2024 (10) TMI 871 - HC - Income Tax

Delayed employees contribution to Provident Fund and ESI - HELD THAT - Issue covered by the decision of the Supreme Court in the case of Checkmate Services Pvt. Ltd. 2022 (10) TMI 617 - SUPREME COURT as held that share of the employee in the provident fund deducted by the employer, has to be deposited as per the due date fixed by the EPF Act and ESI Act concerned and not as per Section 43B of the Act. There is no leeway with the assessee in depositing of amount of employees contribution under EPF Act and ESI Act, beyond the due date as prescribed by the respective Act. It is only on the deposit in compliance with the provisions of the EPF Act and ESI Act, the retained amount is treated for deduction. Decided against assessee. Disallowance made on account of advance against depreciation deferred - whether same is a head created as an internal arrangement and does not affect the nature of receipts as revenue receipts? - HELD THAT - As decided in National Hydro Electric Power Corporation Ltd. 2010 (1) TMI 281 - SUPREME COURT Advance Against Depreciation was not income received for the relevant accounting year and cannot be carried forward through the Profit and Loss account. The question was answered in favour of the assessee. Department is not in a position to distinguish the decision relied upon - Decided against revenue.

Summary

Issues:
1. Interpretation of provisions related to deduction of employees' share of provident fund and ESI contributions.
2. Effect of late deposit of TDS on claiming deduction of expenditure.
3. Treatment of advance against depreciation deferred as revenue receipt.

Analysis:
1. The appeal involved the interpretation of provisions regarding the deduction of employees' share of provident fund and ESI contributions. The Tribunal had dismissed the appellant's appeal, which led to the current appeal. The Supreme Court's decision in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax was crucial in determining the correct interpretation. The Court held that the due date for depositing employees' contributions under EPF Act and ESI Act must be adhered to for claiming deductions, as per the welfare enactments' provisions. The non-obstante clause in Section 43B of the Income Tax Act does not absolve the employer from the obligation to deposit these amounts on time. The appeal was decided in favor of the appellant-Department based on this interpretation.

2. The issue of the effect of late deposit of TDS on claiming deduction of expenditure was also addressed. The Court referred to the Supreme Court's decision in the case of Checkmate Services Pvt. Ltd. to establish the importance of timely deposits for claiming deductions. It was emphasized that the due date specified in the relevant laws must be followed for such deposits to be considered for deductions. The Court's decision favored the appellant-Department on this issue as well.

3. The treatment of advance against depreciation deferred as a revenue receipt was another significant aspect of the appeal. The respondent relied on the decision of the High Court of Punjab and Haryana in the case of Commissioner of Income Tax, Faridabad Vs. NHPC Ltd. to argue their case. The Court held that the Advance Against Depreciation was not income received for the relevant accounting year and could not be carried forward through the Profit and Loss account. Since the appellant-Department could not distinguish the decision relied upon and refute the acceptance of the decision by the department, the substantial question on this issue was answered against the appellant-Department. Ultimately, the appeal was disposed of based on the Court's findings on these issues.