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Income Tax Appellate Tribunal, JABALPUR BENCH ‘DB’, JABALPUR
Before: Dr. B. R. R. KumarSh. Yogesh Kumar US
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by assessee against the order of ld. NFAC/CIT(A), New Delhi dated 20.03.2023.
The assesse has raised the following grounds of appeal are as under:-
1. The learned CIT (Appeal) has erred in holding that due date as prescribed in section 36(1) (VA) and section 2(24) (x) were applicable to assessee.
2. The learned CIT (Appeal) failed to consider the various judgments especially the same issue as decided by the ITAT Jabalpur and Hon'ble MP High Court in the own case of assessee/appellant.
3. The learned CIT (Appeal) quoted the Hon'ble Supreme Court judgement and order of ITAT Mumbai which are all together not applicable to assessee and are irrelevant.
4. The learned CIT (Appeal) failed to appreciate that the amendments made to section 36 and 43B by the Finance Act, 2021 is in the nature of clarification/explanation about 'due date' whereas due date is not applicable to the assessee.
5. The learned CIT (Appeal) decided the appeal in stereo type manner within three days of filing of submission without going
MP Power Management Co. Ltd. through the submission filed, argument advanced and jurisdictional judgment of assessee's own case relied on by the appellant.
At the outset, the ld. Senior DR brought to our notice that the issue involved has been squarely covered by the order of the Hon'ble Apex Court. Hence, the Tribunal proceeded to conclude the hearing.
For the sake of ready reference the relevant portion of ld. CIT(A) is reproduced as under:- “Therefore, respectfully following the decision of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT as well as recent judgment of the Hon'ble ITAT, 'D' Bench, Mumbai in the case of Deutsche India Pvt. Ltd.(Earlier Known as DBOl Global Service Private Limited) vs. ADIT (CPC) , the sum of Rs. 6,19,57,740/- being the employee's contribution to the PF and ESI, not deposited by the appellant within the due date as per section 36(1)(va) of the I.T. Act, 1961, cannot be allowed and accordingly the solitary ground taken by the appellant is rejected. ”
The issue of payment of employees contribution to the PF&ESI and deposit thereof the issue of ESI/PF payment has attained finality by the order of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT-I, vide order dated 12th October, 2022 wherein it was observed that employers have to deposit the employee's contribution towards EPF/ESI on or before the due date for availing deduction . In the cases before the Hon’ble Apex Court, the employers had belatedly deposited their employees' contribution towards the EPF and ESI, considering the due dates under the relevant provisions of the Act. The Assessing Officer ruled that by virtue of Section 36(1)(va) read with Section 2(24)(x) of the IT Act, such sums received by the appellants constituted "income". It was held that those amounts could not have been allowed as deductions under Section 36(1)(va) of the IT Act when the MP Power Management Co. Ltd. payment was made beyond the relevant due date under the respective acts. The Income Tax Appellate Tribunal and later the Gujarat High Court dismissed the chal lenge against this order of AO. In appeal, the court noted that the Hon’ble Kerala High Court has also ruled in favour of revenue on this issue whereas the Hon’ble High Courts of Bombay, Himachal Pradesh, Calcutta, Guwahati and Delhi have favoured the interpretation beneficial to the assessee. The Hon’ble Apex Bench effectively reversed the judgment in Commissioner of Income Tax vs. Alom Extrusions Ltd. (1 SCC 489) relied upon by the assessee.
The Hon’ble Apex Court in the case of “Checkmate Services P. Ltd. vs. Commissioner Of Income Tax-I in CA No. 2833/2016” vide order dated 12.10.2022 observed that there is a marked distinction between the nature and character of the two amounts viz., the employers’ contribution and employees’ contribution required to be deposited by the employer. The first one is the employer’s liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees’ income and held in trust by the employer. The Hon’ble Apex Court held as under:
"In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43 B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made MP Power Management Co. Ltd. beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions- which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non- obstante clause under Section 43 B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction."
As the issue of payment of employee’s contribution towards the PF has been ruled against the assessee by the Hon’ble Supreme Court, the appeal of the assessee on this ground is liable to be dismissed.