2019 (6) TMI 759 - HC - Income Tax

Delayed deposit of PF/ESI - Addition u/s 36(1)(va) r.w.s 2(24) (x) - whether due date for the payment of such contribution arose in the month subsequent to the month in which wages/salary actually disbursed and therefore the liability to deduct employees' contribution arises only on paying salary to employees ? - HELD THAT - Question proposed decided against assessee in M/S CHECKMATE FACILITY AND ELECTRONIC SOLUTIONS PVT LTD. 2018 (10) TMI 994 - GUJARAT HIGH COURT as held after deducting the employee's contribution towards the funds, the same has to be deposited with the Government within fifteen days of the close of every month. Reference to fifteen days of the close of the month must be in relation to the month during which the payment of wages is to be made and corresponding liability to deduct employee's contribution to the fund arises. Appellant is therefore not correct in contending that if such wages are paid in the following month, the liability to deposit the employee's contribution to the fund gets differed by another month. - Decided against assessee

Summary

Issues:
1. Whether delayed deposit of PF/ESI is to be disallowed?
2. Whether liability to deduct employees' contribution arises only on paying salary?

Analysis:
1. The Tax Appeal under Section 260(A) of the Income Tax Act, 1961 challenged the order of the Income Tax Appellate Tribunal dismissing the appeal and affirming the order of the Commissioner of Income Tax (Appeals). The first issue was whether delayed deposit of PF/ESI should be disallowed. The appellant argued that this issue was already settled by a coordinate bench in another case. The coordinate bench had held that delayed deposits beyond the specified date were subject to disallowance under section 36(1)(va) of the Act. The appellant's contention that the liability to deposit the employee's contribution gets differed by another month if wages are paid in the following month was rejected.

2. The second issue involved whether the liability to deduct employees' contribution arises only on paying salary. The appellant contended that the due date for depositing contributions should be interpreted in relation to the month during which wages are paid. However, the court held that as per the relevant provisions, the employer must deduct the employee's contribution before paying wages and deposit the same within fifteen days of the close of every month. The court emphasized that the liability to deposit the employee's contribution arises in the same month as the payment of wages, not the subsequent month. This interpretation was crucial in determining the timing of the liability to deduct and deposit contributions.

3. The court referred to the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, which mandate the employer to deduct and deposit the employee's contribution along with the employer's own contribution within a specified time frame. The court's analysis focused on the interpretation of the due date for depositing contributions and clarified that the liability arises in the month when wages are paid. The court's decision in this case aligned with the principles established in previous judgments and upheld the disallowance of delayed deposits. Ultimately, the court dismissed the appeal, as both issues raised were conclusively addressed by the coordinate bench's decision in a previous case, providing a clear legal precedent for the current dispute.