2024 (6) TMI 1277 - AT - Income Tax

Disallowance of delayed payment of PF ESI - reckoning of due date of payment - difference of due date for deposit of employees contribution is same as due date for deposit of employer s contribution - CIT(A) confirming the addition of employee contribution to PF/ESI U/s 36(1)(va) when the due date of making payment from 15 days from the close of the month is to be reckoned from the date of payment of salary/wages to employees and not from the date when salaries become due. HELD THAT - The issue is covered by the decision of the Hon ble Supreme Court in the case of Checkmate Services Pvt. Ltd. 2022 (10) TMI 617 - SUPREME COURT . Accordingly the entire amount will be disallowed. In our considered view that It has finally been held by Hon ble Apex Court there is clear distinction between employer s contribution which is its primary liability under law in terms of Section 36(1)(iv) and its liability to deposit amounts received by it or deducted by it from its employees in terms of Sec. 36(1)(va). The former part is the employers income and the later retains its character as an income (albeit deemed) by virtue of Section 2(24)(x) and therefore subjected to conditions spelt out by Explanation to Section 36(1)(va) i.e. depositing such amount received or deducted from the employee on or before the due date. This marked distinction has been clarified while interpreting the obligation of every assessee under Section 43B. If the same is not deposited as per mandate of Sec.36(1)(va) the deduction of the same would not be available to the assessee. Decided against assessee.

Summary

Issues:
Appeal against order of Ld. Commissioner of Income-tax (Appeals) confirming addition made in intimation U/s 143(1) for assessment year 2019-20; Addition of Rs. 40,91,341/- for delay in depositing Employees Contribution to Provident Fund and Employees State Insurance; Confirmation of addition of employee contribution to PF/ESI U/s 36(1)(va); Violation of principles of natural justice in assessment order; Interpretation of due date for payment of employees' contribution to Social Security Schemes for tax deduction.

Analysis:
The appeal was filed against the order of Ld. Commissioner of Income-tax (Appeals) confirming the addition made in the intimation U/s 143(1) for the assessment year 2019-20. The impugned order originated from the order of the AO passed U/s 143(1) of the Income Tax Act, 1961. The grounds of appeal included contentions regarding the lawfulness and arbitrariness of the addition made, invoking provisions of section 43B of the Act for delay in depositing Employees Contribution to Provident Fund and Employees State Insurance. The due date for making payment was a point of contention, with the appellant arguing that the due date should be reckoned from the date of payment of salary/wages to employees, not when salaries become due.

The absence of the assessee during the hearing led to the matter being disposed of ex-parte after hearing the ld. D/R. The facts revealed that the assessee's return was processed, and the amount disallowed and added back on account of delayed payments towards employees' contribution to PF&ESI. The appeal before the ITAT challenged the assessment order upheld by the ld. CIT(A), citing arguments based on the retrospective amendment and interpretation of due dates for payment of employees' contribution to Social Security Schemes.

The ITAT considered the arguments presented by the ld. D/R, emphasizing the distinction between employer's contribution and employees' contribution in terms of their liability and character. Referring to the decision of the Hon'ble Supreme Court in a similar case, the ITAT upheld the view against the assessee, following the precedent set by previous ITAT and the Apex Court. The ruling highlighted the importance of depositing employees' contributions by the statutory due date for claiming tax deduction under Section 36(1)(va) of the Act. Consequently, the appeal of the assessee was dismissed, affirming the decision of the ld. CIT(A) and the revenue's stance on the issue.

In conclusion, the ITAT dismissed the appeal, holding that the distinction between employer's and employees' contributions, along with the statutory due date for depositing employees' contributions, was crucial in determining the availability of tax deductions. The decision aligned with the interpretation provided by the Hon'ble Supreme Court and previous ITAT rulings, emphasizing the significance of complying with statutory obligations for claiming deductions under the Income Tax Act, 1961.