2023 (7) TMI 280 - AT - Income Tax

Delayed payment of employees contribution to Provident Fund (P.F)/Employees State Insurance Corporation (E.S.I.C) u/s 36(1)(va) - assessment u/s 143(1) - HELD THAT - We find that the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. ( 2022 (10) TMI 617 - SUPREME COURT held that the payment towards employees contribution to P.F./E.S.I.C., after the due date prescribed under the relevant statute is not allowable as a deduction u/s 36(1)(va). As employees contributions to P.F./E.S.I.C. were deposited after the due date prescribed under the relevant statute sole ground raised by the assessee is dismissed.

Summary

Issues Involved:
The judgment involves a challenge to an order passed u/s 250 of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals) regarding the disallowance of delayed payment of employees' contribution to Provident Fund (P.F)/Employees State Insurance Corporation (E.S.I.C) u/s 36(1)(va) of the Act for the assessment year 2017-18.

Details of the judgment:
1. The assessee challenged the order sustaining the disallowance under section 36 of the Act.
2. The only dispute raised was against the disallowance on account of delayed payment of employees' contribution to Provident Fund (P.F)/Employees State Insurance Corporation (E.S.I.C) under section 36(1)(va) of the Act.
3. The assessee, a private limited company, filed its return of income declaring a total income of Rs. 75,40,880, which was processed under section 143(1) of the Act resulting in a disallowance of Rs. 2,38,889 for delayed payment of employees' contribution to P.F./ E.S.I.C.
4. The learned CIT(A) dismissed the appeal and upheld the disallowance made under section 36(1)(va) of the Act.
5. The issue was whether the payment towards employees' contribution to P.F./E.S.I.C. after the due date prescribed under the relevant statute is allowable as a deduction under section 36(1)(va) of the Act.
6. The Hon'ble Supreme Court decision in Checkmate Services Pvt. Ltd. v/s CIT was cited, stating that such payments are not allowable as a deduction if made after the due date.
7. The Court emphasized the distinction between employer's primary liability and the obligation to deposit amounts deducted from employees' income, holding that the deduction is allowed only if such amounts are deposited on or before the due date.
8. As the employees' contributions were deposited after the due date, the appeal by the assessee was dismissed in line with the Supreme Court decision.

In conclusion, the appeal challenging the disallowance of delayed payment of employees' contribution to Provident Fund (P.F)/Employees State Insurance Corporation (E.S.I.C) under section 36(1)(va) of the Income Tax Act for the assessment year 2017-18 was dismissed based on the precedent set by the Hon'ble Supreme Court regarding the timing of such payments.