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Facts
The assessee company, Samsonite South Asia Pvt. Ltd., filed its return for AY 2018-19. The return was processed under section 143(1) with adjustments for disallowances under sections 40A(7) and 36(1)(va). The assessee appealed to the CIT(A) against these disallowances.
Held
The Tribunal held that the disallowance of employee's contribution to PF/ESI due to a one-day delay, when the due date falls on a Sunday or public holiday, is incorrect. The delay is condoned under Section 10 of the General Clauses Act, and the disallowance is deleted.
Key Issues
Whether disallowance of employee's contribution to PF/ESI for a one-day delay is justified when the due date falls on a holiday, and whether the doctrine of merger applies.
Sections Cited
250, 143(1), 143(3), 154, 36(1)(va), 10, 40A(7)
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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SANDEEP SINGH KARHAIL, JM
(Assessment Year: 2018-19) Samsonite South Asia Pvt. Ltd. ACIT, Circle-3(1)(1), Room No. 607, 6th Floor, 402, Ackruti Star, MIDC, Andheri (East), Mumbai, Vs. Aayakar Bhavan, M.K. Road, Maharashtra-400093. Mumbai-400020. PAN: AAACS8598L Appellant) : Respondent) Appellant /Assessee by : Shri Jitendra Singh & Ms. Shivali Mhatre, AR Revenue / Respondent by : Shri Swapnil Choudhary, Sr. DR : 12.06.2025 Date of Hearing : 23.06.2025 Date of Pronouncement O R D E R
Per Padmavathy S, AM:
This appeal by the assessee is against the order of the Commissioner of Income Tax(Appeals), Panaji [In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) dated 28.12.2024 for AY 2018-19. The assessee raised the following grounds of appeal: “
1. General Ground That on the facts and in the circumstances of the case and in law, the learned AddI/JCIT(A), Panaji erred in passing the order dated 28 December 2024 under section 250 Income-tax Act, 1961 (the Act) upholding the Intimation passed Samsonite South Asia Pvt. Ltd. under section 143(1) of the Act without appreciating that the same is void ab initio and bad in law. 2. a) On the facts and in the circumstances of the case and in law, the learned AddI/JCIT(A), Panaji failed to appreciate that an Assessment Order dated 15 September 2021 under section 143(3) of the Act for the impugned assessment year 2018-19 has been passed and therefore, the Intimation under section 143(1) of the Act has been merged with the assessment order. Hence, the impugned Intimation dated 17 October 2019 issued under section 143(1) does not survive. Consequently, the Appeal filed before the Addl/JCIT(A), Panaji challenging the Intimation is infructuous. b) On the facts and in the circumstances of the case and in law, the learned AddI/JCIT(A), Panaji has failed to consider that the appeal was suo-moto withdrawn by the Appellant as the matter was concluded upon receipt of the Rectification Order under section 154 r.w.s 143(3) of the Act. Hence, appeal filed by the Appellant challenging the Intimation under section 143(1) of the Act becomes infructuous and does not survive. c) On the facts and in the circumstances of the case and in law, given that the Intimation under section 143(1) of the Act does not survive as the same was superseded by the Assessment Order under section 143(3) of the Act read with the Rectification Order passed under section 154 of the Act and the appeal was suo-moto withdrawn by the Appellant, the Order passed by the AddI/JCIT(A), Panaji under section 250 of the Act dated 28 December 2024 is erroneous and bad in law.
3. Incorrect disallowance under section 36(1)(va) of the Act for payment of employee's contribution to Provident Fund made within due date Without prejudice to Ground No. 2, on the facts and circumstances of the case as well as in law, the learned AddI/JCIT(A), Panaji has erred in confirming the disallowance of INR 58,34,905/- towards employee's contribution to Provident Fund under section 36(1)(va) of the Act for the month of March 2018 despite the fact that the said payment was made within the due date in view of section 10 of the General Clauses Act, 1897.”
