2022 (12) TMI 577 - AT - Income Tax

Delay in deposit of Employees Contribution of Provident Fund and Employees State Insurance (PF ESI) - disallowance made u/s. 36(1)(va) - HELD THAT - The issue relating to grounds taken by the assessee have come to rest by the recent verdict of the Hon ble Supreme Court in Chekmate Services Pvt. Ltd. 2022 (10) TMI 617 - SUPREME COURT wherein it has been held that deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees contribution to PF cannot be claimed when deposited within the due date of filing of return even when read with Section 43B of the Income-tax Act,1961. Appeal of the assessee is dismissed.

Summary

Issues involved:
Appeal against order of Ld. CIT(A) regarding disallowance u/s. 36(1)(va) of Income Tax Act for delay in deposit of Employees' Contribution to PF and ESI.

Detailed Analysis:

1. Issue of Disallowance u/s. 36(1)(va):
The appeal challenged the disallowance made under section 36(1)(va) of the Income Tax Act concerning the delay in depositing Employees' Contribution to Provident Fund and Employees State Insurance (PF & ESI). The grounds raised by the assessee contested the order of the Assessing Officer and Ld. CIT(A) for making an addition of Rs.1,41,02,575 despite the contribution being deposited before the due date of filing the return of income u/s. 139(1) of the Act. The Tribunal noted that the recent verdict of the Hon'ble Supreme Court in Chekmate Services Pvt. Ltd. Vs. CIT clarified that deduction u/s. 36(1)(va) for delayed deposit of employees' contribution to PF cannot be claimed if deposited within the due date of filing the return, even when read with Section 43B of the Income-tax Act, 1961. The judgment highlighted the distinction between employer's contribution (Section 36(1)(iv)) and employees' contribution (Section 36(1)(va), emphasizing the conditions for deduction and timely deposit requirements.

2. Application of Supreme Court Judgment:
The Tribunal, considering the Supreme Court's decision, dismissed the appeal as the grounds taken by the assessee were squarely covered by the said judgment. The Court's analysis of the statutory provisions under Section 36(1)(va) and the differentiation between employer's and employees' contributions clarified the legislative intent behind the insertion of Section 36(1)(va) and the importance of depositing such amounts on or before the due date as a condition for deduction. The judgment emphasized the distinction in the nature and character of these contributions, highlighting the obligation of every assessee under Section 43B in ensuring timely payments of liabilities.

3. Outcome of the Appeal:
Respectfully following the decision of the Hon'ble Supreme Court, the Tribunal dismissed the appeal of the assessee, upholding the disallowance made under section 36(1)(va) for the delay in depositing Employees' Contribution to PF and ESI. The Tribunal's decision was based on the interpretation of the statutory provisions, the legislative intent behind the relevant sections, and the conditions laid down for claiming deductions under the Income Tax Act. The judgment provided clarity on the obligations of employers regarding the timely deposit of employees' contributions and the implications of non-compliance with the statutory requirements.

In conclusion, the Tribunal's decision in this case reaffirmed the importance of adhering to the statutory provisions regarding the deposit of Employees' Contribution to PF and ESI within the prescribed timelines as mandated by the Income Tax Act.