2023 (6) TMI 880 - AT - Income Tax

Delayed Employees' contribution to Provident Fund - payment was made after the due date prescribed under relevant Act, even though the payment was made within the time prescribed under section 139(1) of the IT. Act, 1961 for filing the return of income - adjustment is beyond the scope of section 143(1) - HELD THAT - The issue is now covered against the assessee in the case of Checkmate Services Pvt. Ltd. 2022 (10) TMI 617 - SUPREME COURT held that for assessment years prior to AY 2021-22, non obstante clause under section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was held in trust by assessee-employer as per section 2(24)(x), thus, said clause would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. The non obstante clause under section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was not part of assessee-employer's income, thus, said clause would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. Also see Harrisons Malayalam Ltd. 2023 (1) TMI 137 - SC ORDER Recently in the case of Cemetile Industries 2022 (12) TMI 354 - ITAT PUNE held that where assessee-employer deposited amount of employees contribution towards employees' provident fund and employees' state insurance corporation beyond due date stipulated in respective Acts, disallowance made under section 36(1)(va) was justified. The ITAT further held that adjustment u/s 143(1)(a) by means of disallowance made for late deposit of employees' share to relevant funds beyond date prescribed under respective Acts was proper. Decided against assessee.

Summary

Issues involved:
The appeal filed by the assessee against the order of the ld. CIT(A)-1, Ahmedabad, regarding the disallowance of Employees' contribution to Provident Fund made after the due date prescribed under the relevant Act for the assessment year 2018-19.

Issue 1: Disallowance of Employees' contribution to Provident Fund

The assessee contested the disallowance of Rs. 6,08,711/- being Employees' contribution to Provident Fund made after the due date prescribed under the relevant Act. The Hon'ble Supreme Court clarified that for assessment years prior to AY 2021-22, the non obstante clause under section 43B could not apply to amounts held in trust, such as employee's contributions. The Court distinguished between the nature of employer's contribution and amounts retained from employee's income, emphasizing that the liability to deposit employee's contribution on or before the due date remains with the employer. The Court's decision in the case of Checkmate Services Pvt. Ltd. and Harrisons Malayalam Ltd. supported the disallowance of deductions for late payments of employees' contributions. The ITAT upheld the disallowance under section 143(1)(a) based on the Supreme Court's rulings, denying the deduction of belated payments of employees' share of contribution under section 36(1)(va) of the Act. Additionally, the Pune ITAT in the case of Cemetile Industries v. ITO also affirmed that disallowance for late deposits of employees' share to relevant funds was justified.

Decision:
In accordance with the observations and decisions of the Hon'ble Supreme Court and previous rulings, the ITAT dismissed the assessee's appeal, upholding the disallowance of Employees' contribution to Provident Fund made after the prescribed due date. The appeal was dismissed, and the order was pronounced in the open court on 16-06-2023.