2021 (9) TMI 225 - AT - Income Tax

Employee's contribution to P.F. and ESI - amount was not paid within the due dates specified u/s. 36(i)(va) - HELD THAT - As in the case of Gujarat Road Transport Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT held that assessee is entitled for the deduction only if the amount is credited to the relevant funds before the due date, therefore, respectfully following the decision of the Hon'ble Gujarat High Court as referred above, we do not find any infirmity in the decision of the CIT(A). Therefore, this ground of appeal of the assessee is dismissed. Charging of interest u/s. 234B and u/s. 234C - HELD THAT - Against charging the aforesaid interest, the assessee has filed appeal before the ld. CIT(A) and requested to direct the Assessing Officer to charge interest under the aforesaid sections in accordance with the provision of the Act. Without reiterating the facts as mentioned above, we direct the Assessing Officer to examine the issue of computing interest u/s. 234B and 234C after examination of the submission of the assessee in accordance with the provision of section 234B and 234C of the Act respectively. Accordingly, this ground of appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Disallowance of employee's contribution to ESI/EPF under section 36(1)(va) of the Income Tax Act, 1961.
2. Charging of interest under section 234B and 234C.

Issue 1: Disallowance of employee's contribution to ESI/EPF under section 36(1)(va) of the Income Tax Act, 1961:

The case involved an appeal for the assessment year 2015-16 where the Assessing Officer disallowed the delayed payment of employee's contribution towards ESI/EPF amounting to ?14,80,156. The disallowance was made based on the provision of section 36(1)(va) read with section 2(24)(x) of the Income Tax Act, stating that the deduction is allowable only if the sum is credited to the employee's account in the relevant fund before the due date. The CIT(A) dismissed the appeal of the assessee, citing a decision of the Hon'ble Jurisdictional High Court of Gujarat where it was held that the deduction is permissible only if the amount is credited before the due date. Consequently, the ITAT upheld the decision of the CIT(A) and dismissed the appeal concerning the disallowance of employee's contribution to ESI/EPF.

Issue 2: Charging of interest under section 234B and 234C:

The Assessing Officer charged interest under section 234B amounting to ?20,13,204 and under section 234C amounting to ?8,15,197 during the assessment. The assessee appealed to the CIT(A) requesting the proper application of interest calculation under the relevant sections. However, the CIT(A) did not provide specific directions on this matter. Upon review, the ITAT directed the Assessing Officer to re-examine the computation of interest under sections 234B and 234C in accordance with the submissions of the assessee and the provisions of the Act. Consequently, the ITAT allowed this ground of appeal for statistical purposes, partially allowing the appeal of the assessee.

In conclusion, the ITAT upheld the disallowance of employee's contribution to ESI/EPF under section 36(1)(va) and directed a re-examination of the charging of interest under sections 234B and 234C, allowing the appeal partially for statistical purposes.