M/S GIRIRAJ ENTERPRISES,PUNE vs. DEPUTY DIRECTOR OF INCOME TAX , BENGALURU

The distinction between an employer's contribution which is its primary liability under law in terms of Section 36(1) (iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1) (va) are satisfied ie, depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts the employer's liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees' income and held in trust by the employer. This marked distinction has to be bome while interpreting the obligation of every assessee under Section 43B.

In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited og or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the retums are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees' contributions- which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others' income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction.

In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed.”

Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising following grounds of appeal : “On facts and in law, 1] The learned CIT(A) erred in confirming the disallowance of Rs.9,03,700/- on account of employees' contribution to provident fund u/s 36(1)(va) on the ground that the said amount was not paid before the due date specified under the PF Act. 2] The learned CIT (A) erred in holding that the case of the assessee was not covered by the circular issued by EPFO dated 31.08.2021 and therefore, the disallowance was justified. 3] The learned CIT(A) failed to appreciate that there was no delay on the part of the assessee in making the payment of Rs.9,03,700/- on account of employees contribution to PF and hence, no disallowance was warranted u/s 36(1)(va) of the Act. 4] The learned CIT(A) failed to appreciate that the case of the assessee was clearly covered by the circular issued by EPFO dated 31.08.2021 and the delay in depositing the amount was on account of non-seeding of Aadhar in the UAN and therefore, no disallowance was warranted u/s 36(1)(va) of the Act. 5] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”

The Ld. Counsel for the assessee referring to pages 3 and 4 of the paper book drew our attention to the letter addressed by the assessee to the Regional Commissioner, the Employee’s Provident Fund stating that they could not deposit the employees’ contribution to PF before 15th June, 2021 due to certain technical glitches. Referring to page 8 of the paper book, the Ld. Counsel for the assessee drew our attention the deposit made on 16th June, 2021. Referring to the decision of the Delhi Bench of the Tribunal in the case of The Kangra Co-operative Bank Ltd. Vs. Dy. CIT vide for AY 2019-20, order dated 29.11.2024 and in the case of Qualcomm India Private Limited Vs. Dy. CIT in for AY 2022-23 vide order dated 27.09.2024, he submitted that under identical circumstances the Tribunal has deleted the addition sustained by the Ld. CIT(A) on account of delay in deposit of employee’s contribution to PF and ESIC where the Aadhar Number is not linked due to the technical issue. He accordingly submitted that in view of the decisions cited (supra) and in view of the technical glitches on the portal of PF organization, such delay of one day due to technical glitches should be condoned and the addition sustained by the Ld. CIT(A) should be deleted.

On the other hand, the Ld. DR fairly relied on the order of the Ld. CIT(A).

We have heard the rival arguments made by both the sides and perused the record. We find the only dispute in the instant appeal is regarding the allowability of deduction u/s 36(1)(va) of the Act on account of delay in deposit of employees’ contribution to PF by one day due to the technical glitches on the portal of the PF organization. A perusal of the letter addressed by the assessee to the Regional Commissioner, the Employees Provident Fund reads under :

We find from pages 5 to 9 of the paper book that the assessee had deposited the employees’ contribution to PF on 16th June, 2021 i.e. with a delay of only one day which is due to the technical glitches. We find under identical circumstances the Delhi Bench of the Tribunal in the case of Qualcomm India Private Limited (Supra) while deleting the addition sustained by the Ld. CIT(A) on account of disallowance made by the Ld. Assessing Officer on account of delayed payment of employees’ contribution to PF due to the technical glitches has observed as under : “10. During the AY 2022-23, the appellant has deposited an amount of INR 19,48,65,610 towards Employee‟s Contribution Provident Fund („PF‟) for the month of May,2021. The details of the challans for the month of May, 2021 are as under: SI. No Challan Reference Employee's Total amount Date of Date of Number Contribution as per Debit in Challan Challan Bank A/c 1 259160621002965 25,66,403 49,94,817 15-Jun-21 16-Jun-21 2 259160621002919 13,10,01,695 24,81,60,668 15-Jun-21 16-Jun-21 3 259160621002953 1 11,56,102 1 21,78,876 15-Jun-21 16-Jun-21 4 259160621002939 5,96,33,568 11,19,58,937 15-Jun-21 16-Jun-21 5 259160621005055 57,311 1,12,385 16-Jun-21 16-Jun-21 (Non-seeding of Aadhar) 6 259160621005065 4,50,531 8,20,910 16-Jun-21 16-Jun-21 (Non-seeding of Aadhar) With regard to Serial No. 1 to 4, the PF Payments amounting to INR 36,72,93,297 bearing challan numbers 259160621002965, 259160621002919, 259160621002953 & 259160621002939 (copy of payment receipt enclosed as Annexure 1) were duly debited from Appellant's bank account on 15 June 2021 i.e., within the due date. (Refer Page 183 of Factual Paper book) However, the date of echallans was reflecting as 16 June 2021. The Appellant has deposited the PF contribution pertaining to May 2021 before the due date. However, due to technical glitch on the EPFO Portal on the due date i.e., 15 June 2021 the e-challan was generated only on 16 June 2021.”

Since, in the instant case the delay in depositing of the employees’ contribution to PF by one day was due to the technical glitches in the portal of the PF department, therefore, respectfully following the decisions of the Delhi Bench of the Tribunal cited (supra) and in absence of any contrary material brought to our notice, we set aside the order of the Ld. CIT(A) and direct the Assessing Officer to delete the addition of Rs.9,03,700/-. Thus, the grounds raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed.