2022 (1) TMI 828 - AT - Income Tax

Addition u/s 36(1)(va) - late deposit of PF ESI - HELD THAT - Issue decided in favour of assessee as relying on PRO INTERACTIVE SERVICE (INDIA) PVT. LTD. 2018 (9) TMI 2009 - DELHI HIGH COURT and AIMIL LIMITED 2009 (12) TMI 38 - DELHI HIGH COURT as held the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee s Provident Fund (EPD) and Employee s State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x) - Decided against revenue.

Issues Involved:
1. Liability to pay tax, cess, and interest.
2. Addition of ?1,34,148/- under Section 36(1)(va) for late deposit of PF/ESI.
3. Charging of interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Liability to Pay Tax, Cess, and Interest:
The appellant denied its liability assessed by the Assessing Officer and consequently denied its liability to pay the demanded tax, cess, and interest. However, this ground was not pressed during the hearing as the CPC's rectification order dated 15.06.2019 provided relief to the appellant. Therefore, this ground was dismissed as not pressed.

2. Addition of ?1,34,148/- under Section 36(1)(va) for Late Deposit of PF/ESI:
The primary issue in the appeal was the addition of ?1,34,148/- made under Section 36(1)(va) of the Income Tax Act for the late deposit of PF/ESI contributions. The appellant's return of income was processed by the CPC, Bangalore, resulting in an addition of ?1,34,148/- due to the late deposit of employee contributions to PF/ESI.

The appellant argued that the addition was bad in law and should be deleted. However, the CIT(A) upheld the addition, stating that the relevant provisions of the Income Tax Act were clear. According to Section 36(1)(va), any sum received by the assessee from employees as contributions to any provident fund or superannuation fund must be credited to the employee's account in the relevant fund on or before the due date. The due date is defined as the date by which the employer is required to credit the employee's contribution under any Act, rule, order, or notification.

The CIT(A) referenced the decision of the Hon'ble Delhi High Court in CIT vs Bharat Hotels Ltd. [2019] 103 Taxmann.com 295 (Delhi), which held that the assessee is not entitled to claim deductions for contributions made beyond the stipulated period. The ITAT also relied on this decision, emphasizing that the employer must deposit the contributions within the due date to claim deductions.

The Tribunal, after considering the material on record and the decisions of the authorities below, upheld the CIT(A)'s decision. The Tribunal noted that the issue was covered by the judgment of the Hon'ble Delhi High Court in the case of AIMIL Ltd., which allowed deductions if the actual payment was made before the return was filed. However, in this case, the contributions were deposited after the due date, and thus, the assessee was not entitled to the deduction. Therefore, the addition of ?1,34,148/- was confirmed.

3. Charging of Interest under Sections 234A, 234B, and 234C:
The appellant contested the charging of interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961. However, this ground was also not pressed during the hearing as the CPC's rectification order provided relief to the appellant. Consequently, this ground was dismissed as not pressed.

Conclusion:
Based on the above analysis, the Tribunal upheld the addition of ?1,34,148/- under Section 36(1)(va) for the late deposit of PF/ESI contributions and dismissed the grounds related to the liability to pay tax, cess, and interest, as well as the charging of interest under Sections 234A, 234B, and 234C, as not pressed. The appeal of the assessee was allowed in part, with the specific ground related to the late deposit of PF/ESI contributions being dismissed. The order was pronounced in the open Court on 04th January, 2022.

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