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TMI Blog2022 (12) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed under the relevant Statutes. The Hon'ble Supreme Court CHECKMATE SERVICES P. LTD. [ 2022 (10) TMI 617 - SUPREME COURT] further held that if this approach and reasoning is adopted then the non-obstante clause u/s 43B or anything contained in that provision would never absolve the assessee-employer from its liability to deposit employees contribution on or before the due date as mentioned in the respective enactments as a condition for deduction. In view thereof, the Hon'ble Apex Court upheld the findings of Hon'ble Gujarat High Court and also stated that the decisions of other Hon'ble High Courts holding to the contrary do not lay down the correct proposition of law. Reverting to the facts of the present case, it is an admitted fact that the payment of employees contribution to the provident fund was made before the due date of filing of return of income u/s 139(1) but beyond the due date as provided in the respective Statutes. Respectfully following the judgment of Hon'ble Supreme Court (supra) we hold that the assessee-employer was duty bound to deposit the employees contribution to provident fund within the due date as mentioned in the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id by the appellant firm. 4. CIT(A) has erred in not adjudicating the Additional Ground raised for not allowing deduction for Education Cess paid by the Appellant company Rs. 2,789/-. 5. Appellant prays for just and equitable relief. 6. Appellant prays to add, alter, amend, take additional grounds, submit additional evidence during appellate proceedings. 2. The first issue involved in this appeal is the disallowance of employees contribution to Provident Fund as well as ESI. It is the case of the assessee that as per various decisions of Pune Tribunal it has been held that if the employees contribution to provident fund is paid before the due date of filing of return of income, then it is deductible as per provisions of section 43B of the Income-tax Act, 1961 (hereinafter referred to as the Act ) and the amendment made by the Finance Act, 2021 inserting Explanation 2 to section 43B is applicable prospectively i.e. from A.Y. 2021-22. Admittedly, in the present case before us, the payment of employee s contribution to provident fund and ESI was before the due date of filing of return of income u/s 139(1) of the Act 3. In the recent past, it has been held by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due date as prescribed under the respective Acts the right to claim such amounts as allowable deduction while computing the income was lost for ever. The assessee s plea was unsuccessful before the I.T.A.T. and ultimately the Hon'ble Gujarat High Court also rejected the plea of the assessee. As noticed earlier, on this issue since there was a division of opinion amongst various Hon'ble High Courts, therefore, Hon'ble Supreme Court granted Special Leave to Appeal in all these cases. It was observed and held by the Hon'ble Supreme Court as follows: 51. The analysis of the various judgments cited on behalf of the assessee i.e., Commissioner of Income-Tax v. Aimil Ltd.; Commissioner of Income-Tax and another v. Sabari Enterprises; Commissioner of Income Tax v. Pamwi Tissues Ltd.; Commissioner of Income-Tax, Udaipur v. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. and Nipso Polyfabriks (supra) would reveal that in all these cases, the High Courts principally relied upon omission of second proviso to Section 43B (b). No doubt, many of these decisions also dealt with Section 36(va)with its explanation. However, the primary consideration in all the judgments, cited by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the assessee s liability. These include liabilities such as tax liability, cess duties etc. or interest liability having regard to the terms of the contract. Thus, timely payment of these alone entitle an assessee to the benefit of deduction from the total income. The essential objective of Section 43B is to ensure that if assessees are following the mercantile method of accounting, nevertheless, the deduction of such liabilities, based only on book entries, would not be given. To pass muster, actual payments were a necessary pre-condition for allowing the expenditure. 53. The distinction between an employer s contribution which is its primary liability under law in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed. 4. In the aforesaid judgment, the Hon'ble Supreme Court has analysed the legal essence of the welfare legislations such as ESI, EPF, etc. which are primarily for the benefit of the employees. The employees hard earned money are contributed to these funds whereby their contributions are given to the employers to be deposited as per these enactments. When the money is given by the employees, the employer is holding that money on behalf of the employees in the manner of good faith and trust. They are not part of the employers income, nor are they heads of deduction per se in the form of statutory pay out. In fact, they are others income, money, only deemed to be income with the object of ensuring that they are paid within the due date specified in that particular statute. Therefore, they have to be deposited in terms of such welfare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Industries Ltd. Vs. Addl. CIT in I.T.A. No. 2184/Kol/2018 dated 26-10-2021 has held that the Education cess is an additional surcharge levied on income-tax and hence it partakes the character of Income-tax. Accordingly, it was held that the Education cess is not allowable as deduction. The Tribunal also noted the judgment rendered by Hon ble Bombay High Court in the case of Sesa Goa Ltd. 117 taxman.com 96 and by Hon ble Rajasthan High Court in the case of Chambalal Fertilizers and Chemicals Ltd. Vs. Jt. CIT (I.T.A No. 52/2018 dated 31-7-2018) wherein it was held that the Education Cess was allowable as deduction. However, the Tribunal observed that the judgment rendered by the Hon ble Supreme Court in the case of CIT Vs. K. Shrinivasan (1972) 83 ITR 346 was not brought to the notice of the Hon ble High Courts. The Tribunal expressed a view that the decision rendered by the Hon ble Supreme Court in the case of K. Shrinivasan (supra) shall prevail on this issue and accordingly held that the Education Cess is not allowable as deduction. Following this proposition of law and on same parity of reasoning the Bangalore Tribunal in the case of Ray Keshavan Associates Pvt. Ltd. Vs. Dy ..... X X X X Extracts X X X X X X X X Extracts X X X X
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