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Before: MS. KAVITHA RAJAGOPAL & SMT. RENU JAUHRI
Assessee by : Shri Yash Sangharajka Revenue by : Shri Hemashu Joshi Date of Hearing 29.01.2025 Date of Pronouncement 30.01.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Learned Additional/Joint Commissioner of Income-tax (Appeals), Gurugram- 2/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 28.10.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2017-18.
2. The assessee has raised the following ground of appeal: “NON-DISALLOWANCE OF PAYMENTS IN CONTEXT OF SECTION 438
It is to be noted that the assessee has made all payments of EPF and ESIC on a monthly basis and such all payments have been duly made before the due date of filing of return of income u/s 139(1) of the Income Tax Act, 1961. Out of the twelve months of the relevant previous year under consideration, there has been a marginal delay of i to 5 days in case of EPF (two times) and ESI (three times). It should be noted that the payment of ESI and EPF is to be made using Internet Banking and the success of payment depends upon the proper functioning of the Internet Banking Website and EPF/ESI Portal. During certain months, there are technical difficulties that companies face whilst attempting to make payment which results in a marginal delay in payment of the statutory amount. In fact, during FY 2016-17, the Unified Portal of the EPFO was under construction and as a reason there were severe technical problems on the EPF Website. In fact, for the month of December, 2016 the EPFO has extended the due date of payment of EPF from 15th January, 2017 to 20th January, 2017.
It is pertinent to note that the case of assessee pertains to AY 2017-18. This is to further bring to your notice that the amendment to section 36 (1)(va) and section 43B of the Finance Act, 2021 is only prospective in nature and not retrospective.
3. This is further proved by the judgement of ITAT Delhi in the case of Mahindra and Mahindra Financial Services Ltd V/s DCIT- "In the present matter, the assessee contended that payment of employee's contribution fee has been made before the due date for filing of return of income u/s. 139(1) of the Act, then same is allowable as deduction. Ld. AR of the assessee further submitted that the amendment to section 36(1) (va) and 43B of the I.T. Act by Finance Act. 2021 is only prospective in nature i.e. w.e.f. 01.04.2021 and not retrospective In the above case ITAT Delhi Concludes that the amendment was brought in Finance Act, 2021 w.e.f 01.04.2021. The law was not framed/amended in the relevant Assessment year and any legal proposition which cast additional burden/liability on the assessee cannot be implemented retrospectively. Considering the overall facts, circumstances, judicial decisions, are of the reasoned view that the amendment to section 36(1)(va) of the Act will not be applicable to Assessment Year 2019-20. The assessee has deposited the employees contribution of provident fund before the due date u/s. 139(1) of the Act. Accordingly, we set aside the order of the Ld.CIT(A) and direct the assessing officer to delete the disallowance and allow the grounds of appeal
in favour of the assessee.
4. Hence, in the present case the claim of the assessing officer to disallow the expense of the 15,73,807/- towards delay of payment in PF and ESIC or payment towards the same after due date of the fund is not correct.
5. Further, the previous submission of the assessee against the notice clearly states that the payment of PF & ESIC in the month January was extended till 20th January 2017 and there was marginal delay of one to five days for other delayed payments from the due date of fund however all the payment were made before the due date of filling return u/s 139(1). For Further clarification the assessee has attached a copy of previous reply filed with the assessee along A.Y. 2017-18 Kohinoor Televideo Private Limited. with payment schedule of delayed payments as Annexure A and B along with this letter.
