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Income Tax Appellate Tribunal, DELHI “SMC” BENCH: NEW DELHI
Before: SHRI KUL BHARAT
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “SMC” BENCH: NEW DELHI
(THROUGH VIDEO CONFERENCING)
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER
ITA No.327/Del/2021 [Assessment Year : 2017-18] Senator Travels Pvt.Ltd., vs ITD, 2K, DCM Building, 16, CPC, Barakhamba Road, Bengalore. New Delhi-110001. PAN-AABCS2702B APPELLANT RESPONDENT Appellant by None Respondent by Sh. Om Prakash, Sr.DR Date of Hearing 04.01.2022 Date of Pronouncement 04.01.2022
ORDER PER KUL BHARAT, JM : This appeal filed by the assessee for the assessment year 2017-18 is
directed against the order of Ld.CIT(A)-8, New Delhi dated 30.07.2020. The
assessee has raised following grounds of appeal:-
“That the appellant denies its liability assessed by learned Assessing Officer and accordingly denies its liability to pay tax, cess and interest demanded thereon. 2. That having regard to the fact and circumstances of the case the addition of Rs.1,34,148/- sustained by the honourable CIT(A) u/s 36(1)(va) relating to late deposit of PF/ESIC is bad in law and deserves to be deleted. 3. That having regard to the facts and circumstances of the case, CPC has erred in law and on facts in charging interest u/s 234A, 234B and 234C of the Income Tax Act, 1961.
That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.” 2. No one appeared on behalf of the assessee at the time of hearing. The
notice sent through speed post was returned with remark “left”. The assessee
has not provided any new address to the Registry. Therefore, the appeal was
taken up for hearing in the absence of assessee.
The only effective ground in this appeal is against the sustaining of
addition of Rs.1,34,148/- made u/s 36(1)(va) of the Act relating to late deposit
of PF & ESI.
Facts giving rise to the present appeal are that the present electronically
filed appeal is directed against the intimation u/s 143(1) of the Income Tax
Act, 1961 (“the Act”) issued by Centralized Processing Centre, Banglore on
27.03.2019. The assessee filed return of income on 30.10.2017 for Assessment
Year 2017-18, declared total income of Rs.18,92,090/-. The return of income
was duly processed by CPC, Bangalore at an income of Rs.28,16,410/- by
making (i) addition of Rs.1,34,148/- on account of late deposit of PF/ESI u/s
36(1)(va) of the Act; (ii) addition of Rs.2,30,759/- on account of exempt income;
and (iii) addition of Rs.5,59,419/- u/s 43B of the Act.
Aggrieved against this, the assessee preferred appeal before Ld.CIT(A),
confirmed the addition.
Now, the assessee is in appeal before this Tribunal.
Ld. Sr. DR vehemently submitted that law is clear in this respect and he
relied upon the decision of Ld.CIT(A). He further relied upon the decision of
Hon’ble Delhi High Court in the case of CIT vs Bharat Hotels Ltd. [2019] 103
Taxmann.com 295 (Delhi) wherein the Hon’ble High Court has decided the issue
in favour of the Revenue by observing as under:-
“Having regard to the specific provisions of the Employees‟ 8. Provident Funds Act and ESI Act as well as the concerned notifications which granted a grace period of 5 days (which appears to have been late withdrawn recently on 08.01.2016), we are of the opinion that the ITAT‟s decision in this case was not correct. The assessee undoubtedly was entitled to claim the benefit and properly treat such amounts as having been duly deposited, which were in fact deposited within the period prescribed (i.e. 15 + 5 days in the case of EPF and 21 days + any other grace period in terms of the extent notification). As far as the amounts employees‟ constituting deductions from salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns.”
