2018 (1) TMI 73 - AT - Income Tax

Delayed payment of contribution of Employees for P.F. - Held that - Assessee had not deposited said contribution in respective fund account on date as prescribed in Explanation to section 36(1)(va), disallowance made by Assessing Officer was just and proper. See Gujarat State Road Transport Corporation case 2014 (1) TMI 502 - GUJARAT HIGH COURT - Decided against assessee

Summary

Issues:
- Disallowance of payment of contribution of Employees for P.F.
- Interpretation of provisions of Section 36(1)(va) and Section 43B of the Income Tax Act
- Justification for disallowance of the addition of payment
- Applicability of judgments in similar cases
- Appeal against the order of the Commissioner of Income Tax(Appeals)-2, Ahmedabad

Issue 1: Disallowance of Payment of Contribution of Employees for P.F.:
The appeal was against the order confirming an addition of ?1,75,742 as payment of contribution of Employees for P.F. due to late payment. The appellant argued that the payment was made before filing the return under section 139(1) and should not be disallowed. The delay in payments towards Provident Fund/Superannuation Fund was highlighted, and the appellant's explanation was based on the interpretation of Section 36(1)(va) and Section 43B of the Income Tax Act. The appellant relied on various judgments to support the deduction of employees' contributions towards provident fund and ESI even if paid after the due date prescribed under the Provident Fund Act/ESI Act but before the due date of filing the return.

Issue 2: Interpretation of Provisions of Section 36(1)(va) and Section 43B:
The crux of the issue lay in the interpretation of Section 36(1)(va) and Section 43B of the Income Tax Act concerning the deduction of sums contributed to employees' accounts in relevant funds. The amendment by the Finance Act, 2003, and the impact on deductions for employer contributions were discussed. The High Court's consideration of extending the benefit of Section 43B to employees' contributions paid after the due date under the PF law but before the due date for filing the return was pivotal in the argument presented by the appellant.

Issue 3: Justification for Disallowance of the Addition of Payment:
Despite the appellant's contentions and reliance on judgments supporting the deduction of employees' contributions, the Assessing Officer treated the amount as the assessee's income under section 2(24)(x) of the I.T. Act. The learned CIT(A) dismissed the appeal, leading to the appeal before the tribunal. The tribunal upheld the disallowance based on the judgment of the Hon'ble Gujarat High Court, emphasizing the importance of crediting sums received as employees' contributions to the employees' account in the relevant fund before the due date prescribed in Section 36(1)(va).

Issue 4: Applicability of Judgments in Similar Cases:
The appellant relied on various judgments such as CIT Vs. AIMIL Ltd. and CIT Vs. M/s. Kichha Sugar Company Ltd. to support their case. However, the tribunal, following the judgment of the Jurisdictional High Court in the case of Gujarat State Road Transport Corporation, upheld the disallowance made by the AO. The tribunal found no infirmity in the order passed by the learned CIT(A) and subsequently dismissed the appeal filed by the assessee.

In conclusion, the tribunal dismissed the appeal against the order of the Commissioner of Income Tax(Appeals)-2, Ahmedabad, upholding the disallowance of the payment of contribution of Employees for P.F. due to late payment. The interpretation of provisions of Section 36(1)(va) and Section 43B of the Income Tax Act played a crucial role in the decision, supported by relevant judgments and the precedent set by the Hon'ble Gujarat High Court.