2023 (9) TMI 908 - AT - Income Tax

Delayed payment of employees contribution of PF ESIC - same has been paid beyond the due date prescribed under the relevant Act - HELD THAT - As payment shown at Sl. No.13 to 24 on account of depositing the employees contribution of ESIC fund on 17th of every month of 2017, which is prior to the due date for depositing the ESIC fund dated 12th of every month of 2017 for part amount. This fact is further corroborated from the challan verification form available at page 93 to 115 of the paper book. When the deduction otherwise available to the assessee on account of deposit of employees contribution of ESIC the same is liable to be allowed as there is no estoppel against the statute. In these circumstances, we partly set aside the impugned order passed by the Ld. CIT(A) to the extent of amount of Rs. 19,09,265/- deposited by the assessee on account of employees contribution of ESIC well before the due date prescribed under the relevant Act being not sustainable in the eyes of law. The remaining amount has been rightly disallowed by the AO/Ld. CIT(A) on account of late deposit of employees contribution of PF beyond the due date prescribed under the Act in accordance with the law laid down by the Hon ble Supreme Court in case of Checkmate Services Pvt. Ltd. ( 2022 (10) TMI 617 - SUPREME COURT ). So the AO shall allow the deduction claimed by the assessee qua deposit of employees contribution of ESIC well within the due date prescribed under the relevant Act after due verification as claimed under the audit report (supra). The remaining amount has been rightly disallowed by the AO/Ld. CIT(A) - Decided partly in favour of assessee.

Summary

Issues involved:
The judgment involves the disallowance of contribution towards Employees State Insurance (ESIC) under section 36(1)(va) of the Income Tax Act, 1961 and the lack of consideration of submissions by the appellant by the Learned CIT (A).

Disallowed ESIC Contribution:
The assessee, a private limited company providing micro loans, filed an appeal against the addition of Rs. 20,47,733 for ESIC contribution disallowance. The Central Processing Centre added this amount due to delayed payment of employees' ESIC contribution. The CIT (A) confirmed this addition. The Tribunal considered the undisputed fact that the payment was made beyond the due date prescribed by law. Relying on a Supreme Court case, it was established that such delayed payments are not allowable deductions. The appellant argued that the payments were made within the prescribed period but were incorrectly reported by the tax auditor. The correct audit report and challan verification supported this claim.

Judicial Decision:
After reviewing the evidence, the Tribunal found that a significant portion of the ESIC contribution was made before the due date. Accordingly, the Tribunal partly set aside the CIT (A) order, allowing the deduction of Rs. 19,09,265 deposited by the assessee on time. However, the remaining amount of Rs. 1,96,438 was rightly disallowed due to late PF contribution deposit. The Tribunal emphasized that the deduction for ESIC contribution made on time should be allowed, following the law without estoppel. Therefore, the appeal was partly allowed, with the AO directed to verify and allow the deduction for ESIC contribution made within the prescribed period.

Separate Judgment:
The judgment was delivered by Shri Kuldip Singh, Judicial Member, and Shri Prashant Maharishi, Accountant Member.