2023 (5) TMI 783 - AT - Income Tax

Delayed payment of employee s contribution to ESI and PF - Payment beyond the due date by invoking the provisions of section 36(1)(va) but within the due date for filing return of income u/s.139(1) of the Act.n the case of CHECKMATE SERVICES PVT LTD VS CIT-1 2022 (10) TMI 617 - SUPREME COURT held that allowability/treatment of delayed Employee PF Contribution payment to be taxable in hands of assessee under provisions of Income Tax Act. Hon ble Supreme Court held that Section 36(1)(va) and Section 43B(b) operate on totally different equilibriums and have different parameters for due dates, i.e., employee's contribution is linked to payment before the due dates specified in the respective Acts and employer's contribution is linked to the payment before the prescribed due date for filing of return u/s. 139(1) of the Act. It was held that result of any failure to pay within the prescribed dates also leads to different results. In the case of employee's contribution, any failure to pay within the prescribed due date under the respective PF Act or Scheme will result in negating employer's claim for deduction permanently forever u/s.36(1)(va) of the Act. On the other hand, delay in payment of employer's contribution is visited with deferment of deduction on payment basis u/s.43B of the Act and is therefore not lost totally. Therefore, as per the above decision, the disallowance made by the Revenue authorities, were fully justified. Grounds raised by the assessee stands dismissed.

Summary

Issues involved:
The judgment involves the disallowance on delayed payment of employee's contribution to ESI and PF beyond the due date, invoking section 36(1)(va) of the Income Tax Act, 1961, but within the due date for filing the return of income under section 139(1) of the Act.

Assessment Year 2018-19:
The appellant contested the disallowance of Employees' Contribution to Provident Fund under section 36(1)(va) of the Act, emphasizing that the contribution was remitted before the due date for filing the Income Tax Returns, citing jurisdictional High Court decisions. The appellant argued that recent amendments should be applied prospectively and relied on a recent decision by the Income Tax Appellate Tribunal to support their case. The appellant also denied liability for interest under section 234 of the Act.

Assessment Year 2019-20:
Similar to the previous year, the appellant challenged the disallowance of Employees' Contribution to Provident Fund under section 36(1)(va) of the Act, asserting that the contribution was remitted before the due date for filing the Income Tax Returns. The appellant referenced jurisdictional High Court decisions and recent amendments to support their position. Additionally, the appellant denied liability for interest under section 234 of the Act.

Brief Facts:
For both assessment years, the appellant's returns were processed under section 143(1) of the Income Tax Act, with the Centralised Processing Centre disallowing the Employees' Contribution to Provident Fund and ESI. The appellant's rectification application was rejected by the Assessing Officer, leading to appeals before the Commissioner of Income Tax (Appeals) and subsequently before the Tribunal.

Court Decision:
The Tribunal dismissed the appeals, upholding the disallowance of the Employees' Contribution to Provident Fund based on the provisions of section 36(1)(va) of the Act. Citing a Supreme Court judgment, the Tribunal explained the distinction between employee and employer contributions, emphasizing the importance of timely payment for employee contributions to claim deductions. The Tribunal found the Revenue authorities' disallowance justified, leading to the dismissal of the appellant's appeals for both assessment years.