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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI PRASHANT MAHARISHI & SHRI KULDIP SINGH
Per : Kuldip Singh, Judicial Member:
The assessee by filing the present appeal, sought to set aside the impugned order dated 19.01.2023 passed by the National Faceless Appeal Centre(NFAC) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)] qua the assessment year 2018-19 on the grounds inter-alia that :- “1. On the facts, and in circumstances of the case, and in law, the Learned Assessing Officer has erred in making addition of Rs.20,47,733, being disallowance of contribution towards Employees State Insurance (ESIC) u/s 36(1)(va) of Income Tax Act, 1961 without 2 M/s. Swatantra Microfin Private Limited appreciating that the dues were paid in time without any delay and that there was an error in the tax audit report which was rectified later. 2. On the facts, and in circumstances of the case, and in law, the Learned CIT (A) has erred in disregarding and not considering the submission made by the Appellant nor granting a hearing before passing the Appellate order.”
Briefly stated facts necessary for consideration and adjudication of the issues at hand are : the assessee is a private limited company engaged in the business of providing micro loans for micro business to its customers. During the year under consideration the return of income filed by the assessee declaring gross total income of Rs.61,53,883/- was processed under section 143(1) of the Income Tax Act, 1961 (for short ‘the Act’) by the Central Processing Centre (CPC) [Assessing Officer (AO)], Bangalore at the gross total income of Rs.82,63,913/- by making addition of Rs.21,05,703/- on account of disallowing the deduction claimed by the assessee on account of delayed payment of employees’ contribution of Provident Fund (PF) and Employees State Insurance Corporation (ESIC) (under section 36(1)(va) of the Act.)
The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has confirmed the addition made by the CPC/AO by dismissing the appeal. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the assessee has come up before the Tribunal by way of filing present appeal.
We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light 3 M/s. Swatantra Microfin Private Limited of the facts and circumstances of the case and law applicable thereto.
Undisputedly the AO/CPC has disallowed the deduction claimed by the assessee on account of delayed payment of employees’ contribution of PF & ESIC on the ground that the same has been paid beyond the due date prescribed under the relevant Act. It is also not in dispute that as per law laid down by the Hon’ble Supreme Court in case of Checkmate Services Pvt. Ltd. vs. CIT order dated 12.10.2022 when the assessee being the employer has deposited the employees’ contribution of PF & ESIC beyond the due date prescribed under the relevant Act the same is not allowable deduction under section 36(1)(va) of the Act.
In the backdrop of the aforesaid undisputed facts the Ld. A.R. for the assessee challenging the impugned order passed by the Ld. CIT(A) contended that all the payments by the assessee company on account of employees’ contribution of PF & ESIC have been made within the period prescribed under the relevant Act, but on account of mistake committed by the tax auditor the same have been shown to be made after the date prescribed under the Act and now placed on record correct audit report available at page 37 of the paper book and further contended that the same is allowable contribution under the Act.
However, on the other hand, the Ld. D.R. for the Revenue by relying upon the order passed by the Ld. CIT(A) contended that when the assessment has been framed as per tax audit report filed by the assessee there is no error on the part of lower revenue authorities. 4 M/s. Swatantra Microfin Private Limited
We have perused the correct tax audit report relied upon by the assessee, available at page 34 to 45 of the paper book, relevant pages 36 & 37, wherein payment shown at Sl. No.13 to 24 on account of depositing the employees’ contribution of ESIC fund on 17th of every month of 2017, which is prior to the due date for depositing the ESIC fund dated 12th of every month of 2017, total amounting to Rs.19,09,265/- out of total disallowance of Rs.21,05,703/-. This fact is further corroborated from the challan verification form available at page 93 to 115 of the paper book.
