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Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
This appeal by the assessee is directed against order dated 23.08.2021 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2018-19. The appeal was originally adjudicated on 20.05.2022, however subsequently on the Miscellaneous Application filed by the Revenue, the appeal has been recalled by the order of the Tribunal dated 13.04.2023 passed in MA No. 405/Mum/2022, and thus this appeal came before us for hearing. The grounds raised by the asse hearing. The grounds raised by the assessee are reproduced as ssee are reproduced as under:
On facts and in law, the Ld. Commissioner of Income On facts and in law, the Ld. Commissioner of Income- On facts and in law, the Ld. Commissioner of Income tax Appeals (hereinafter referred to as Ld. CIT-A) had tax Appeals (hereinafter referred to as Ld. CIT tax Appeals (hereinafter referred to as Ld. CIT erred in confirming the disallowance of Rs.10,09,648/- erred in confirming the disallowance of Rs.10,09,648/ erred in confirming the disallowance of Rs.10,09,648/ being belated payment of PF/ESIC u/s 36(1)(va) of the being belated payment of PF/ESIC u/s 36(1)(va) of the being belated payment of PF/ESIC u/s 36(1)(va) of the Income Income-tax Act.
On facts and in law, the Ld. CIT(A) erred in not On facts and in law, the Ld. CIT(A) erred in not On facts and in law, the Ld. CIT(A) erred in not appreciating that the amendment made by Finance appreciating that the amendment made by Finance appreciating that the amendment made by Finance Act, 2021 is prospective in nature under the facts and Act, 2021 is prospective in nature under the facts and Act, 2021 is prospective in nature under the facts and circumstances, the addition of Rs.10,09,648/- ought to circumstances, the addition of Rs.10,09,648/ circumstances, the addition of Rs.10,09,648/ have been deleted. have been deleted. 2. Before us, the Ld. Counsel of the assessee admitted that Before us, the Ld. Counsel of the assessee admitted that Before us, the Ld. Counsel of the assessee admitted that employees contribution to PF/ESI deposited after due date under employees contribution to PF/ESI deposited after due date under employees contribution to PF/ESI deposited after due date under the relevant Acts is not allowable as deduction u/s 36(1)(va) of the is not allowable as deduction u/s 36(1)(va) of the is not allowable as deduction u/s 36(1)(va) of the Act in view of decision of the Hon’ble Supreme Court in the case of Act in view of decision of the Hon’ble Supreme Court in the case o Act in view of decision of the Hon’ble Supreme Court in the case o Checkmate Services Pvt. Ltd. v. CIT reported in 143 Checkmate Services Pvt. Ltd. v. CIT reported in 143 Checkmate Services Pvt. Ltd. v. CIT reported in 143 taxmann.com 178. . However, the Ld. Counsel before us submitted However, the Ld. Counsel before us submitted that as per the clause 38 of the Provident Fund Scheme, the that as per the clause 38 of the Provident Fund Scheme that as per the clause 38 of the Provident Fund Scheme employee’s contribution to the provident fund is required to be contribution to the provident fund is required to be contribution to the provident fund is required to be deposited 15 days from the close of s from the close of every month. He submitted that month. He submitted that the term “every month every month” under the clause 38 of the employee under the clause 38 of the employee’s provident fund scheme 1952 should be read as the month of provident fund scheme 1952 should be read as the month of provident fund scheme 1952 should be read as the month of payment of the salary payment of the salary, which is a month subsequent to the month which is a month subsequent to the month for which salary was paid. In support of contention, the Ld. Counsel for which salary was paid. In support of contention, the Ld. Counsel for which salary was paid. In support of contention, the Ld. Counsel relied on the decision of the Tribunal in the case of “ the Master relied on the decision of the Tribunal in the case of relied on the decision of the Tribunal in the case of Polishers” in for assessment year 2020 in ITA No. 252/Mum/2023 for assessment year 2020-21, in ITA No. 252/Mum/2023 for assessment year 2020 wherein the Tribunal has restored the matter back to the file of the ibunal has restored the matter back to the file of the ibunal has restored the matter back to the file of the Assessing Officer for deciding the term every month. Assessing Officer for deciding the term every month. Assessing Officer for deciding the term every month.
