ASHA KIRAN PACKAGING ,BANGALORE vs. INCOME TAX OFFICER, WARD-6(3)(1), BANGALORE

PER WASEEM AHMED, ACCOUNTANT MEMBER:

“5. DECISION:- 5.1 I have carefully gone through the Intimation u/s 143(1). the grounds of appeal and submission made by the appellant in this regard. Briefly stating facts of the case is that the appellant filed return of income which was processed u/s 143(1) by CPC making certain adjustments over and above the returned income. The only issue involved in this case is that the appellant which is a partnership firm collected contribution from its employees towards PF and ESI but deposited some of the monthly contributions after the due date as prescribed in the respective PF and ESI Acts Due to this, CPC added back this amount of Rs.2,78,976/- u/s 36(1)(va) of the I.T Act. 5.2 Grounds of appeal raised by the appellant are all against the addition of Rs.2.78,976/- u/s 36(1)(va). In this regard, there is no dispute that PF contribution to the extent of Rs.1,96.284/- and ESI contribution to the extent of Rs.82,692/- were deposited after the due dates. So CPC added the total amount of Rs.2,78,976/-. On the other hand, the appellant has quoted several High Court and Supreme Court Judgements where it has been held that even if there is delay in deposit of the respective monthly contributions beyond the due dates as specified in the respective Acts, if the amounts are deposited within the due date of filing return of income u/s 139(1), the same will qualify for deduction u/s 43B of the Act. The matter has however been settled by amendment to section 36 by Finance Act, 2021 with effect from 01.04.2021. Explanation 2 below section 36(1)(va). introduced w.e.f. 01.04.2021, clearly states that the provisions of sec. 43B shall not apply and shall be deemed never to have been applied for the purposes of determining the "due date" under this clause. Thus. it is very clear that although the said Explanation was introduced with effect from AY-2021- 22, but the wordings `'shall be deemed never to have been applied" effectively means that the amendment is to have effect for all other earlier years also. Hence, appellant's appeal fails. This ground of appeal is therefore rejected and dismissed.”

6.1 In addition, the learned AR also submitted that such disallowance cannot be made under section 143(1) of the Act because this adjustment was brought into the statute with effect from 1 April 2021 whereas the present case pertains to AY 2019-20.

8.1 In this regard, we note that the law is well settled by the judgment of the Hon’ble Supreme Court in the case of Checkmate Facility (P) Ltd. v. CIT [2022] 143 taxmann.com 178 (SC). The Hon’ble Apex Court, while dealing with the scope of section 36(1)(va) read with section 43B of the Act has observed that the non-obstante clause in . section 43B, and its operation, cannot be read as doing away with the condition that such payment has to be made within the due date under the relevant welfare statute. Section 43B(b) cannot override section 36(1)(va) of the Act. In other words, an assessee is entitled to deduction only if the employees’ contribution is credited to the employees’ account in the relevant fund under the Provident Fund Act or ESI Act before the due date under those enactments. If there is a delay, even by a day, the deduction is not allowable.

8.2 In view of the above, we hold that the CPC rightly made the disallowance on account of late deposit of employees’ provident fund and ESI beyond the date prescribed under the respective Act.

8.3 Before parting, it is necessary to note that the learned AR submitted that there were some payments which were made within the due date specified under the respective Acts. This contention was also raised before the learned CIT(A), which can be verified from the order of the learned CIT(A). However, no finding was given. To this extent, we find force in the argument of the learned counsel for the assessee. Accordingly, we set aside the issue to the file of the AO for the limited purpose of verifying the payments with respect to employees’ provident fund and ESI which have been made within the due date as prescribed under the respective Acts, and allow the same. Hence, the ground of appeal of the assessee is partly allowed for statistical purposes.