Hon ble Gujarat High Court Gujarat State Road Transport Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT does not apply where the payment has been made on or before the due date. The deduction under s.36(1)(va) in such case is available without any fetters. It may be pertinent to observe that disallowance under s.43B r.w.s. 36(1)(va) of the Act in respect of non-payment of provident fund etc. within the due date is not intended to cover genuine and routine cases on late payment but only those where the employer has mis-utilized the funds collected from the assessee. The addition/disallowance under s.43B of the Act for such delay of bare one or two days in depositing the employees provident fund would thus be wholly disproportionate to the default committed, if any. Thus, seen from any angle, the addition/disallowance under s. 36(1)(va) r.w.s. 2(24)(x) of the Act is not justified in the instant case. Assessee appeal allowed.

Summary

Issues:
Single issue - Addition of Rs.33,95,734/- on account of late payment of Provident Fund under s.36(1)(va) of the Income Tax Act, 1961.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-7, Ahmedabad concerning AY 2014-15. The sole issue in the appeal was the addition of Rs.33,95,734/- due to late payment of Provident Fund under s.36(1)(va) of the Act. The CIT(A) relied on a previous decision of the Hon'ble Jurisdictional High Court and dismissed the appeal. Despite the absence of the assessee during the hearing, the matter was heard ex parte. The learned DR supported the CIT(A)'s order. The case records revealed that the assessee contested the addition related to belated payment of employees' PF contribution under s.36(1)(va) r.w.s.2(24) of the Act. The assessee argued that the delay was due to the delayed disbursement of salaries, not the actual payment date of PF contribution. The ITAT observed that if the payment was made on or before the due date, the deduction under s.36(1)(va) should be allowed without restrictions. The ITAT emphasized that the disallowance under s.43B r.w.s. 36(1)(va) is not meant for genuine delays but for cases of misutilization of funds by the employer. Therefore, the addition in this case was deemed unjustified, and the appeal by the assessee was allowed.

This detailed analysis of the judgment highlights the key legal points and arguments presented before the Appellate Tribunal ITAT AHMEDABAD.