CHECKMATE FACILITY AND ELECTRONIC SOLUTIONS PRIVATE LIMITED,VADODARA vs. THE ACIT, CIRCLE-1(1)(1), AHMEDABAD

The brief facts of the case are that the assessee is engaged in the business of providing security personnel services and filed its return of income for the year under consideration on 14.10.2016 declaring total income of Rs.97,41,980/-. During the course of assessment proceedings, the Assessing Officer observed that the assessee had deposited employees’ contribution towards PF and ESI beyond the due dates prescribed under the respective Welfare Statutes. Accordingly, the Assessing Officer invoked the provisions of section 2(24)(x) read with section 36(1)(va) of the Act and made a disallowance of Rs.52,12,766/- on account of delayed deposit of employees’ contribution.

Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(Appeals) contending that though there was a delay in depositing employees’ contribution, the same was paid before the due date of filing of return of income and therefore allowable under section 43B of the Act. The assessee also relied on various judicial pronouncements in support of its contention and pleaded that a liberal view should be adopted considering the nature and scale of its business. However, the CIT(Appeals) after considering the submissions of the assessee held that section 36(1)(va) Checkmate Facility & Electronic Solutions Pvt. Ltd. vs. ACIT - 3– of the Act specifically governs employees’ contribution and mandates deposit within the due date prescribed under the relevant welfare statutes. The CIT(Appeals) observed that employees’ contribution is treated as income under section 2(24)(x) and deduction is allowable only upon fulfillment of the condition prescribed under section 36(1)(va). Placing reliance on the decision of the Hon’ble Supreme Court in Checkmate Services (P.) Ltd. vs. Commissioner of Income-tax-1 [2022] 143 taxmann.com 178 (SC), the CIT(Appeals) held that section 43B does not override section 36(1)(va) in respect of employees’ contribution and accordingly confirmed the disallowance of Rs.52,12,766/-.

The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.

We have heard the rival submissions and perused the material available on record.

The sole issue for our consideration is with respect to disallowance of employees’ contribution to PF/ESI amounting to Rs.52,12,766/- deposited beyond the due date prescribed under the relevant welfare statutes.

This issue is no longer res integra. The Hon’ble Supreme Court in Checkmate Services (P.) Ltd. vs. Commissioner of Income-tax [2022] 143 taxmann.com 178 (SC) / [2023] 290 Taxman 19 (SC) / [2022] 448 ITR 518 (SC) has categorically held that there is a clear and marked distinction between employer’s contribution and employees’ contribution. The employees’ contribution, deducted from the salary of employees, is treated as Checkmate Facility & Electronic Solutions Pvt. Ltd. vs. ACIT - 4– deemed income under section 2(24)(x) and is held in trust by the employer. Such contribution is allowable as deduction only if it is deposited within the due date prescribed under the respective welfare Acts as mandated by section 36(1)(va) of the Act. The Hon’ble Supreme Court further held that the non obstante clause under section 43B of the Act does not apply to employees’ contribution and cannot absolve the assessee-employer from the obligation to deposit such contribution within the statutory due date.

The aforesaid legal position has been reiterated and followed by the Hon’ble Supreme Court in Harrisons Malayalam Ltd. vs. Commissioner of Income-tax [2022] 145 taxmann.com 608 (SC) / [2023] 291 Taxman 196 (SC) / [2022] 449 ITR 391 (SC), wherein the Hon’ble Supreme Court dismissed the SLP filed by the assessee by holding that the issue is squarely covered by the decision in Checkmate Services (P.) Ltd. Similarly, in Principal Commissioner of Income-tax vs. Strides Arcolab Ltd. [2023] 147 taxmann.com 202 (SC) / [2023] 291 Taxman 530 (SC) / [2023] 450 ITR 129 (SC), the Hon’ble Supreme Court set aside the order of the High Court which had allowed the deduction and held that delayed deposit of employees’ contribution is not allowable.

We further note that even prior to the decision of the Hon’ble Supreme Court, the Hon’ble Gujarat High Court in Commissioner of Income-tax-II vs. Gujarat State Road Transport Corporation [2014] 41 taxmann.com 100 (Gujarat) / [2014] 366 ITR 170 (Gujarat) had taken a consistent view that employees’ contribution deposited beyond the due date prescribed under section 36(1)(va) is not allowable, even if deposited before the due date of filing of return. This view has been reaffirmed by the Hon’ble Gujarat High Checkmate Facility & Electronic Solutions Pvt. Ltd. vs. ACIT - 5– Court in Diversified Services vs. Income-tax Officer [2023] 150 taxmann.com 384 (Gujarat), holding that after the decision of the Hon’ble Supreme Court in Checkmate Services (P.) Ltd., the law operates squarely against the assessee.

The Hon’ble Bombay High Court in Rohan Korgaonkar vs. Deputy Commissioner of Income-tax [2024] 159 taxmann.com 321 (Bombay) has also held that in view of the decision of the Hon’ble Supreme Court in Checkmate Services (P.) Ltd., disallowance of employees’ contribution to PF and ESI under section 36(1)(va) of the Act is justified and the fact that the adjustment was made under section 143(1)(a) would make no difference.

In view of the aforesaid binding judicial precedents, we find that the issue is squarely covered against the assessee. The admitted position is that the employees’ contribution to PF/ESI was not deposited within the due date prescribed under the relevant Welfare Statutes. Therefore, the disallowance made by the Assessing Officer and confirmed by the CIT(Appeals) is in accordance with law and does not call for any interference.

This Order is pronounced in the Open Court on 20/04/2026 (NARENDRA P. SINHA) JUDICIAL MEMBER Ahmedabad; Dated 20/04/2026 TANMAY, Sr. PSITA No. 1554/Ahd/2025 Checkmate Facility & Electronic Solutions Pvt. Ltd. vs. ACIT - 6–

""थ" / The Respondent. संबंिधत आयकर आयु" / Concerned CIT 3. 4. आयकर आयु"(अपील) / The CIT(A)- 5. िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad गाड" फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.