2023 (4) TMI 332 - AT - Income Tax

Late remittance of employees contribution to P.P. E.S.LC. u/s. 36(l)(va) r.w.s. 2(24(x) - disallowance under section 143(1)(a) - HELD THAT - ITAT held that disallowance under section 143(1)(a) was valid in view of Supreme Court s decision in case of Checkmate Services (P.) Ltd. 2022 (10) TMI 617 - SUPREME COURT and the assessee will not be entitled to deduction of belated payment of ESI and PF of employees share of contribution as per provisions of section 36(1)(va) - jurisdictional High Court decision in case of Gujarat State Road Transportation Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT wherein it was held that where assessee did not deposit employees contribution to employees account in relevant fund before due date prescribed in Explanation to section 36(1)(va) no deduction would be admissible even though he deposits same before due date under section 43B of the Act - Decided against assessee.

Summary

Issues Involved:
The appeal against the order of the Commissioner of Income Tax (Appeals)-2, Ahmedabad, regarding addition on account of late remittance of employees' contribution to P.P. & E.S.I.C. u/s. 36(1)(va) r.w.s. 2(24)(x) for the assessment year 2016-17.

Summary:
The assessee appealed against the addition made by the Assessing Officer on account of late remittance of employees' contribution to PF and ESIC u/s 36(1)(va) of the Act, which was confirmed by the Ld. CIT(Appeals). The issue was clarified by the Supreme Court in the case of Checkmate Services (P.) Ltd. for assessment years prior to AY 2021-22, emphasizing the distinction between the nature of employer's and employee's contributions. The Supreme Court held that the non obstante clause under section 43B could not apply to employee's contributions held in trust, and failure to deposit such contributions on time would not absolve the employer from liability. The decision was further supported by the case of Harrisons Malayalam Ltd. where deduction under section 36(1)(va) was disallowed for late payment of employees' contributions. The ITAT also upheld the disallowance in a recent case involving belated payments of ESI and PF contributions. Previous decisions by the Gujarat High Court and other tribunals were cited to support the dismissal of the appeal based on non-compliance with the statutory requirements regarding employees' contributions.

Decision:
In line with the Supreme Court rulings and precedents, the appeal of the assessee was dismissed, affirming the addition on account of late remittance of employees' contribution to PF and ESIC.