2024 (2) TMI 1373 - HC - Income Tax

Disallowing adjustment u/s 143(1)(a)(iv) r.w.s. 36(1)(va) - delayed remittance of employees contributions to Employee State Insurance (ESI) and Provident Fund (PF) - ITAT as relying on decision of the Hon ble Supreme Court in Checkmate Services Pvt. Ltd. 2022 (10) TMI 617 - SUPREME COURT held that based upon such delayed deposits no adjustments or deductions could be claimed - assessee submitted that Checkmate Services Pvt. Ltd. (Supra) was a matter where the assessment was made u/s 143(3) of the IT Act and not under Section 143(1)(a) as in the present case. HELD THAT - The fact that the assessment order in Checkmate Services Pvt. Ltd. (supra) was incidentally under Section 143(3) and the assessment order in the present case is under Section 143(1)(a) of the IT Act makes no difference to the principle involved in this matter. The ITAT decision does not discuss why this circumstance constitutes a distinguishing feature based on which the ratio of Checkmate Services Pvt. Ltd. (supra) could be departed from. Checkmate Services Pvt. Ltd. (Supra) holds that the deductions can be claimed or adjustments can be made under section 141(1)(a)(iv) read with Section 36(1)(va) only when the employer deposits the contributions in the employees accounts on or before the due date prescribed under the Employees Provident Fund /Employees State Insurance Act. In this case admittedly the contributions were deposited in the employees accounts beyond the due date. The circumstance that the assessment order was made under Section 143(1)(a) of the IT Act can make no difference - Decided against assessee.

Summary

Issues involved:
The judgment involves an appeal under Section 260A of the Income Tax Act, 1961 challenging orders disallowing an adjustment under Section 141(1)(a)(iv) read with Section 36(1)(va) in relation to delayed remittance of employees' contributions to Employee State Insurance (ESI) and Provident Fund (PF) for the assessment year 2018-2019.

Summary of Judgment:

Issue 1: Delayed remittance of employees' contributions to ESI and PF

The ITAT noted that the Assessee failed to deposit contributions to ESI and PF before the due date under the PF/ESI Acts for the relevant assessment year. However, the contributions were deposited before the Assessee filed returns under Section 139(1) of the IT Act. Citing the decision in Checkmate Services Pvt. Ltd., the ITAT held that no adjustments or deductions could be claimed based on delayed deposits.

Issue 2: Applicability of Checkmate Services Pvt. Ltd. ruling

The Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. clarified that deductions or adjustments can only be claimed if the employer deposits the contributions in employees' accounts before the due date set out under the PF/ESI Acts. The ITAT's reliance on this ruling was deemed consistent with the law, leading to no grounds for interference with the decisions of the AO, CIT(Appeals), and ITAT.

Issue 3: Assessment under Section 143(1)(a) vs. Section 143(3)

The appellant argued that the assessment order in the present case was under Section 143(1)(a) while Checkmate Services Pvt. Ltd. was under Section 143(3), attempting to distinguish the applicability of the ruling. However, the court found no difference in principle based on the assessment section, emphasizing that deductions can only be claimed if contributions are deposited before the due date.

Conclusion:

The court concluded that no substantial questions of law arose in the appeal, as the contributions were deposited beyond the due date, rendering the appellant ineligible for deductions or adjustments. Therefore, the appeal was dismissed with no order as to costs, upholding the decisions of the three authorities.