We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The issue in dispute and perused the relevant material on record. dispute and perused the relevant material on record. dispute before us is regarding the due date before which the s is regarding the due date before which the s is regarding the due date before which the employee’s contribution should be deposited into provident fund contribution should be deposited into provident fund contribution should be deposited into provident fund account. The Ld. Counsel of the assessee has referred to clause 38 account. The Ld. Counsel of the assessee has referred to clause 38 account. The Ld. Counsel of the assessee has referred to clause 38 of the employee’s provident fund which reads that provident s provident fund which reads that provident s provident fund which reads that provident contribution fund are payable to central government within 15 days e payable to central government within 15 days e payable to central government within 15 days of the close of every month. The Ld. Counsel has referred to the of the close of every month. The Ld. Counsel has referred to the of the close of every month. The Ld. Counsel has referred to the decision of the Co-ordinate Bench of the Tribunal (Kolkata) Bench ordinate Bench of the Tribunal (Kolkata) Bench ordinate Bench of the Tribunal (Kolkata) Bench in the case of Kanoi Paper and Industries Ltd ACIT in Kanoi Paper and Industries Ltd ACIT in Kanoi Paper and Industries Ltd ACIT in ITA No. 1260/Mum/1996. T . The Tribunal in the case of Master Polishers he Tribunal in the case of Master Polishers (supra) has referred to the said finding. For ready reference, said (supra) has referred to the said finding. For ready reference, said (supra) has referred to the said finding. For ready reference, said finding is reproduced as under: finding is reproduced as under:
“6. Clause 38 of the Employees' Provident Fund Scheme, 6. Clause 38 of the Employees' Provident Fund Scheme, 6. Clause 38 of the Employees' Provident Fund Scheme, 1952, fixes the time limit for making payment in respect 1952, fixes the time limit for making payment in respect 1952, fixes the time limit for making payment in respect of contribution to the provident fund to be 15 days from of contribution to the provident fund to be 15 days from of contribution to the provident fund to be 15 days from the close of the month concerned. However, the issue the close of the month concerned. However, the issue the close of the month concerned. However, the issue here is whether the "month" should be considered to be here is whether the "month" should be considered to be here is whether the "month" should be considered to be the month to which the wages relates or the month in the month to which the wages relates or the month in the month to which the wages relates or the month in which the actual disbursement of the w which the actual disbursement of the wages is made, we ages is made, we are of the considered opinion that the expression "month" are of the considered opinion that the expression "month" are of the considered opinion that the expression "month" should should should mean mean here mean here here the the the month month month during during during which which which the the the wages/salary is actually disbursed irrespective of month wages/salary is actually disbursed irrespective of month wages/salary is actually disbursed irrespective of month to which the same relates. Thus, the scheme of the to which the same relates. Thus, the scheme of the to which the same relates. Thus, the scheme of the government in this regard is government in this regard is that once a deduction is that once a deduction is made in respect of the employees' contribution to the made in respect of the employees' contribution to the made in respect of the employees' contribution to the provident fund from the salary/wages of the employee or provident fund from the salary/wages of the employee or provident fund from the salary/wages of the employee or the employer also makes his contribution, factually at the the employer also makes his contribution, factually at the the employer also makes his contribution, factually at the time of disbursement of the salary the payment in respect time of disbursement of the salary the payment in respect time of disbursement of the salary the payment in respect of such contribution should be made forthwith. If for some uch contribution should be made forthwith. If for some uch contribution should be made forthwith. If for some reason or other the payment of salary for a particular reason or other the payment of salary for a particular reason or other the payment of salary for a particular month be held up for considerable period of time it cannot month be held up for considerable period of time it cannot month be held up for considerable period of time it cannot be said that the employer would be liable to make be said that the employer would be liable to make be said that the employer would be liable to make payments in respect of the "employer' payments in respect of the "employer's" as well as s" as well as "employees" contribution in respect of wages for such "employees" contribution in respect of wages for such "employees" contribution in respect of wages for such period within a period of 15 days from the close of the period within a period of 15 days from the close of the period within a period of 15 days from the close of the month to which the wages relates. On the other hand, in month to which the wages relates. On the other hand, in month to which the wages relates. On the other hand, in