2019 (8) TMI 807 - HC - Income Tax

Disallowance u/s 2(24)(x) r.w.s. 36(1)(va) - delay in payment of employee's contribution to PF and ESI - whether it was deposited before due date of filling return of income? - HELD THAT - The issue raised as aforesaid is squarely covered by a decision of this Court in the case of M/s Checkmate Facility And Electronic Solutions Pvt. Ltd. Vs. Deputy Commissioner of Income Tax Circle 1 2018 (10) TMI 994 - GUJARAT HIGH COURT as held provision requires an employer before paying the employee his wages to deduct the employee's contribution along with the employer's own contribution as fixed by the Government. It is further required that he shall within fifteen days of the close of every month pay the same to the fund such contribution and administrative charges. 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. The expression within fifteen days of the close of every month therefore must be interpreted as having reference to the close of the month, for which, the wages are required to be paid with corresponding duty to deduct employee's contribution and to deposit the same in the fund. 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:
Tax appeal under Section 260A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal for the A.Y 2012-13. The substantial question of law raised is whether the Tribunal was right in not allowing the claim of the appellant amounting to ?39,91,179.

Analysis:
The issue raised in the appeal is regarding the disallowance of employees' contributions towards provident fund and ESI by the Assessing Officer due to late deposits. The Assessing Officer applied the disallowance under section 36(1)(va) of the Act as the contributions were not deposited within the specified time frame. The appellant contended that the time limit for depositing contributions should be based on the month in which the salary payment is made, as per section 38 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952.

The court analyzed the relevant provisions of the Act and the EPF Act, emphasizing that the employer must deduct and deposit the employee's contribution towards the funds within fifteen days of the close of every month in which the wages are paid. The court clarified that the reference to fifteen days of the close of the month must be in relation to the month during which the payment of wages is made, not when the wages are paid in a subsequent month. Therefore, the liability to deposit the employee's contribution arises in the same month as the wages are paid.

The appellant referred to a previous decision of the court in the case of M/s Checkmate Facility And Electronic Solutions Pvt. Ltd. and argued that it conflicted with another decision in the case of Commissioner of Income Tax Vs. Urmin Products Pvt. Limited. The court dismissed the argument, stating that the two decisions were not per incuriam, and there was no merit in the contention. The court also highlighted that the decision in the Urmin Products Pvt. Limited case did not establish any legal principle but merely upheld the Tribunal's decision based on a Delhi High Court ruling.

Ultimately, the court dismissed the appeal, finding no error in the Tribunal's decision and concluding that no question of law arose for consideration. The appellant failed to satisfy the court on the issues raised, leading to the dismissal of the tax appeal.