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2021 (9) TMI 363 - AT - Income TaxDisallowance on account of delayed deposit of Employees Contribution to PF and ESI - delay in clearance of cheque - as argued the delay in such deposit was attributable to the technical reasons of delay in clearance of cheque although such cheques had been issued by the assessee on due dates as per the respective Acts of ESI and PF? - whether for the purpose of section 36(1)(va) of I.T. Act, date of deposit of cheque in the bank is relevant or the date of clearance of the cheque is relevant? - HELD THAT - As decided in REPCO HOME FINANCE LTD. 2014 (11) TMI 487 - MADRAS HIGH COURT even if the cheques were taken conditionally, the cheques not having been dishonoured but having been cashed, the payment related back to the dates of the receipt of the cheques and in law the dates of payments were the dates of the delivery of the cheques. The Hon ble High Court further held that once the cheque issued by the assessee is encashed, the payment relates back to the date of receipt of the cheque. We are of the view that the relevant date to be considered for the purpose of section 36(1)(va) of I.T. Act is the date of deposit of cheque in the bank, and not the date of clearance of the cheque. Consequently, we hold that the aforesaid amount as allowable under section 36(1)(va) of I.T. Act. Accordingly, we direct the Assessing Officer to allow the aforesaid amount - Assessee appeal is allowed.
Issues:
1. Disallowance of Employees' Contribution to PF and ESI. 2. Interpretation of Section 36(1)(va) of the Income Tax Act, 1961 regarding the date of payment. Analysis: Issue 1: The Assessee appealed against the disallowance of ?5,76,522 on account of delayed deposit of Employees' Contribution to PF and ESI. The Assessing Officer disallowed the amount as the deposits were made after the due date specified in section 36(1)(va) of the Income Tax Act. The Assessee argued that the delay was due to the clearance of cheques, not the actual deposit date. The CIT(A) upheld the disallowance. The ITAT considered the issue and analyzed whether the date of deposit or clearance of cheques is relevant for section 36(1)(va) of the IT Act. The ITAT referred to legal precedents and held that the date of deposit of cheques in the bank should be considered as the date of payment, not the date of clearance. Consequently, the disallowed amount was allowed under section 36(1)(va) of the IT Act. Issue 2: The core issue was the interpretation of Section 36(1)(va) of the IT Act regarding the relevant date for payment. The ITAT examined legal precedents, including the decision of the Madras High Court in a similar case. The Madras High Court ruled that the date of payment relates back to the date of receipt of cheques once they are encashed, not the date of clearance. The Supreme Court's decision further supported this view. The ITAT applied this interpretation to the present case and concluded that the date of deposit of cheques in the bank should be considered for section 36(1)(va) of the IT Act, leading to the allowance of the disputed amount. In conclusion, the ITAT allowed the Assessee's appeal, directing the Assessing Officer to allow the disallowed amount of ?5,76,522. The decision emphasized the significance of the date of deposit of cheques for determining the payment date under section 36(1)(va) of the IT Act, aligning with established legal principles and precedents.
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