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2023 (5) TMI 1359 - AT - Income TaxDisallowance u/s. 36(1)(va) - delay in payment of employees' contribution to PF and ESI - HELD THAT - No disallowance can be made u/s. 143(1)(a) of the Act towards employees contribution to EPF and ESI is concerned, we find that this issue is settled in the case of AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd 2021 (4) TMI 1169 - MADRAS HIGH COURT -The contention of the assessee that no disallowance could be made u/s. 143(1)(a) of the Act towards employees contribution to EPF and ESI is rejected. Disallowance for the month of August 2017 Sept. 2017 - assessee submitted that these payments were made in the following months, therefore the date of payment of salary should be considered the month in which the salary has been paid because the employee cannot contribute in the EPF/ESI without the payments made by the employer - In view of the above, we remit this issue to the AO with a direction to examine and decide the issue in the light of the above judgment. Accordingly this issue is allowed for statistical purpose. Employees contribution to EPF ESI - submission of the assessee is that these remittances were within the due date for filing return u/s. 139(1) though they were belated payments under the respective Acts and hence no disallowance is called for - This issue is settled in Checkmate Services (P.) Ltd. 2022 (10) TMI 617 - SUPREME COURT wherein it is held that that Section 43B(b) does not cover employees' contributions to PF, ESI etc. deducted by employer from salaries of employees and that employees contribution has to be deposited within the due date u/s 36(1)(va) i.e. due dates under the relevant employee welfare legislation like PF Act, ESI Act etc. failing which the same would be treated as income in the hands of the employer u/s.2(24)(x). Respectfully following this judgment, we sustain the disallowance towards belated remittances towards employees contribution to EPF ESI under the respective Acts. Appeal by the assessee is partly allowed for statistical purposes.
Issues Involved:
Disallowance u/s. 36(1)(va) for delay in payment of employees' contribution to PF and ESI. Detailed Analysis: 1. Background: The appeal was filed against the order of the CIT(Appeals) regarding disallowance u/s. 36(1)(va) for delay in payment of employees' contribution to PF and ESI for AY 2018-19. 2. Assessee's Submission: The assessee, a partnership firm in the food business, declared total income of Rs.1,04,89,720 for AY 2018-19. The return was processed u/s. 143(1) of the Act, disallowing Rs.17,25,211 for delay in payment of employees' contribution to PF and ESI. 3. Appeal and Arguments: The assessee contended that a significant portion of the amount was paid within the due dates as per EPF & ESI Acts, with some inadvertent errors in Form 3CD regarding remittance dates. 4. Judgment on Disallowance: The CIT(Appeals) dismissed the appeal, leading to the current appeal before the Tribunal. 5. Tribunal's Decision: The Tribunal considered various legal precedents and judgments. It remitted the issue of verifying the proof of payments back to the AO and directed the assessee to produce necessary documents for verification. 6. Further Disallowance: The Tribunal also addressed the disallowance of Rs. 1,29,106 for August and September 2017, remitting the issue to the AO for examination based on the actual payment dates of salaries. 7. Employees' Contribution: The Tribunal upheld the disallowance of Rs. 40,588 for belated remittances of employees' contribution to EPF & ESI, citing the Supreme Court judgment that such contributions must be deposited within due dates under relevant legislation. 8. Final Decision: The appeal by the assessee was partly allowed for statistical purposes, with the Tribunal providing detailed directions for further examination and verification by the AO. In conclusion, the Tribunal's judgment addressed the issues of disallowance u/s. 36(1)(va) for delay in employees' contribution to PF and ESI, remitting some aspects back to the AO for verification and examination based on legal precedents and relevant legal provisions.
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