2. The assessee is a company is mainly engaged in the business of manufacturing, marketing and distribution of moulded luggage and travel accessories as well as trading marketing and distribution of soft luggage of the Samsonite brand under an agreement with Samsonite Corporation. The assessee Samsonite South Asia Pvt. Ltd. filed the return of income for AY 2018-19 on 30.11.2018 declaring a total income of Rs. 1,59,78,63,890/-. The return was processed under section 143(1) of the Act by making the following adjustments: (i) Adjustment under section 40A(7) - Rs. 39,60,232/- (ii) Adjustment under section 36(1)(va) - Rs. 58,34,905/- 3. Aggrieved the assessee filed appeal before the CIT(A). Subsequently the Assessing Officer (AO) passed a rectification order deleting the addition made under section 40A(7) and hence the ground raised by the assessee in this regard was dismissed by the CIT(A) as infructuous. With regard to the disallowance made under section 36(1)(va) towards delayed remittance of PF/ESI. The CIT(A) confirmed the addition by placing reliance on the decision of the Hon'ble Supreme Court in the case of Checkmate Services (P.) Ltd. Vs. CIT [2022] 143 taxmann.com 178 (SC).
The ld. AR submitted that the assessee's case was selected for scrutiny and the order under section 143(3) of the Act was passed on 15.09.2021 accepting the income returned by the assessee. The ld. AR further submitted that accordingly the disallowance made in the intimation under section 143(1) of the Act no longer survives since the order under section 143(1) gets merged with assessment order passed under section 143(3) of the Act. The ld. AR further submitted that the adjustment with respect to employee contribution to PF/ESI is a debatable issue at the time of passing the order under section 143(1) and therefore no adjustment towards the same could have been made under section 143(1). On merits, the ld. AR submitted that the assessee has deposited the contribution for the month of March, 2018 in April, 2018 with a one day delay for the reason that 15.04.2018 was a Samsonite South Asia Pvt. Ltd. Sunday. The ld. AR therefore argued that there is no delay in depositing the contribution as per section 10 of General Clauses Act, 1897.
The ld. DR on the other hand submitted that the doctrine of merger does not apply to assessee's case since in the assessment order passed under section 143(3) the issue of delayed remittance of PF/ESI has not been considered. On merits, the ld. DR submitted that the delayed remittance of PF/ESI has been settled by the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra) and therefore there is no room for allowing the deduction even if there is a delay by one day.
We heard the parties and perused the material on record. The assessee has deposited the contribution for the month of March 2018 with one day on 16.04.2018 since 15.04.2018 is a Sunday. In this regard we notice that the coordinate bench of the Delhi Tribunal has considered a similar issue in the case of Maxx Solutions vs DCIT (ITA No.3499/Del/2023 dated 11.09.2024) where it has been held that – “6. We have heard both the parties and perused the material available on record. The CPC while processing the return u/s 143(1) of the Act, made disallowed u/s 36(1)(Va) of the Act for late payment of Provident Fund. It is the case of the assessee that out of six payments, four payments were done very next day of official holiday/s of the Central Government, therefore, there is no delay in depositing the same. For the purpose of examination, and for the sake of convenience, the details of the payments made by the assessee which are subject to the disallowance are as under:
It is seen from the above chart except Serial No. 1 & 5 to all other payments were made on the next day of the official/gazetted holiday of the Central Government, such as Saturday, Sunday and the Independence Day. The Co-ordinate Bench of the Tribunal while deciding the similar issue as to whether contribution of ESI and EPF made by the assessee with one day delay is allowable when the due date of payment of ESI and EPF Contribution prescribed in respective acts falls on Sunday or gazette holiday, held that the authorities have committed error in disallowing the deposit made with one day delay, wherein the due date under the respective Acts fall either on Sunday or gazette holiday in following manners:-
“7. We have heard both the parties and perused the material available on record. The only issue remains for consideration in the present Appeal that whether the contributions of ESIC and EPF made by the Assessee with one day delay is allowable when the due date for payment of ESIC and EPF contributions prescribed in the respective acts of ESI & PF falls on Sunday or gazetted holiday?.
