MILLENNIUM HERBAL CARE LTD,MUMBAI vs. ACIT CIRCLE 3(2) (1), MUMBAI

The present appeal has been filed by the assessee challenging the impugned order dated 02/12/2021, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2017–18.

Millennium Herbal Care Ltd. ITA no.2325/Mum./2021 ex–parte, qua the assessee after hearing the learned Departmental Representative (“learned DR”) and on the basis of material available on record.

“1. The learned CIT(A) has erred in law and on the facts of the case in sustaining the disallowance of Rs.2,38,889, under section 36 of the Act. 2. The assessee craves leave to add, alter or amend the above ground of appeal.”

5. The only dispute raised by the assessee is against the disallowance on account of delayed payment of employees’ contribution to Provident Fund (P.F)/Employees State Insurance Corporation (E.S.I.C) under section 36(1)(va) of the Act.

6. The brief facts of the case as emanating from the record, are: The assessee is a private limited company. For the year under consideration, the assessee filed its return of income declaring a total income of Rs.75,40,880. The said return of income was processed vide intimation dated 18/03/2019 issued under section 143(1) of the Act computing the total income of the assessee at Rs.78,05,620, inter-alia, after making disallowance of Rs.2,38,889, on account of delayed payment of employees’ contribution to P.F./ E.S.I.C. under section 36(1)(va) of the Act. Vide impugned order, the Page | 2

Millennium Herbal Care Ltd. ITA no.2325/Mum./2021 learned CIT(A) dismissed the appeal filed by the assessee and upheld the disallowance made under section 36(1)(va) of the Act. Being aggrieved, the assessee is in appeal before us.

Millennium Herbal Care Ltd. ITA no.2325/Mum./2021 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 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 43B 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.”