2022 (4) TMI 379 - AT - Income Tax

Belated payment of employees contribution of PF u/s 36(1)(va) r.w.s.2(24) - HELD THAT - It is noticed that there is a delay of one or two day in depositing the employees contribution to Provident Fund by the employer assessee when seen with reference to due date of accrual of salary. It is the case of the assessee that the salary also has been paid belatedly and when seen with reference to the actual date of payment of salary, no delay has occurred in depositing the employees contribution to Provident Fund. Thus, the assessee has tried to demonstrate before the CIT(A) towards contribution of the employees to the PF has been deposited by the assessee employer before the due date in terms of interpretation rendered by the decision of Kanoi Paper and Industries Ltd. 2001 (5) TMI 139 - ITAT CALCUTTA-E - We observe that the decision of the Hon ble Gujarat High Court 2014 (1) TMI 502 - GUJARAT HIGH COURT does not apply where the payment has been made on or before the due date. The deduction under s.36(1)(va) in such case is available without any fetters. It may be pertinent to observe that disallowance u/s 43B r.w.s. 36(1)(va) of the Act in respect of non-payment of provident fund etc. within the due date is not intended to cover genuine and routine cases on late payment but only those where the employer has mis-utilized the funds collected from the assessee. Addition/disallowance u/s 43B of the Act for such delay of bare one or two days in depositing the employees provident fund would thus be wholly disproportionate to the default committed, if any. Thus, seen from any angle, the addition/disallowance under s. 36(1)(va) r.w.s. 2(24)(x) of the Act is not justified in the instant case. - Appeal of assessee allowed.

Summary

Issues:
1. Addition of late payment of Provident Fund under s.36(1)(va) for AY 2013-14.
2. Similar issue for AY 2014-15 under s.43B.

Analysis:

Issue 1: Addition of late payment of Provident Fund under s.36(1)(va) for AY 2013-14
The appeal was filed against the order of the CIT(A) concerning the assessment order passed by the AO for AY 2013-14. The primary issue was the addition of ?30,31,719 on account of late payment of Provident Fund under s.36(1)(va) of the Income Tax Act, 1961. The assessee contended that the contribution to PF was deposited before the due date, even though there was a delay in depositing employees' contribution when seen with the accrual date of salary. The ITAT observed that the deduction under s.36(1)(va) is available without any fetters if the payment is made on or before the due date. Disallowance under s.43B is not intended for genuine cases of late payment but for mis-utilization of funds. The ITAT held that the addition/disallowance under s.36(1)(va) was not justified in this case, and thus, allowed the appeal.

Issue 2: Similar issue for AY 2014-15 under s.43B
The issue for AY 2014-15 was similar to that of AY 2013-14, involving an addition/disallowance under s.43B, amounting to ?30,31,719 further enhanced to ?38,75,050 by the CIT(A). The ITAT, in line with its reasoning for AY 2013-14, directed the deletion of the addition/disallowance under s.43B. The order of the CIT(A) was set aside, and the addition made by the AO was reversed, resulting in the allowance of the appeal for AY 2014-15 as well.

In conclusion, both appeals of the assessee were allowed by the ITAT, emphasizing the importance of timely deposit of Provident Fund contributions and distinguishing genuine cases of delay from mis-utilization of funds. The judgments were pronounced on 24/11/2021 by the ITAT Ahmedabad.