2019 (6) TMI 1005 - HC - Income Tax

Disallowance towards Employees Contribution to PF and towards Employees contribution to ESIC - Whether the same were deposited with the relevant fund before the due date prescribed u/s 139(1) ? - HELD THAT - As relying on GUJARAT STATE ROAD TRANSPORT CORPORATION 2014 (1) TMI 502 - GUJARAT HIGH COURT assessee did not deposit the amount of contribution with the PF Department / DSI Department within due date under the PF Act and/or ESI Act - There is no amendment in Section section 36(1)(va) and considering section 36(1)(va) as it stands, with respect to any sum received by the assessee from any of his employees to which the provisions of clause (x) of sub-section (24) of section 2 applies, assessee shall not be entitled to deduction of such amount in computing the income referred to in section 28 if such sum is not credited by the assessee to the employees' account in the relevant fund or funds on or before the due date as per explanation to section 36(1)(va) of the Act - By deleting Second Proviso to section 43B by Finance Act, 2003, it cannot be said that Section 36(1) (va) is amended and/or explanation below clause (va) of sub-section (1) of section 36 is deleted, which is with respect to employees' contribution - additions confirmed - Decided in favour of Revenue.

Summary

Issues:
1. Disallowance of Employees' Contribution to PF and ESIC.
2. Interpretation of due dates for contribution deposits under the Income Tax Act.

Analysis:
1. The Tax Appeal challenged the order of the Appellate Tribunal regarding the disallowance of ?51,06,031 towards Employees' Contribution to PF and ?2,82,708 towards Employees' contribution to ESIC for the Assessment Year 2014-15. The main question raised was whether the Tribunal was correct in upholding the disallowance despite the contributions being deposited before the due date prescribed under section 139(1) of the Income Tax Act, 1961. Additionally, the appellant questioned the Tribunal's decision to confirm the disallowance for all months, even though some contributions were made within the due date as per section 36(1)(va) if reckoned from the end of the month in which salaries were paid.

2. The Tribunal relied on the decision of the High Court in the case of CIT vs. Gujarat State Road Transport Corporation and upheld the disallowance. The Tribunal noted that the employer had not deposited the contributions received from employees within the due dates as prescribed under the Provident Fund Act and ESIC. Citing the High Court's decision, the Tribunal concluded that failure to credit the sum received as employees' contribution to the employees' account before the due date would disentitle the assessee from deduction. The Tribunal, therefore, dismissed the appeal based on the judicial findings and upheld the decision of the CIT(A).

3. The Court observed that the issue was conclusively settled by the High Court's decision, which is now pending before the Supreme Court. Consequently, the Court dismissed the appeal, stating that the issue was squarely covered by the earlier decision. The appellant's contention regarding the due dates for contribution deposits and the disallowance of deductions based on non-compliance with the prescribed timelines were addressed and decided in line with the existing legal precedent.

This detailed analysis of the judgment highlights the issues raised, the legal interpretations made by the Tribunal, and the final decision rendered by the High Court, providing a comprehensive understanding of the case.