6. The above fact is also supported by judgement in M/s. Hebe Infrastructure Pvt. Ltd case, ITAT New Delhi directs to delete disallowance of employees' contribution to EPF and ESI as contribution was made before due date for filing return of income where The Centralized Processing Centre (CPC) Bangalore, at the time of processing the return u/s 143(1) of the Act, disallowed the employees' contribution to ESI and PF. The CIT (Appeals) also sustained the disallowance. The assessee, M/s. Hebe Infrastructure Pvt Lid made an appeal before the Tribunal. It was submitted by the department that the amendment brought in by the Finance Act, 2021 in Sections 36(1) (va) and 43B of the Act by way of inserting Explanation 2 and Explanation 5 respectively have retrospective applicability. The Counsel for the assessee, submitted that the amendments are prospective and are applicable for Assessment Years 2021-22. The Counsel for the assessee submitted that the contributions to PF and ESI were paid to Govt. before due dates for filing of return of income by the assesse. Thus, the issue is covered by the decision of the jurisdictional High Court in the case of CIT Vs. AIMIL Ltd. The Bench observed that "the amendment brought in by Finance Act, 2021 is effective from 1.04.2021 and no disallowance is called for, on belated payment of employees' contribution to ESI and PF in case the assessee deposited the said contribution before due date for filing of return of income under Income Tax Act".
In the case of CIT v/s AIMIL Ltd The Delhi High Court held that Even employees' contribution to PF paid before due date of filing ROI is allowable u/s 43B: S. 2 (24) (x) provides that amounts received by an assessee from employees towards PF contributions ete shall be "income". S. 36 (1) (va) provides that if such sums are contributed to the employees account in the relevant fund on or before the due date specified in the PF etc legislation, the assessee shall be entitled to a deduction as 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.”
Brief facts of the case are that the assessee filed its return declaring income of Rs. 16,81,51,129/- on 05.11.2017. The case was selected for scrutiny. Ld. AO noted that the assessee had made late payment of the amounts deducted from the Employees’ Provident Fund (EPF) and Employees' State Insurance (ESI) contribution for various months, and therefore, a total amount of Rs. A.Y. 2017-18 Kohinoor Televideo Private Limited. 15,73,807/-, being delayed payment, was disallowed and added back to the income u/s 36(1)(va) of the Act.
Aggrieved with the order of Ld. AO, the assessee preferred an appeal before Ld. CIT(A). Vide order dated 28.10.2024, Ld. CIT(A) relying on the order of Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. v/s CIT vide Civil Appeal No. 2833/2016 dated 12.10.2022 upheld the disallowance made by the AO on account of late payments of EPF & ESI. Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before the Tribunal.
Ld. AR has submitted that there was a delay in making the payments of employees’ contributions on account of EPF and ESIC as under:
Fund Due date Actual date Amount ESI 21-Apr-17 28-May-17 2,10,658 ESI 21-Feb-17 22-Feb-17 2,29,943 ESI 15-Sep-16 16-Feb-16 4,56,198 EPF 15-Jan-17 20-Jan-17 3,56,541 EPF 15-Apr-17 16-Apr-17 3,20,467 15,73,807 6. It was submitted that most of the payments have been made only one day after the due date. In such cases, the delay was due to a technical issue on the website which was not attributable to the assessee. With regard to the EPF contribution deposited in January 2017, Ld. AR has also furnished a copy of the press release regarding the extension of the due date by the EPFO. It was, therefore, submitted by the Ld. AR that the marginal delay of 1-5 days in the A.Y. 2017-18 Kohinoor Televideo Private Limited. payment of ESIC & EPF contributions using net banking should be ignored because the success of payment depends on the proper functioning of the website. Since the technical difficulties were faced by several companies while attempting to make payments, the due date was also extended by the EPFO on few occasions.
7. On the other, Ld. DR has relied on the orders of the lower authorities as well as the decision of the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. (supra).
We have heard the rival submissions and perused the material placed before us. Admittedly, there has been a delay in depositing employees’ contributions towards EPF & ESI in some months by the assessee. For few months, the delay is only one day which is claimed to be on account of technical glitches on the EPFO. The assessee has claimed that the due date was extended by the EPFO from 15th January to 20th January 2017 for the payment due in the month of January.
All these facts and contentions of the assessee are required to be verified. As such, we deem it proper to restore the issue for requisite verification to the file of Ld. AO who is directed to take into account the extension of the due date by the competent authority in each of the months for which the delay has occurred in depositing the employees’ contribution towards EPF & ESIC and recompute the disallowance accordingly. The assessee is also directed to submit A.Y. 2017-18 Kohinoor Televideo Private Limited. the requisite evidence in support of its claim relating to technical glitches on the website as well as the extension of the due date by the competent authority.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 30.01.2025.