FAIR EXPORTS(INDIA) PVT. LTD,MUMBAI vs. ASST/DY/CIT/INCOME TAX DEPT, MUMBAI

In this appeal, the assessee has raised the following grounds:–

The present appeal has been listed for hearing before us pursuant to the order dated 17/02/2023, passed by the coordinate bench of the Tribunal in ACIT vs M/s Fair Exports (India) Pvt. Ltd., M.A. no. 429/Mum./2022 (in ITA no. 304/Mum./2022, for the assessment year 2018-19), whereby, the earlier order dated 24/05/2022, passed under section 254(1) of the Act was recalled and the appeal was directed to be re-fixed for hearing.

When this appeal was called for hearing neither anyone appeared on behalf of the assessee nor was any application seeking adjournment filed. Therefore, in view of the above, we proceed to dispose off the present appeal ex–parte, qua the assessee after hearing the learned Departmental Representative (“learned DR”) and on the basis of material available on record.

In this appeal, the only grievance of the assessee is against the disallowance on account of delayed payment of employees’ contribution to Fair Exports (India) Pvt. Ltd. ITA no.304/Mum./2022 Provident Fund (P.F) and Employees State Insurance Corporation (E.S.I.C) under section 36(1)(va) of the Act.

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 on 29/11/2018, declaring a total income of Rs.81,20,25,312. The said return of income was processed vide intimation dated 19/11/2019 issued under section 143(1) of the Act computing the total income of the assessee at Rs.81,25,58,319, after making disallowance of Rs.5,33,007, on account of delayed payment of employees’ contribution to P.F. and E.S.I.C. under section 36(1)(va) of the Act. Vide impugned order, the learned CIT(A) dismissed the appeal filed by the assessee. Being aggrieved, the assessee is in appeal before us.

The learned DR submitted that the issue arising in the present appeal is squarely covered in favour of the Revenue by the decision of the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. v/s CIT, [2022] 448 ITR 518 (SC).

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 43B 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 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.”

In the present case, from the record it is evident that the employees’ contribution to P.F. and E.S.I.C. were deposited after the due date prescribed under the relevant statute. Thus, respectfully following the aforesaid decision of Hon’ble Supreme Court in Checkmate Services Pvt. Ltd. (supra), the grounds raised by the assessee are dismissed.

In the result, the appeal by the assessee is dismissed. Order pronounced in the open Court on 17/05/2023