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2022 (10) TMI 939 - AT - Income TaxDelayed payment of employees contribution to ESI and Provident Fund u/s. 43B r.w.s. 36(1)(va) - HELD THAT - We notice that the Hon ble Supreme Court in the case of Checkmate Services 2022 (10) TMI 617 - SUPREME COURT has considered the issue of whether the employees contribution paid before due date for filing the return of income u/s.139(1) whether otherwise allowable u/s.43B, putting to rest the contradicting decisions of various High Court. We hold that the employees contribution to PF and ESI should be remitted before the due date as per explanation to section 36(1)(va) i.e. on or before the due date under the relevant employee welfare legislation like PF Act, ESI Act etc., for the same to be otherwise allowable u/s.43B. We therefore see no reason to interfere with the order of the CIT(Appeals). The grounds taken by the assessee on this issue is dismissed.
Issues Involved:
1. Condonation of delay in filing appeals. 2. Disallowance of delayed payment of employees' contribution to ESI and Provident Fund under Section 43B read with Section 36(1)(va) of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Condonation of Delay in Filing Appeals: The appeals by the assessee were delayed by 103 days for both assessment years 2018-19 and 2019-20. The delay was attributed to the restructuring and reconstitution of the company's management, which led to personnel changes, including the accountant handling significant matters. The Supreme Court had extended the period of limitation due to COVID-19, effectively making the appeals time-barred for 103 days from 30.5.2022 to 9.9.2022. The Tribunal considered the principles laid down by the Supreme Court in the case of Collector of Land Acquisition v. Mst. Katiji, emphasizing that substantial justice should prevail over technical considerations. The Tribunal found the reasons for the delay to be genuine and bonafide, thus condoning the delay and admitting the appeals for adjudication. 2. Disallowance of Delayed Payment of Employees' Contribution to ESI and Provident Fund: The only issue in the appeals was the disallowance of delayed payment of employees' contribution to ESI and Provident Fund under Section 43B read with Section 36(1)(va) of the Income-tax Act, 1961. For AY 2018-19, the assessee had filed its return declaring a total income of Rs. 2,54,94,660, and an intimation u/s. 143(1) proposed additions for inconsistency in the amount debited to Profit & Loss u/s. 43B and delay in deposit of employees' contribution to PF and ESI Fund. The CPC issued a rectification order sustaining the disallowances, which was confirmed by the CIT(Appeals), NFAC. Similarly, for AY 2019-20, the CPC made an addition for delayed deposit of employees' PF after the due date, which was also confirmed by the CIT(Appeals), NFAC. The assessee argued that the payment of employee contribution to PF & ESI, though belated, was made before the due date of filing the return of income u/s. 139(1) and should be allowable u/s. 43B. However, the Tribunal referred to the Supreme Court's decision in Checkmate Services (P.) Ltd. Vs CIT-1, which clarified that Section 43B(b) does not cover employees' contributions to PF, ESI, etc., deducted by the employer from employees' salaries. The employees' contribution must be deposited within the due date specified under Section 36(1)(va), failing which it would be treated as income in the hands of the employer u/s. 2(24)(x). The Supreme Court emphasized the distinction between the employer's contribution (Section 36(1)(iv)) and the employees' contribution (Section 36(1)(va)), stating that employees' contributions are held in trust by the employer and must be deposited by the due date specified in the relevant legislation. The Tribunal upheld the CIT(Appeals)'s order, dismissing the assessee's appeals. Conclusion: The Tribunal condoned the delay in filing the appeals due to genuine and bonafide reasons but dismissed the appeals on the merits, holding that employees' contributions to PF and ESI must be deposited within the due dates specified under the relevant employee welfare legislation for the same to be allowable under Section 43B.
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