MAX VIGIL SECURITY PVT. LTD. vs. ASST. COMMISSIONER OF INCOME TAX

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TAXAP/1108/2018HC GujaratGJHC24052577201810 September 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal. The Court referred to its own decision in Commissioner of Income Tax vs. Gujarat State Road Transport Corporation ([2014] 366 ITR 170 [Guj.]), which dealt with the identical issue. In that decision, the Court had held that for sums received from employees to which Section 2(24)(x) applies, a deduction under Section 28 is permissible only if such sums are credited by the assessee to the employees' account in the relevant fund on or before the due date specified in the explanation to Section 36(1)(va). Consequently, the Court held that the Tribunal had erred in deleting the disallowances made by the AO when such sums were not credited to the employees' accounts in the Provident Fund or ESI Fund on or before the due date. The ratio is that the timing of crediting the employees' contribution to the respective funds is crucial for claiming deduction, and failure to meet the statutory due date leads to disallowance.

What were the facts?

The assessee, Max Vigil Security Pvt. Ltd., is challenging an order of the Income Tax Appellate Tribunal (ITAT), Ahmedabad, dated March 22, 2018. The Assessing Officer (AO) for Assessment Year 2013-2014 had made an addition of Rs. 2,32,83,560 to the assessee's total income. This addition was based on the AO's finding that the assessee had failed to deposit the employees' contribution to Provident Fund (PF) and Employees' State Insurance Corporation (ESIC) within the statutory due dates. The present appeal before the High Court raises a question of law concerning the interpretation of Section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961.

What were the issues?

1. Whether, on the facts and evidence on record, the Tribunal has erred in law in interpreting provisions of Section 36(1)(va) read with Section 2(24)(x) of the Income-tax Act, 1961, for confirming the addition/disallowance of Rs. 2,32,83,560 made by the Assessing Officer? Assessee's Contention: The assessee's counsel candidly stated that the issue has been examined by the High Court in the case of Commissioner of Income Tax vs. Gujarat State Road Transport Corporation. (The judgment does not record any specific arguments made by the assessee beyond this reference). Revenue's Contention: The judgment does not explicitly record the revenue's contentions. However, the AO's action, confirmed by the Tribunal, implies that the revenue contended that the employees' contribution to PF and ESIC, not deposited by the due dates, constituted a disallowance.

Which sections of the Income-tax Act were involved?

Section 36(1)(va),Section 2(24)(x),Section 28

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Ahmedabad

For the AY 2013-2014, the Assessing Officer had made addition of a sum of Rs. 2.32 Crore [rounded off] to the total income of the assessee on the ground that the employees’ Transport Corporation, reported in [2014] 366 ITR 170 [Guj.]. In such decision, this very issue came up for consideration wherein it was held as under:- “8. In view of the above and for the reasons stated above, and considering section 36(1)(va) of the Income Tax Act, 1961 read with sub-clause (x) of clause 24 of section 2, it is held that with respect to the sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees account in the relevant fund or funds on or before the due date mentioned in explanation to section 36(1)(va).

Consequently, it is held that the learned tribunal has erred in deleting respective disallowances being employees contribution to PF Account / ESI Account C/TAXAP/1108/2018 ORDER made by the AO as, as such, such sums were not credited by the respective assessee to the employees accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees contribution to the employees account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act.”

In the result, this Tax Appeal is dismissed. [Akil Kureshi, J.] [B.N Karia, J.] Prakash

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