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2023 (7) TMI 168 - AT - Income TaxAddition u/s 36(1)(va) r.w.s. 2(24)(x) - delayed deposit of employees contribution to PF/ESI i.e. after the due date as provided under the respective welfare enactments - Who's duty to deposit contribution? - HELD THAT - Once the employee has earned basic wages, the Act under Section 6 r/w Para 30, 32 38 of the Scheme casts a duty upon the employer to deposit the contribution with the Employees Provident Fund Organisation. As per Para 30 of the Scheme, the employer at the first instance has to pay both the contribution payable by himself and also on behalf of the member employed by him. Under Para 32, the employer is authorised before paying the member employee his wages to deduct the employee's contribution from his wages. As per para 38 of the Employees' Provident Funds Scheme prescribes mode of payment, the employer is required to remit both the employees' as well as the employer's share of contributions together with administrative charges thereon before the close of the 15th of every month electronically through internet banking of the authorised banks, portal etc. Para 38 of the scheme is to be read in consonance with the Para 30 and 32 of the Scheme along with relevant provisions of the EPF Act, 1952. The Employees Provident Fund and Miscellaneous Provisions Act, 1952 is a beneficial piece of legislation for providing social security to the employees and their families and casts an obligation upon the employer to make compulsory deduction for provident fund and to deposit in the workers account in the EPF office. The initial responsibility for making payment of the contribution of the employer as well as of the employee, lies on the employer, however, the employer is authorised before paying the member employee his wages in respect of any period or part of period for which contributions are payable, to deduct the employee's contribution from his wages. The issue is squarely covered against the assessee by the decisions of CHECKMATE SERVICES P. LTD. 2022 (10) TMI 617 - SUPREME COURT and many High Courts of the country. There is no merit in the appeal of the assessee, the same is accordingly, hereby dismissed.
Issues Involved:
1. Disallowance made under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act for delayed deposit of employees' contribution to PF/ESI. Summary: Issue 1: Disallowance under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act The sole issue in this appeal concerns the disallowance made by the Assessing Officer/Central Processing Centre (CPC) under Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act due to the delayed deposit of employees' contribution to PF/ESI beyond the due date specified under the respective welfare enactments. The Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC) clarified that the deduction under Section 36(1)(va) for delayed deposit of employees' contribution to PF cannot be claimed even if deposited within the due date of filing the return as per Section 43B. The amounts received or deducted by an employer under Section 36(1)(va) are deemed income by virtue of Section 2(24)(x) unless deposited by the due date specified under the respective enactments. Issue 2: Retrospective Application of Supreme Court Decisions The law declared by the Supreme Court has retrospective effect unless stated otherwise. Previous decisions of High Courts favoring the assessee are considered non-existent or wiped out by the Supreme Court's latest decision. This principle is supported by various Supreme Court rulings, including Ramdas Bhikaji vs. Sadananda, Manoj Parihar vs. State of Jammu & Kashmir, PV George vs. State of Kerala, and Assistant Commissioner vs. Saurashtra Kutch Stock Exchange Ltd. Issue 3: Determination of Due Date for Deposit of Employees' Contribution The assessee argued that the due date for depositing employees' contribution to PF should be calculated from the date of actual disbursement of salary. The assessee contended that the due date should be the 15th of the month following the month in which the salary is disbursed, not the month in which the salary is due. The assessee's counsel submitted that if the salary is disbursed on the 7th of the subsequent month, the due date for PF contribution should be the 15th of the following month. Issue 4: Legal Provisions and Interpretation The relevant provisions of the Employees Provident Funds Miscellaneous Provisions Act, 1952, and the Employees' Provident Fund Scheme, 1952, were examined. The employer is required to deduct the employee's contribution from wages and deposit it along with the employer's contribution within 15 days of the close of every month. This interpretation aligns with the purpose of the welfare statute, which aims to provide social security to employees. Issue 5: Judicial Precedents and Tribunal Decisions The Tribunal referred to various judicial precedents, including the Supreme Court's decision in Organo Chemical Industries vs. Union of India and the Madras High Court's decision in Presidency Kid Leathers (P) Ltd. vs. Regional Provident Fund. These decisions emphasized the employer's responsibility to deposit contributions within the specified time frame, irrespective of the actual payment of wages. The Tribunal concluded that the assessee's contention regarding the due date for PF contribution lacks merit. The issue is squarely covered against the assessee by the decisions of the Supreme Court and various High Courts. Accordingly, the appeal of the assessee was dismissed. Conclusion: The appeal was dismissed, and the disallowance made under Section 36(1)(va) read with Section 2(24)(x) for delayed deposit of employees' contribution to PF/ESI was upheld. The Tribunal emphasized the retrospective application of the Supreme Court's decision and the employer's obligation to deposit contributions within the specified time frame.
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