I have heard the Ld.Sr.DR and perused the material available on record
and gone through the orders of the authorities below. Ld.CIT(A) has decided
the issue by observing as under:-
DECISION ~ “Ground No.2: The contention of the Appellant has been considered and the order of AO has also been perused. The relevant provisions of the Income Tax Act 1961 as applicable in this case, are reproduced as hereunder: "Definitions. 2. In this Act, unless the context otherwise requires,- *** *** (24) "Income" Includes- Page | 3
*** *"'* (xl any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees ;] ,. "Other deductions. 36. (1) The deduction provided for In the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- *** [(va) any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation.-For the purposes of this clause, "due data" means the dote by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification Issued thereunder or under any standing order, award, contract of service or otherwise;]" 4.1 The provisions of the law are very clear. The facts from the written submission filed by the appellant shown that an amount of Rs. 1,34,148/- contributions received from the employees for various funds deposited after the due date was not allowable expenditure u/s 36(1)(va). This was a mistake apparent from the record. The income is rightly assessable in the hands of the appellant under the provisions of section 2(24) of the Act r.w.s. 36(l)(va) as no deduction is allowable from the income under this section on account of late deposit of the employee's contribution in the accounts of the employees of the respective funds i.e. EPF and ESI.. I therefore, decline to interfere and confirm the addition as made by the AO u/s 143(1). In this connection, reliance is being placed on a recent decision of ITAT Delhi 'B' bench in ITA No. 324/Del./2017 dated 25/07/2019 in the case of M/s Eagle Trans Shipping and Logistics (India) Pvt Ltd vs ACIT, Circle-8(1), New Delhi. The Hon'ble ITAT has relied upon the decision of Hon'ble High Court of Delhi In the case of CIT vs Bharat Hotels Ltd (2019) 410 ITR 417 (Del). The relevant para of ITAT decision is reproduced as under: "8. Before proceeding further we would like to go through the relevant provisions contained u/s 36(l)(va) of the Act which are extracted for ready perusal as under :- "36. (I) The deductions provided for In the following clauses shall be allowed In respect of the matters dealt with therein, in computing the Income referred to in section 28- Page | 4
(va) any sum received by the assessee from any of his employees to which the provisions of sub- clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation.-For the purposes of this clause, "due date" means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise. " 9. When we examine the issue in controversy in the light of the provisions contained u/s 36(1)(va) of the Act, it is apparently clear that the assessee would be entitled for deductions quo the sum received from any office employee to Which provisions under subsection (x) of clause (24) of section 2 is applied only, if such sum is credited by the assessee to the employees account in the relevant fund or funds on or before the due date. Due date is further defined in the Explanation, which means, the date by which the assessee is required as an employer to credit employees contribution to the employees account in the relevant fund under any Act or rule or order or notification issued thereunder or any standing order or award or service or otherwise. Meaning thereby, in case, employer fails to deposit the entire amount towards employees contribution on account of PF & ESI with concerned department on or before the due date under PF & ESI, the assessee shall be entitled for deduction to that extent. 10. Decision of the Hon'ble Supreme Court relied upon by the assessee cited as CIT vs. Alom Extrusions Ltd. (supra) is not applicable to the facts and circumstances of the case because Hon'ble Supreme Court has decided the issue in Alom Extrusions Ltd. case quo employers contribution as per section 43B(b) of the Act and not qua employees contribution U/S 36(1)(va) of the Act. 11. Hon'ble Jurisdictional High Court in case of CIT vs. Bharat Hotels Ltd. (2019) 410 ITR 417 {Deihl} (supra) decided the identical issue qua delayed deposit of employees contribution on account of PF & ESI against the assessee by holding that assessee would be entitled to deduction In terms of section 36(1)(va) of the Act to the extent if the employees contribution on account of PF & ESl deposited on or before the due date, and the employees contribution on account of PF & ESI deposited beyond the stipulated period would not make the assessee company entitled to claim deduction from its return. For ready perusal, operative part of the Judgment of CIT vs. Bharat Hotels Ltd. (supra) is extracted as under:- "7. The issue here concerns the Interplay of Section 2(24)(x) of the Act read with Section 36(1)(va) of the Act alongside Page | 5
provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (especially Regulation 38 of the Employees' Provident Funds Scheme, 1952) and the provisions of the Employees' State Insurance Act, 1948. The AO had brought to tax amounts which were deducted by the employer/assessee from the salaries and wages payable to its employees as port of their contributions. It is not in dispute that the employer's right to claim deductions under the main part of Section 43-8 of the Act is not an issue. The question the AO had to then decide was whether the amounts deducted from the salaries of the employees which had to be deposited within the stipulated time (in terms of notification/circular dated 19.03.1964 which was modified on 24.10.1973), as for as the EPF contribution went and the period of three weeks as far as the ESI contributions went. The AD made a tabular analysis with respect to the contributions deducted and actually deposited. The cumulative effect of notifications under the Employees' Provident Funds Act, 1952 and the Employees State Insurance Act. 1948 was that in respect of the EPF Scheme contributions the deductions were to be deposited within 15 days of the succeeding wage period with a grace period of 5 days; for ESI contributions the deposit with the concerned statutory authority had to be made within three weeks of the succeeding wage month/period. The CIT in this case confirmed the additions - made by the AO based on the entire amounts that were disallowed. The ITAT however granted complete relief. 8. Having regard to tile specific provisions of the Employees' Provident Funds Act and ESI Act as well 05 the concerned notifications which granted a grace period of 5 days (which appears to have been late withdrawn recently on 08.01.2016), we are a/the opinion that the ITAT’s decision in this case was not correct The assessee undoubtedly was entitled to claim the benefit and properly treat such amounts as having been duly deposited, Which were in fact deposited within the period prescribed (I.e. 15 + 5 days In the case of EPF and 21 days + any other grace,. period in terms of the extent notification). As far as the amounts constituting deductions from employees' salaries towards their contributions, which were made beyond such stipulated period, obviously the assessee was not entitled to claim the deduction from its returns. 9. In view of this discussion, the Revenue's appeal is partly allowed. The AO is directed to examine the contributions made with reference to the dates when they were actually made and grant relief to such of them which qualified for such relief in terms of the prevailing provisions and notifications. We also Page | 6
clarify that the assessee would be entitled to deduction in terms of Section 36(l)(va) of the Act. 12. In view of what has been discussed above and following the decision rendered by the Hon'ble jurisdictional High Court incase of CIT vs. Bharat Hotels Ltd. (supra),.we are of the considered view that the assessee company is not entitled for deduction of Rs.4,29,110/- u/s 36(1)(va) of the Act claimed on account of depositing the employees contribution towards ESI & PF as per provisions contained u/s 2(24)(x) read with section 36(1)(va) after due date which is evident from table extracted in Preceding para no.5. So, the case laws relied upon by the Id. AR for the assessee is not applicable to the facts and circumstances of the case. Consequently, finding no illegality or perversity in the impugned order passed by the Ld. CIT (A), appeal filed by the assessee is hereby dismissed.” 4.2 Considering the decision of Hon'ble ITAT and the jurisdictional High Court I am of the view that the appellant is not entitled for deduction u/s 36(1)(va) due to failure on his part in depositing the employees’ contribution on or before the due date. Accordingly, Ground no.2 of appeal is dismissed and addition of Rs.1,34,148/- is hereby confirmed. 5. Grounds No.1 & 3 : Grounds No. 1 & 3 of the appeal of the appellant, CPC in its rectification order dtd. 15.06.2019 provided the relief to the appellant company and therefore ground No.1 & 3 have not been pressed by the appellant. Therefore, these grounds are dismissed as not pressed.”
I find that the issue is covered by the judgement of Hon’ble Delhi High
Court rendered in the case of AIMIL Ltd. (supra) wherein it has been held:-
“We may only add that if the employees’ contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income Tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Supreme Court in Vinay Cement (supra).”
Further, Hon’ble Delhi High Court in the case of PCIT vs Pro Interactive
Service (India) Pvt.Ltd. in ITA No.983/2018 [Del.] order dated 10.09.2018 held as
under:-
“In view of the judgement of the Division Bench of Delhi High Court in Commissioner of Income Tax versus AIMIL Limited, (2010) 321 ITR 508 (Del.) the issue is covered against the Revenue and, therefore, no substantial question of law arises for consideration in this appeal. The legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee’s Provident Fund (EPD) and Employee’s State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x) of the Act.”
Therefore, respectfully following the ratio laid down by the Hon’ble
Jurisdictional High Court in the above-mentioned binding precedents, I hereby
direct the Assessing Officer to delete the disallowance. Thus, ground raised by
the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 04th January, 2022.
Sd/-
(KUL BHARAT) JUDICIAL MEMBER
*Amit Kumar*