our view, most appropriate interpretation would be that our view, most appropriate interpretation would be that our view, most appropriate interpretation would be that the employer would b the employer would be at liberty to make payment of the e at liberty to make payment of the contribution concerned within 15 days (subject however contribution concerned within 15 days (subject however contribution concerned within 15 days (subject however to the further grace period) from the end of the month to the further grace period) from the end of the month to the further grace period) from the end of the month during which the disbursement of the salary is actually during which the disbursement of the salary is actually during which the disbursement of the salary is actually made and the contribution of the, provident fund are, made and the contribution of the, provident fund are, made and the contribution of the, provident fund are, thus, generated, inasmuch as, the provision relating to thus, generated, inasmuch as, the provision relating to thus, generated, inasmuch as, the provision relating to the disallowance of such contribution on account of delay the disallowance of such contribution on account of delay the disallowance of such contribution on account of delay is rather an artificial provision. In our view, a liberal is rather an artificial provision. In our view, a liberal is rather an artificial provision. In our view, a liberal approach has got to be made to this issue. Ultimately, approach has got to be made to this issue. Ultimately, approach has got to be made to this issue. Ultimately, therefore, we reverse the ord therefore, we reverse the order of the lower authorities er of the lower authorities and direct the assessing officer to examine whether the and direct the assessing officer to examine whether the and direct the assessing officer to examine whether the payments of contribution in the present case were made payments of contribution in the present case were made payments of contribution in the present case were made within 15 days (allowed with further grace period of 5 within 15 days (allowed with further grace period of 5 within 15 days (allowed with further grace period of 5 days) from the close of the respective months during days) from the close of the respective months during days) from the close of the respective months during which the disbursement of the salary/wages were disbursement of the salary/wages were actually made. The assessing officer should recompute actually made. The assessing officer should recompute actually made. The assessing officer should recompute the amount disallowable, if any, on the above basis and the amount disallowable, if any, on the above basis and the amount disallowable, if any, on the above basis and take appropriate action accordingly. take appropriate action accordingly.” 3.1 However, we find that the Hon’ble Madras High Court in the However, we find that the Hon’ble Madras High Court in the However, we find that the Hon’ble Madras High Court in the case of the Commissioner of Income Commissioner of Income-tax v. Madras Radiators & tax v. Madras Radiators & Pressing Ltd. 264 ITR 620 Madras Pressing Ltd. 264 ITR 620 Madras has held that the term has held that the term “every month” in clause 58 of the Provident Fund Scheme should be read clause 58 of the Provident Fund Scheme should be read clause 58 of the Provident Fund Scheme should be read as month in which the wages were actually earned i.e. salary as month in which the wages were actually earned i.e. salary as month in which the wages were actually earned i.e. salary payable. The relevant finding of the Hon’ble Madras High Court is payable. The relevant finding of the Hon’ble Madras High Court is payable. The relevant finding of the Hon’ble Madras High Court is reproduced as under: reproduced as under:
“4. In our considered opinion, we are of the view that 4. In our considered opinion, we are of the view that 4. In our considered opinion, we are of the view that the Tribunal is not correct in coming to the conclusion that Tribunal is not correct in coming to the conclusion that Tribunal is not correct in coming to the conclusion that there was some ambiguity in construing the expression there was some ambiguity in construing the expression there was some ambiguity in construing the expression "month" "month" "month" used used used in in in para para para 38 38 38 of of of the the the Scheme Scheme Scheme under under under the Provident Fund Act Provident Fund Act on the premise that the assessee he assessee used to pay the salary to its employees only on the 7th used to pay the salary to its employees only on the 7th used to pay the salary to its employees only on the 7th day of succeeding month under day of succeeding month under section 5 of the Payment of the Payment of Wages Act. It is true that of Wages Act. It is true that section 5 of the Payment of of the Payment of Wages Act provided for payment of wages in respect of Wages Act provided for payment of wages in respect of Wages Act provided for payment of wages in respect of certain categories of industries on or before the 7th day of certain categories of industries on or before the 7th day of certain categories of industries on or before the 7th day of succeeding month. However succeeding month. However section 4 of the Act provided of the Act provided for fixation of wage period and also provided that no wage ixation of wage period and also provided that no wage ixation of wage period and also provided that no wage period shall extend one month. period shall extend one month.