For facility of reference, details of contribution received from employees for various funds as referred to in section 36(1)(va) of the Act as mentioned in tax audit report is extracted for ready perusal as under:
Details of contributions received from employees for various funds as referred to in section 36(1)(va) S.No. Nature of fund Sum Due date The actual The actual received for amount date of from payment paid payment employees to the concerned authorities 785061 15/05/2017 785061 10/05/2017 1 Provident Fund 2 Provident Fund 805329 15/06/2017 805326 14/06/2017 801737 15/07/2017 801737 07/07/2017 3 Provident Fund 4 Provident Fund 816631 15/08/2017 816629 14/08/2017 850169 15/09/2017 850169 11/09/2017 5 Provident Fund 6 Provident Fund 907713 15/10/2017 902991 13/10/2017 1004567 15/11/2017 992979 14/11/2017 7 Provident Fund 8 Provident Fund 1072055 15/12/2017 1061775 14/12/2017 1075843 15/01/2018 1067764 12/01/2018 9 Provident Fund 5 M/s. Swatantra Microfin Private Limited 10 Provident Fund 1136995 15/02/2018 1128828 14/02/2018 11 Provident Fund 1178418 15/03/2019 1219559 13/03/2019 12 Provident Fund 1252124 15/04/2018 1244386 10/04/2018 13 Any Fund set up 141199 21/05/2017 140792 17/05/2017 under the provisions of ESI Act, 1948 14 Any Fund set up 153952 21/06/2017 154349 17/06/2017 under the provisions of ESI Act, 1948 15 Any Fund set up 139881 21/07/2017 139878 17/07/2017 under the provisions of ESI Act, 1948 16 Any Fund set up 143254 21/08/2017 143248 17/08/2017 under the provisions of ESI Act, 1948 17 Any Fund set up 151233 21/09/2017 151229 17/09/2017 under the provisions of ESI Act, 1948 18 Any Fund set up 161843 21/10/2017 161843 17/10/2017 under the provisions of ESI Act, 1948 19 Any Fund set up 167669 21/11/2017 167659 17/11/2017 under the provisions of ESI Act, 1948 20 Any Fund set up 178122 21/12/2017 178120 17/12/2017 under the provisions of ESI Act, 1948 21 Any Fund set up 183616 21/01/2018 184209 17/01/2018 under the provisions of ESI Act, 1948 22 Any Fund set up 199486 21/02/2018 200077 17/02/2018 under the provisions of ESI Act, 1948 23 Any Fund set up 207067 21/03/2018 207262 17/03/2018 under the 6 M/s. Swatantra Microfin Private Limited provisions of ESI Act, 1948 24 Any Fund set up 220491 21/04/2018 220477 17/04/2018 under the provisions of ESI Act, 1948 25 Any Fund set up 5526 15/07/2017 4836 07/07/2017 under the provisions of ESI Act, 1948 26 Any Fund set up 6621 15/01/2018 6621 17/01/2018 under the provisions of ESI Act, 1948
We are of the considered view that in the totality of the facts and circumstances of the case when the deduction otherwise available to the assessee on account of deposit of employees’ contribution of ESIC the same is liable to be allowed as there is no estoppel against the statute. In these circumstances, we partly set aside the impugned order passed by the Ld. CIT(A) to the extent of amount of Rs.19,09,265/- deposited by the assessee on account of employees’ contribution of ESIC well before the due date prescribed under the relevant Act being not sustainable in the eyes of law. The remaining amount of Rs.1,96,438/- has been rightly disallowed by the AO/Ld. CIT(A) on account of late deposit of employees’ contribution of PF beyond the due date prescribed under the Act in accordance with the law laid down by the Hon’ble Supreme Court in case of Checkmate Services Pvt. Ltd. (supra).
So the AO shall allow the deduction claimed by the assessee qua deposit of employees’ contribution of ESIC well within the due date prescribed under the relevant Act after due verification as claimed under the audit report (supra). The remaining amount of 7 M/s. Swatantra Microfin Private Limited Rs.1,96,438/- has been rightly disallowed by the AO/Ld. CIT(A) in accordance with the law laid down by the Hon’ble Supreme Court in case of Checkmate Services Pvt. Ltd. (supra).
Resultantly, the appeal filed by the assessee is hereby partly allowed. Order pronounced in the open court on 31.05.2023.