M/S JAI AMBE AGRICULTURAL INDUSTRIES,VARANASI vs. D.C.I.T., CIRCLE - 2(1), VARANASI

This appeal, filed by assessee, arising out of the appellate order,dated 23.12.2022 passed by the learned CIT(A), National Faceless Appeal Centre, Delhi (DIN & Order No. ITBA/NFAC/S/250/2022-23/1048192998(1)) in Appeal No. CIT(A), Varanasi/10002/2020-21, for assessment year 2019-20, which in turn has arisen out of the intimation dated 29.02.2020 passed u/s 143(1) by CPC, Bengaluru vide Document Identification No. CPC/1920/A5/1975401671. The above appeal was heard in physical hearing mode in Open Court proceedings.

The assessee has raised following grounds of appeal in memo of appeal filed with the Income Tax Appellate Tribunal(hereinafter called “the tribunal”), Circuit Bench, Varanasi, U.P. :- “1. Because, the learned

Because, order is bad in law and against facts of the case.”

The brief facts of the case are that the assessee filed its return of income on 27.10.2019 for assessment year 2019-20 returning income of Rs. 2,28,687/-. The said return of income was processed by Revenue under section 143(1) of the Act and addition of Rs. 1,28,680/- was made to the returned income by CPC, Bangalore, while processing the return of income on account of delayed deposit of EPF / ESI within the due date as prescribed under the relevant statute , which was in violation of provisions of Section 36(1)(va) r.w.s. 2(24)(x) of the Act.

The assessee filed first appeal before the learned CIT(A) who dismissed the appeal of the assessee by relying on the decision of Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. v. CIT (Civil Appeal No. 2833 of 2016, vide judgment and order dated 12.10.2022),reported in (2022) 143 taxmann.com 178(SC) .

Aggrieved by the appellate order passed by ld. CIT(A), the assessee filed second appeal with tribunal. The learned counsel for the assessee submitted that the additions are being made of Rs. 1,28,680/- for delayed deposit of EPF / ESI beyond 2 Assessment Year: 2019-20 M/s Jai Ambe Agricultural Industries the time stipulated under section 36(1)(va) r.w.s. 2(24)(x) of the Act. The ld. Counsel for the assessee submitted that processing of return of income was done by CPC , Bengaluru under section 143(1). The ld. Counsel for the assessee drew our attention to provisions of Section 14 of the Income Tax Act,1961 which defines various heads of income under which income is chargeable to tax. The ld. Counsel for the assessee also drew our attention to provisions of Section 2(24)(x) and 28 of the Act , and it was submitted that section 2(24)(x) of the Act is not covered by section 28 , and the said employee contribution which is recovered by the employer is not covered under section 28 and it is not an income from Business or Profession under section 28. He drew our attention to section 36(1)(va) of the Act. The ld. Counsel for the asses submitted that this income cannot be brought to tax under the head ‘Profits and Gain of Business or Profession’ as there is no reference to income u/s 2(24)(x) in Section 28, while it can be charged to tax as ‘income from other sources’ under section 56 of the Act. The ld. Counsel for the asses drew our attention to Section 56 of the Act and submitted that it refers to income to be charged to tax u/s 2(24)(x), and hence the employee contribution recovered by employer is an income specifically brought to tax under the head ‘Income from other sources’ and then deduction is allowed u/s 57(ia) if the employee contribution recovered by the employer is deposited within the due date prescribed for deposit of PF / ESI under the relevant statute, as is referred to in Section 36(1)(va). The ld. Counsel for the assessee drew our attention to para 30 and 32 at page no. 9 and 10 of the paper book , and submitted that it is the employer’s responsibility to deposit the employer contribution as well as employee contribution with the fund, within the due date. The employer is entitled to recover the employee contribution from the salary of the employee. He referred to provisions of Section 43B of the Act. The ld. Counsel for the assessee also referred to provisions of section 40 of the Employees State Insurance Act. He drew our attention to page no. 4 of the paper book where the complete detail of the PF / ESI payable by the assessee with respect to employees contribution as well as the actual date of payment is mentioned and was submitted 3 Assessment Year: 2019-20 M/s Jai Ambe Agricultural Industries that it is an admitted position that the addition made was in respect to employees contribution of PF / ESI which was deposited late beyond the time prescribed for making payment under the relevant statute. It was submitted that Section 28 does not refer to income as stipulated under Section 2(24)(x) of the Act . It was submitted that there was an amendment to the Act , and there are Notes of clauses and Memorandum to Finance Bill, 2021 which clearly stipulates that the amended provisions are applicable from assessment year 2021-22 and hence the amendment is not applicable for earlier years. It was also submitted by ld. Counsel for the assessee that decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd.(supra) is not applicable in the instant case. However, the ld. Counsel for the assessee fairly admitted that assessee has deposited employees contribution of PF / ESI beyond the date prescribed under the relevant statute governing PF/ESI. It was submitted that it is covered under section 43B and hence the addition should be allowed. 4b. The learned Sr. DR, on the other hand submitted that the employees contribution of EPF / ESI is deemed as an income under 2(24)(x) of the Act irrespective of the head of the income. Section 56 refers to income chargeable as income from other sources. It is applicable to such as entity like school, college, Trust etc. where PF / ESI is applicable , but the income is not chargeable to tax under the head income from ‘Profit and gain from business or profession’ and such type of enterprises are covered under section 56 which are not business enterprises, and the income is chargeable to tax under the head ‘Income from other sources’. Reference is drawn by ld. Sr. DR to provisions of section 57(ia) of the Act, and it was submitted that provisions of Section 36(1)(va) is referred to in Section 57(ia) and deduction shall be allowed only when the employee contribution towards PF/ESI are deposited within the due date as prescribed under the relevant statute. Section 2(24)(x) creates a deeming fiction wherein employee contribution towards PF/ESI constitute deemed income. The ld. SR DR submitted that the issue 4 ITA No.19/Vns/2023 Assessment Year: 2019-20 M/s Jai Ambe Agricultural Industries is covered by the decision of Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd(supra). The ld. Sr DR also submitted that ITAT Chennai Bench in order dated 04.11.2022 in the case of Electrical India v. ADIT, CPC followed the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd.(supra).