Para 29 of the Scheme under the 5. Para 29 of the Scheme under the Provident Fund Provident Fund Act provided that the contribution payable should be provided that the contribution payable should be provided that the contribution payable should be calculated on calculated on the basis of the basic wages and other the basis of the basic wages and other allowances actually drawn during the whole month allowances actually drawn during the whole month allowances actually drawn during the whole month whether paid on daily, weekly, fortnightly or monthly whether paid on daily, weekly, fortnightly or monthly whether paid on daily, weekly, fortnightly or monthly basis. The expression "basic wages" is defined as all basis. The expression "basic wages" is defined as all basis. The expression "basic wages" is defined as all emoluments, which are earned by an employee while on emoluments, which are earned by an employee while on emoluments, which are earned by an employee while on duty or on leave or on holidays with wages in either case on leave or on holidays with wages in either case on leave or on holidays with wages in either case in accordance with the terms of the contract of employment in accordance with the terms of the contract of employment in accordance with the terms of the contract of employment and which are paid or payable in cash to him. and which are paid or payable in cash to him.
Para 30 of the Scheme of the Provident Fund Act 6. Para 30 of the Scheme of the Provident Fund Act 6. Para 30 of the Scheme of the Provident Fund Act imposed an obligation on the employer to remit bo imposed an obligation on the employer to remit bo imposed an obligation on the employer to remit both the shares of contributions in the first instance and para 32 shares of contributions in the first instance and para 32 shares of contributions in the first instance and para 32 empowered the employer to recover the employees' empowered the employer to recover the employees' empowered the employer to recover the employees' contributions from the wages of the employees. As per contributions from the wages of the employees. As per contributions from the wages of the employees. As per para 38 of the Scheme, the employer is required to remit para 38 of the Scheme, the employer is required to remit para 38 of the Scheme, the employer is required to remit both the contributions together both the contributions together with the administrative with the administrative charges thereon within 15 days before the close of every charges thereon within 15 days before the close of every charges thereon within 15 days before the close of every month.
Thus as seen from the above provisions, it is clear that 7. Thus as seen from the above provisions, it is clear that 7. Thus as seen from the above provisions, it is clear that it is the responsibility of the employer to make payment of it is the responsibility of the employer to make payment of it is the responsibility of the employer to make payment of the contributions at the first instance irrespe the contributions at the first instance irrespective of the ctive of the fact, whether the wages are paid in time or not. Hence the fact, whether the wages are paid in time or not. Hence the fact, whether the wages are paid in time or not. Hence the actual payment of wages on the 7th day of succeeding actual payment of wages on the 7th day of succeeding actual payment of wages on the 7th day of succeeding month would not any way alter the situation and give month would not any way alter the situation and give month would not any way alter the situation and give room for interpreting that the "close of 15th day" has to be room for interpreting that the "close of 15th day" has to be room for interpreting that the "close of 15th day" has to be calculated from t calculated from the end of the month in which the wages he end of the month in which the wages were actually paid. The payment of wages on the 7th day were actually paid. The payment of wages on the 7th day were actually paid. The payment of wages on the 7th day
