2023 (5) TMI 1408 - AT - Income Tax

Belated payment of PF/ESIC u/s 36(1)(va) - provident contribution fund are payable to central government within 15 days of the close of every month - HELD THAT - As relying on the case of Madras Radiators Pressing Ltd. 2002 (12) TMI 36 - MADRAS HIGH COURT has held that the term every month in clause 58 of the Provident Fund Scheme should be read as month in which the wages were actually earned i.e. salary payable. Decided against assessee.

Summary

Issues:
1. Disallowance of belated payment of PF/ESIC under section 36(1)(va) of the Income-tax Act.
2. Interpretation of the due date for depositing employee's contribution to provident fund account.

Issue 1: Disallowance of belated payment of PF/ESIC under section 36(1)(va) of the Income-tax Act:

The appeal was against the order of the Ld. Commissioner of Income-tax (Appeals) confirming the disallowance of Rs. 10,09,648/- for belated payment of PF/ESIC under section 36(1)(va) of the Income-tax Act. The assessee's counsel argued that the Finance Act, 2021 amendment should be prospective, and the disallowance ought to be deleted. However, the counsel admitted that as per the Supreme Court decision in Checkmate Services Pvt. Ltd. v. CIT, employees' contribution to PF/ESI deposited after the due date is not allowable. The counsel relied on the Provident Fund Scheme's clause 38, arguing that the term "every month" should be interpreted as the month of payment of salary. The Tribunal's decision in the case of "the Master Polishers" was cited to support this contention.

Issue 2: Interpretation of the due date for depositing employee's contribution to provident fund account:

The dispute revolved around the due date for depositing the employee's contribution to the provident fund account. The assessee's counsel referred to clause 38 of the employee's provident fund scheme, which mandates payment within 15 days of the close of every month. The Tribunal's decision in the case of Master Polishers was cited, emphasizing that the due date should be linked to the month in which the salary was actually disbursed. However, the Madras High Court's decision in the case of Commissioner of Income-tax v. Madras Radiators & Pressing Ltd. held that the term "every month" should be construed as the month in which the wages were actually earned, i.e., the salary payable. The court emphasized the employer's responsibility to remit contributions within 15 days from the close of the month for which the employees earned their salary. Given the higher hierarchy of the High Court, the Tribunal rejected the assessee's plea to restore the matter back to the Assessing Officer, and the appeal was dismissed.

In conclusion, the Appellate Tribunal upheld the disallowance of belated payment of PF/ESIC under section 36(1)(va) of the Income-tax Act, based on the interpretation of the due date for depositing the employee's contribution to the provident fund account as per the Madras High Court's decision. The appeal was dismissed, and the Tribunal's decision was pronounced in open court on 31/05/2023.