2023 (5) TMI 626 - AT - Income Tax

Delayed employees contribution of PF / ESI within the prescribed due date as per Section 36(1)(va) - adjustment as envisaged u/s 143(1)(a)(iv) - HELD THAT - As relying on case of Emson Tools Mfg. Corp 2023 (4) TMI 626 - ITAT CHANDIGARH CIT(A) was justified in sustaining the adjustment u/s 143(1)(a) by means of disallowance made for late deposit of employees share of PF/ESI contribution to the relevant funds beyond the date prescribed under the respective Acts. Appeal of the assessee is dismissed.

Summary

Issues Involved:
1. Disallowance of employees' contribution to PF/ESI u/s 36(1)(va) r.w.s 143(1)(a)(iv).
2. Prima facie adjustment u/s 143(1)(a) by CPC.

Summary:

Issue 1: Disallowance of employees' contribution to PF/ESI u/s 36(1)(va) r.w.s 143(1)(a)(iv):
The assessee filed its return of income declaring total income of Rs. 83,16,645/-. The return was processed by the CPC and an order u/s 143(1) was passed, disallowing Rs. 3,46,006/- for failure to pay employees' contribution to PF/ESI before the prescribed due date. The CIT(A), NFAC upheld this disallowance, stating that the employees' contribution can only be allowed as a deduction if paid within the prescribed due date under the relevant welfare funds. This position of law applies retrospectively. The ITAT confirmed that the disallowance made u/s 143(1) by the CPC was strictly in accordance with law and falls under the prima facie adjustment as envisaged u/s 143(1)(a)(iv).

Issue 2: Prima facie adjustment u/s 143(1)(a) by CPC:
The ITAT referred to the decision of the Coordinate Chandigarh Bench in 'Emson Tools Mfg. Corp. Ltd. Vs. DCIT, Ludhiana' and the Hon'ble Supreme Court in 'Checkmate Services P. Ltd. & Ors. Vs. CIT & Ors.' which clarified that the employees' contribution to relevant funds is the employer's income u/s 2(24)(x), but the deduction can be allowed u/s 36(1)(va) only if deposited before the stipulated date under the respective Act. The ITAT also cited the decision of the Coordinate Pune Bench in 'Cemetile Industries & Ors. Vs. ITO & Ors' which emphasized that the disallowance u/s 36(1)(va) can be made during the processing of return u/s 143(1)(a) if indicated in the audit report and not accounted for in the return. The ITAT concluded that the CIT(A) was justified in sustaining the adjustment u/s 143(1)(a) for late deposit of employees' share of PF/ESI contributions.

Conclusion:
The appeal of the assessee was dismissed, and the adjustment u/s 143(1)(a) by means of disallowance for late deposit of employees' share of PF/ESI contribution was upheld.