of succeeding month would not in any way alter the initial of succeeding month would not in any way alter the initial of succeeding month would not in any way alter the initial responsibility of the employer for making payment of responsibility of the employer for making payment of responsibility of the employer for making payment of contributions, which he is statutorily authorised contributions, which he is statutorily authorised to recover to recover from the employees salary, whether the salary is paid in from the employees salary, whether the salary is paid in from the employees salary, whether the salary is paid in time or not. Hence the one and only reasonable Hence the one and only reasonable time or not. conclusion is that the employer has to remit both conclusion is that the employer has to remit both conclusion is that the employer has to remit both the contributions to the Provident Fund within 15 the contributions to the Provident Fund within 15 the contributions to the Provident Fund within 15 days from the close of the month for whi days from the close of the month for whi days from the close of the month for which the employees earned their salary i.e., Salary payable. employees earned their salary i.e., Salary payable. employees earned their salary i.e., Salary payable. Our view has been fortified by the Division Bench of this Our view has been fortified by the Division Bench of this Our view has been fortified by the Division Bench of this court in Presidency Kid Leather (P) Ltd. v. Regional Presidency Kid Leather (P) Ltd. v. Regional Presidency Kid Leather (P) Ltd. v. Regional Provident Fund CIT Provident Fund CIT (1997) 91 F.J.R. 661, wherein the 661, wherein the Division Bench of this court held as follows : Division Bench of this court held as follows : "As per para 38 of the Employees' Provident Funds "As per para 38 of the Employees' Provident Funds "As per para 38 of the Employees' Provident Funds Scheme, the employer is required to remit both the Scheme, the employer is required to remit both the Scheme, the employer is required to remit both the employees' employees' employees' as as as well well well as as as the the the employer's employer's employer's share share share of of of contributions together with administrative c contributions together with administrative charges thereon harges thereon before the close of the 15th of every month. Para 30 of the before the close of the 15th of every month. Para 30 of the before the close of the 15th of every month. Para 30 of the Scheme imposes an obligation on the employer to remit Scheme imposes an obligation on the employer to remit Scheme imposes an obligation on the employer to remit both the shares of contributions in the first instance and both the shares of contributions in the first instance and both the shares of contributions in the first instance and para 32 of the Scheme enables the employer to recover the para 32 of the Scheme enables the employer to recover the para 32 of the Scheme enables the employer to recover the employees contributions from the wages of the employees. contributions from the wages of the employees. contributions from the wages of the employees. The initial responsibility for making payment of the The initial responsibility for making payment of the The initial responsibility for making payment of the contributions lies on the employer irrespective of the fact contributions lies on the employer irrespective of the fact contributions lies on the employer irrespective of the fact whether the wages are paid in time or not. As such, the whether the wages are paid in time or not. As such, the whether the wages are paid in time or not. As such, the Provident Fund payments made after the d Provident Fund payments made after the due date will ue date will attract the penal damages under attract the penal damages under section 14B of the Act." of the Act." The Tribunal committed serious error in coming to the The Tribunal committed serious error in coming to the The Tribunal committed serious error in coming to the contrary conclusion. Hence the first two questions of law contrary conclusion. Hence the first two questions of law contrary conclusion. Hence the first two questions of law referred to us are answ referred to us are answered in the negative against the ered in the negative against the assessee and in favour of the revenue. assessee and in favour of the revenue.” (emphasis supplied externally) (emphasis supplied externally) 3.2 The Hon’ble High Court being higher in hierarchy of judiciary The Hon’ble High Court being higher in hierarchy of judiciary The Hon’ble High Court being higher in hierarchy of judiciary than the Tribunal, therefore, following the decision of the Hon’ble therefore, following the decision of the Hon’ble therefore, following the decision of the Hon’ble Madras High Court (supra), (supra), we reject the prayer of the Ld. Counsel we reject the prayer of the Ld. Counsel of the assessee for restoring the matter back to the Assessing of the assessee for restoring the matter back to the Assessing of the assessee for restoring the matter back to the Assessing Officer. The grounds of appeal of the assessee are accordingly Officer. The grounds of appeal of the assessee are accordingly Officer. The grounds of appeal of the assessee are accordingly dismissed.
In the result, the appeal of the assessee is dismissed. In the result, the appeal of the assessee is dismissed. In the result, the appeal of the assessee is dismissed.