THE KERALA STATE CO-OP COIR MARKETING FEDERATION LTD,ALAPPUZHA vs. THE ACIT, CIRCLE-1, ALAPPUZHA

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ITA 464/COCH/2018Status: DisposedITAT Cochin27 November 2018AY 2013-144 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the disallowance, stating that employees' contribution to PF and ESI, if not paid within the statutory due date, cannot be allowed as a deduction. The decision followed the jurisdictional High Court's ruling in Merchem Limited.

What were the facts?

The assessee disallowed a sum of Rs.58,98,073 for belated remittance of employees' contribution to EPF and ESI. The Assessing Officer and CIT(A) confirmed this disallowance, relying on the Kerala High Court's decision in CIT v. Merchem Ltd.

What were the issues?

Whether belated remittance of employees' contribution to EPF and ESI beyond the statutory due date is an allowable deduction under the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 36(1)(va)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN

Before: Shri Chandra Poojari, AM & Shri George George K, JM

Hearing: 27.11.2018Pronounced: 27.11.2018

Per George George K., JM

This appeal at the instance of the assessee is directed against CIT(A)’s order dated 25.07.2018. The relevant assessment year is 2013-2014.

2.

The solitary issue for consideration is whether the CIT(A) is justified in confirming the assessment order, wherein belated remittance of employees’ contribution to EPF and ESI u/s 36(1)(va) of the I.T.Act.

3.

Brief facts of the case are as follows:- The Assessing Officer had disallowed a sum of Rs.58,98,073, being employees’ contribution towards ESI & PF since the payment was not made within the due date specified in the respective statutes. The relevant observation of the Assessing Officer reads as follows:-

ITA No.464/Coch/2018. 2 M/s.The Kerala State Co-op Coir Mktg.Fed.Ltd.

“5.1 On perusal of the Form 3CD, it is noticed that the contributions collected from the employees towards Provident Fund and ESI was paid to the respective funds after the “due date” as specified u/s 36(1)(va). Hence the total of these payments Rs.58,98,073/- (PF - Rs.53,77,257/-; ESI – Rs.5,20,816/-) is to be added back to the total income of the assessee. The due date for PF payment is 20th of every month and ESI payment is 21st of every month. Normally an assessee gets a grace period of 5 days for making the payment. Reliance is placed on the decision of the Kerala High Court in the case of Commissioner of Income-tax Cochin v. Merchem Ltd. reported in [(2015) 61 taxmann.com 119 (Kerala). So an addition of Rs.58,98,073/- is made to the total income of the assessee.”

4.

Aggrieved by the confirmation of disallowance, the assessee preferred an appeal before the first appellate authority. The CIT(A) following the judgment of the Hon’ble jurisdictional High Court in the case of CIT v. Merchem Limited [(2015) 378 ITR 443 (Ker.)], dismissed the appeal of the assessee.

5.

The assessee being aggrieved by the CIT(A)’s order, has filed the present appeal before the Tribunal. The learned AR submitted that the employees’ contributions received by the assessee were paid before the date of the filing of the return, and hence, was an allowable deduction. The learned Departmental Representative, on the other hand, submitted that the issue in question is squarely covered in favour of the Revenue by the judgment of the Hon’ble jurisdictional High Court in the case of Merchem Limited (supra).

6.

We have heard the rival submissions and perused the material on record. The Hon’ble jurisdictional High Court in the case of Merchem Limited (supra) had categorically held

ITA No.464/Coch/2018. 3 M/s.The Kerala State Co-op Coir Mktg.Fed.Ltd. that employees’ contribution to PF and ESI, if not paid within the due date mentioned in the respective statute cannot be allowed as a deduction u/s 36(1)(va) of the I.T.Act. The Hon’ble jurisdictional High Court in the case of Hon’ble jurisdictional High Court in the case of Merchem Limited (supra) had considered the judicial pronouncements on the issue and had taken a decision in favour of the Revenue (including the Hon’ble Apex Court judgment relied on by the assessee in its grounds of appeal before us). The judgment of the Hon’ble jurisdictional High Court in the case of Merchem Limited (supra) was followed by the recent judgment of the Hon’ble Kerala High Court in the case of Alliaz Corhill Information Services (P) Ltd. v. DCIT [(2018) 406 ITR 150 (Ker.)]. In view of the above judicial pronouncement of the Hon’ble jurisdictional High Court, we hold that the Assessing Officer has correctly disallowed the sum of Rs.58,98,073. Therefore, the CIT(A)’s order confirming the assessment order does not require any interference and the same is upheld. It is ordered accordingly.

7.

In the result, assessee’s appeal is dismissed.

Order pronounced on this 27th day of November, 2018.

Sd/- Sd/- (Chandra Poojari) (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER

Cochin ; Dated : 27th November, 2018. Devdas*

ITA No.464/Coch/2018. 4 M/s.The Kerala State Co-op Coir Mktg.Fed.Ltd.

Copy of the Order forwarded to : 1. The Applicant. 2. The Respondent. 3. The CIT (A)-Kottayam 4. The Pr.CIT, Kottayam. 5. DR, ITAT, Cochin 6. Guard file.

BY ORDER,

(Asstt. Registrar) ITAT, Cochin

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