2023 (7) TMI 375 - AT - Income Tax

Delayed employees contribution to PF and ESIC - due date for making payment - whether the payments of contribution in the present case were made within 15 days (allowed with further grace period of 5 days) from the close of the respective months during which the disbursement of the salary/wages were actually made? - HELD THAT - As decided in case of The Master Polishers 2023 (4) TMI 1224 - ITAT MUMBAI it will be appropriate if the term every month' specified in Provident Fund scheme, whether it is the month for which salary/wages are due or month of the payment is referred to Relevant Authorities for finding out with reference to any judicial precedent in respect of provisions of the relevant Act. Accordingly, restored this issue back to the file of the AO with the direction to find out from the relevant PF authorities about the term every month' as mentioned in clause 38 of the employees provident fund scheme. Similarly, he may find out from the ESI Authorities. Thus we restore this issue to the file of the AO to decide the issue. Expenses incurred on employees stock option scheme - allowable deduction u/s 37 or not? - HELD THAT - We find that the issue is covered in favour of the assessee in the case of Pr. CIT Vs. Lemon Tree Hotels Pvt. Ltd 2019 (4) TMI 602 - SC ORDER We also notice that the ld. CIT (Appeals) while allowing the claim of the assessee followed the decision of PCIT Vs. Lemon Tree Hotels Pvt. Ltd. 2018 (4) TMI 1680 - DELHI HIGH COURT and also case of CIT Vs. Biocon Ltd 2020 (11) TMI 779 - KARNATAKA HIGH COURT Thus, we see no infirmity in the order passed by the CIT (A) in allowing the claim of ESOP expenses under section 37(1) of the Act. The ground raised by the Revenue is rejected.

Summary

Issues involved:
The judgment involves the following issues:
1. Disallowance of employees' contribution to PF and ESIC under section 43B of IT Act.
2. Disallowance of Employees Stock Option Scheme expenses under section 37 of the Act.

Issue 1: Disallowance of employees' contribution to PF and ESIC under section 43B of IT Act:
The Revenue appealed against the order of the ld. Commissioner of Income Tax (Appeals) regarding the disallowance of employees' contribution to PF and ESIC. The Revenue contended that such disallowance should not have been deleted as the contributions were not made within the due date specified under the relevant Acts. The ld. DR argued that the issue is settled by a Supreme Court decision in the case of Checkmate Services P. Ltd. vs. CIT, where it was held that contributions remitted beyond the due date are not allowable deductions. However, the assessee's counsel referred to interpretations by different Tribunals and requested verification of due dates. The Tribunal decided to restore the issue to the Assessing Officer for further examination based on the directions in a similar Mumbai Tribunal case.

Issue 2: Disallowance of Employees Stock Option Scheme expenses under section 37 of the Act:
Regarding the second issue raised by the Revenue on the allowability of expenses incurred on Employees Stock Option Scheme under section 37 of the Act, the Tribunal found in favor of the assessee. Citing the decision of the Delhi High Court in the case of Pr. CIT vs. Lemon Tree Hotels Pvt. Ltd., the Tribunal held that the expenses were allowable deductions under section 37(1) of the Act. The Tribunal noted that the ld. CIT (Appeals) followed the Delhi High Court decision and a Special Bench Bangalore Tribunal decision, finding no fault in allowing the claim of ESOP expenses. Consequently, the ground raised by the Revenue was rejected.

Conclusion:
In conclusion, the judgment partly allowed the Revenue's appeal for statistical purposes concerning the disallowance of employees' contribution to PF and ESIC, while rejecting the appeal on the disallowance of Employees Stock Option Scheme expenses. The issues were decided based on legal interpretations and precedents, with one issue being restored for further examination by the Assessing Officer.