It is not in dispute that the assessee had deposited ESI & EPF with one day delay and it is also not in dispute that the due date under the respective Acts falling either on Sunday or gazetted holiday. The details of the payments are as under:- ESI for AY 2019-20 Month of deduction pertain to/Bok Entry date Amount of employee contribution (amount Rs.) Due date of payment Actual date of payment Remarks June 2018 1,94,673/- 15.07.2018 (Sunday) 16.07.2018 1 Day due to previous day-Holiday July 2018 1,94,413/- 15.08.2018 (Holiday 16.08.2018 1 Day due to previous day-Holiday EPF for AY 2019-20 Month of Amount of Due date of Actual date Remarks deduction employee payment of payment pertain contribution to/Bok Entry (amount Rs.) date June 2018 1,94,673/- 15.07.2018 16.07.2018 1 Day due to (Sunday) previous day- Holiday July 2018 1,94,413/- 15.08.2018 16.06.2018 1 Day due to (Holiday previous day- Holiday Samsonite South Asia Pvt. Ltd. EPF for AY 2019-20 Month of Amount of Due date of Actual date Remarks deduction employee payment of payment pertain contribution to/Bok Entry (amount Rs.) date June 2018 780547 15.07.2018 16.07.2018 1 Day due to (Sunday) previous day- Holiday July 2018 767368 15.08.2018 16.06.2018 1 Day due to (Holiday previous day- Holiday
9. The Ld. Ld. Departmental Representative, the Revenue neither disputed the above facts nor produced any material contrary to the above data given by the Assessee.
The Section 10 of the General Clause Act, 1897 reads as under:- “Section 10 in The General Clauses Act, 1897 10 Computation of time. — (1) Where, by any 19 [Central Act] or Regulation made after the commencement of this Act, any act or proceeding is directed or allowed to be done or taken in any Court or office on a certain day or within a prescribed period, then, if the Court or office is closed on that day or the last day of the prescribed period, the act or proceeding shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the Court or office is open: Provided that nothing in this section shall apply to any act or proceeding to which the Indian Limitation Act, 1877 20, applies. 2). This Section applies also to all 19 [Central Acts] and Regulations made on or after the fourteenth day of January, 1887.”
Thus, in our opinion, considering the fact that the due date for depositing the contribution of ESIC & EPF falls on Sunday and gazetted holiday, the said delay of one day deserves to be condoned as per Section 10 of General Clauses Act. Further it is also observed that the assessee has no intention not to deposit the contribution of ESI & EPF well within the time, depositing the contribution very next day of Holiday proves the bona-fide of the Assessee. Therefore, in our opinion, the authorities have committed error in disallowing the deposit made with one day delay where the due date under respective acts falls either on Sunday or on gazetted holiday.
In view of the above discussion, we allow Ground No. 3 of the assessee and delete the disallowance of delay deposit of one day on account of public holiday/Sunday on ESIC of Rs. 3,89,086/- and EPF of Rs. 15,47,915/-. Since the assessee has restricted Appeal to Ground No. 3 and the to the amount mentioned above, the Ground No. 1,2, 4 to 9 are dismissed as not pressed. 8. Considering the above settled position of law, the payment of contribution mentioned at Serial No. 2, 3 & 4 of Rs. 2,29,176/-, 2,60,465/- and 2,80,196/- which are made immediately after the due date followed by Saturday, Sunday and independence day, therefore, the disallowance made in respect of the those payments are hereby deleted.” 7. We notice that the coordinate bench in the above case has applied the ratio laid down by the Hon'ble Delhi High Court in the case of PCIT vs Pepsico India Holding Pvt Ltd ([2023] 156 taxmann.com 25 (Delhi)) where it has been held that section 10 of the General Clauses Act should help the assessee where the due date for remittance of PF falls on a National Holiday / Sunday. In assessee's case we notice that the assessee has deposited the PF contribution within the due for all the months except March'2018 and the one day delay as submitted was due to the fact that the due date fell on a Sunday. Therefore in our considered view, the above referred judicial precedence would apply to assessee's case also and therefore we direct the AO to delete the disallowance made in this regard. 8. Since we have allowed the appeal considering the impugned issue on merits (Ground No.3), the other contentions in Ground No. 1 & 2 have become academic and left open accordingly.
In result appeal of assessee is allowed.