2022 (11) TMI 1428 - AT - Income Tax

Delayed Employees contribution to PF and ESI - payment beyond the time prescribed under the relevant PF Act - HELD THAT - Admittedly the Hon ble Supreme Court in the case of Checkmate Services Pvt Ltd ( 2022 (10) TMI 617 - SUPREME COURT ) has categorically held that the employees contribution to PF and ESI to the extent it is not paid within due date prescribed under the PF Act is not allowable u/s. 36(1)(va) of the Act. The Hon ble Supreme Court has also admittedly held that the provisions of section 43B would not apply to the provisions of section 36(1)(va) of the Act in respect of employees contribution. Respectfully following the decision of Hon ble Supreme Court in the case of Checkmate Services Pvt Ltd(supra) we are of the view that the delayed payment in respect of employees contribution to PF and ESI is not allowable. In the case of Nirakar Security Consultancy Services Pvt Ltd 2022 (11) TMI 69 - ITAT CUTTACK Liberty is granted to the Id AR to make all submissions in respect of allowability of disallowed contribution of the employees to PF and ESI under other relevant provisions in the interest of justice. This direction is being given because Id AR has submitted that as the amount is not allowable under section 36(1)(va) of the Act and same is also not covered under section 43B of the Act the amount of delayed contribution to PF and ESI in respect of employees contribution would be treated as income in the hands of the assessee u/.s. 2(24)(x) and on subsequent payment of the same it would be a business expenditure which can be claimed u/s.37(1). Liberty is also granted to the assessee to raise all arguments as are found necessary by him before the lower authorities As the issue in the present appeal is also identical to the issue in the case of Nirakar Security Consultancy Services Pvt Ltd., (supra) on identical findings the issue in this appeal is restored to the file of the AO for re-adjudication after granting the assessee adequate opportunity of being heard.

Summary

Issues: Delayed payment of PF and ESI in respect of employees' contribution.

Analysis:
1. The appeal was filed against the order of the CIT(A) for the assessment year 2018-19 regarding the delayed payment of PF and ESI in respect of employees' contribution.
2. The issue involved was whether the delayed payment of employees' contribution to PF and ESI is allowable under section 43B of the Income Tax Act.
3. The Senior DR argued that the Hon'ble Supreme Court in the case of Checkmate Services Pvt Ltd vs CIT has held that if the employees' contribution to PF and ESI is paid beyond the prescribed time, it is not allowable under section 43B or section 36(1)(va) of the Act.
4. The Tribunal noted that the Supreme Court had indeed held that the delayed payment of employees' contribution to PF and ESI is not allowable under section 36(1)(va) of the Act and that section 43B does not apply to these contributions.
5. Referring to the case of Nirakar Security & Consultancy Services Pvt Ltd vs ITO, the Tribunal decided to restore the issue to the Assessing Officer for re-adjudication, granting the assessee an opportunity to present arguments on the allowability of the disallowed contributions under other relevant provisions.
6. Consequently, the appeal was partly allowed for statistical purposes, and the issue was remanded to the Assessing Officer for further consideration after providing the assessee with a fair hearing opportunity.

This detailed analysis of the judgment highlights the key arguments presented by both parties, the relevant legal provisions, and the Tribunal's decision to remand the issue for further examination in light of the Supreme Court's ruling and the arguments presented by the assessee in a similar case.