2015 (10) TMI 308 - AT - Income Tax

Disallowance of Employees Contribution to Provident Fund and Employees State Insurance Contribution paid belatedly - delays in payments ranging from two days to nine days from the due date of payments including grace period - Held that - In view of the undisputed fact that the Employees share of contribution of Provident fund and ESIC was paid after the prescribed due date, and following the decision in the case of Gujarat State Road Transport Corporation (2014 (1) TMI 502 - GUJARAT HIGH COURT) wherein held that the payment of employees contribution is only allowable if the same is paid before the due date, we find no reason to interfere with the order of CIT(A) - Decided against assessee.

Summary

Issues:
- Disallowance of Employees' Contribution to Provident Fund and Employees' State Insurance Contribution
- Condonation of delay in filing the appeal
- Interpretation of Section 36(1)(va) and Section 43B
- Applicability of judicial precedents

Issue 1: Disallowance of Employees' Contribution to Provident Fund and Employees' State Insurance Contribution:
The Assessee, engaged in manufacturing, filed its return for A.Y. 2006-07 with a declared income of Rs. Nil. The Assessing Officer (A.O) disallowed the delayed payment of Rs. 3,52,876 towards Provident Fund and ESIC contributions, citing Section 36(1)(va) of the Act. The CIT(A) upheld the disallowance, emphasizing that Section 43B does not apply to employee contributions, which are only allowable if paid within due dates under relevant Acts. The Assessee argued for deduction based on prior judicial decisions, but the Tribunal dismissed the appeal, following the Gujarat High Court's ruling that contributions must be paid before the due date for deduction eligibility.

Issue 2: Condonation of delay in filing the appeal:
The Assessee requested condonation of a 76-day delay in filing the appeal, providing reasons for the delay, which the Tribunal accepted after considering the explanation and admitted the appeal for hearing.

Issue 3: Interpretation of Section 36(1)(va) and Section 43B:
The Tribunal analyzed the interplay between Section 36(1)(va) and Section 43B, emphasizing that employee contributions are only allowable if paid within due dates specified in relevant Acts. The Tribunal rejected the Assessee's argument to follow a later Karnataka High Court decision, asserting the binding nature of the Gujarat High Court's ruling on the jurisdiction. The Tribunal concluded that since the employee contributions were paid after the prescribed due date, the disallowance was justified under Section 36(1)(va).

Issue 4: Applicability of judicial precedents:
The Assessee relied on various judgments to support its claim for deduction of delayed contributions. However, the Tribunal primarily considered the Gujarat High Court's decision and rejected the Assessee's plea to follow a later Karnataka High Court ruling, emphasizing the binding nature of decisions from the jurisdictional High Court.

In conclusion, the Tribunal dismissed the Assessee's appeal, upholding the disallowance of delayed contributions to Provident Fund and ESIC based on Section 36(1)(va) and the Gujarat High Court's interpretation, despite arguments citing conflicting judicial precedents. The Tribunal's decision focused on the statutory provisions and the binding nature of jurisdictional High Court rulings in such matters.