2023 (8) TMI 1618 - AT - Income Tax

Disallowance towards employees contribution to PF ESI u/s. 36(1)(va) r.w.s. 43B - HELD THAT - Hon ble Supreme Court in the case of Checkmate Services P. Ltd. 2022 (10) TMI 617 - SUPREME COURT has considered the issue of disallowance of employees contribution to PF ESI beyond due date specified under respective Acts but within due date prescribed u/s. 139(1) of the Act and after considering relevant provisions of the Act held that belated payment of employees contribution to PF ESI cannot be allowed as deduction in terms of provisions of Sec. 36(1)(va) r.w.s. 43B of the Act. We are of the considered view that belated payment of employees contribution to PF ESI cannot be allowed as deduction in terms of provisions of Sec. 36(1)(va) r.w.s. 43B of the Act and thus we reject the arguments of the assessee and upheld the disallowance of employees contribution to PF ESI. Appeal filed by the assessee is dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

1. Whether the intimation under Section 143(1) issued by the Assistant Director of Income Tax, Centralized Processing Center, Bengaluru, was without jurisdiction.

2. Whether the Commissioner of Income Tax (Appeals) erred in dismissing the appeal as infructuous and non-existent due to the completion of assessment under Section 143(3) of the Act.

3. Whether the doctrine of merger applies to the facts and circumstances of the case.

4. Whether the disallowance of employees' contributions to PF & ESI under Section 36(1)(va) read with Section 43B of the Income Tax Act was justified.

5. Whether the issue of allowability of employees' contributions to PF & ESI within the due date of filing the return of income is a debatable issue and whether such disallowance can be made while processing the return under Section 143(1).

ISSUE-WISE DETAILED ANALYSIS

1. Jurisdiction of Intimation under Section 143(1)

- Legal Framework and Precedents: Section 143(1) of the Income Tax Act allows for the processing of returns and the issuance of intimation based on apparent errors or incorrect claims in the return.

- Court's Interpretation and Reasoning: The Tribunal did not find any jurisdictional error in the issuance of intimation under Section 143(1) by the CPC, Bengaluru.

- Application of Law to Facts: The Tribunal upheld the jurisdiction of the CPC in issuing the intimation.

- Conclusion: The Tribunal found no merit in the assessee's claim of lack of jurisdiction.

2. Dismissal of Appeal as Infructuous

- Legal Framework and Precedents: The doctrine of merger and the procedural aspects of appeal dismissal were considered.

- Court's Interpretation and Reasoning: The Tribunal noted that the CIT(A) dismissed the appeal as infructuous due to the completion of assessment under Section 143(3).

- Application of Law to Facts: The Tribunal found that the CIT(A)'s dismissal was appropriate given the circumstances.

- Conclusion: The Tribunal upheld the dismissal of the appeal as infructuous.

3. Doctrine of Merger

- Legal Framework and Precedents: The doctrine of merger relates to the absorption of a lower court's decision into a higher court's decision.

- Court's Interpretation and Reasoning: The Tribunal found that the doctrine of merger did not apply to the facts of this case.

- Conclusion: The Tribunal rejected the applicability of the doctrine of merger.

4. Disallowance of Employees' Contributions to PF & ESI

- Legal Framework and Precedents: The relevant provisions are Section 36(1)(va) and Section 43B of the Income Tax Act. The Supreme Court decision in Checkmate Services P. Ltd. v. CIT was pivotal.

- Court's Interpretation and Reasoning: The Tribunal relied on the Supreme Court's decision, which held that belated payments of employees' contributions to PF & ESI beyond the due date specified under the respective Acts cannot be allowed as deductions.

- Key Evidence and Findings: The Tribunal noted the delayed payments as per the audit report.

- Application of Law to Facts: The Tribunal applied the Supreme Court's interpretation to uphold the disallowance.

- Conclusion: The Tribunal upheld the disallowance of Rs. 2,02,67,165/- towards employees' contributions to PF & ESI.

5. Debatable Issue of Allowability of Contributions

- Legal Framework and Precedents: The Tribunal considered whether the issue was debatable, referencing the Supreme Court's clear stance.

- Court's Interpretation and Reasoning: The Tribunal found that the issue was not debatable following the Supreme Court's decision.

- Conclusion: The Tribunal dismissed the argument that the issue was debatable.

SIGNIFICANT HOLDINGS

- The Tribunal upheld the jurisdiction of the CPC in issuing the intimation under Section 143(1).

- The Tribunal confirmed the dismissal of the appeal as infructuous by the CIT(A).

- The doctrine of merger was found inapplicable to the case at hand.

- The disallowance of employees' contributions to PF & ESI was upheld based on the Supreme Court's decision in Checkmate Services P. Ltd. v. CIT.

- The Tribunal concluded that the issue of allowability of contributions was not debatable.

Final Determination: The appeal filed by the assessee was dismissed, with the Tribunal affirming the disallowance of employees' contributions to PF & ESI and rejecting the assessee's arguments on all grounds.