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Facts
The assessee appealed against a disallowance of Rs. 8,22,528 made by the Centralized Processing Centre (CPC) under Section 36(1)(va) for delayed deposit of employee contributions to Provident Fund and ESI for Assessment Year 2020-21. The assessee contended that these payments were made within the financial year or before the due date for filing the return of income, and therefore should be allowed as a deduction.
Held
The Income Tax Appellate Tribunal dismissed the assessee's appeal, upholding the disallowance. Relying on the Supreme Court judgment in Checkmate Services Private Limited, the Tribunal held that employee contributions to Provident Fund and ESI, if deposited after the due date prescribed by the relevant acts, are liable for disallowance under Section 36(1)(va) and treated as income under Section 2(24)(x) of the Income-tax Act, 1961.
Key Issues
Whether delayed deposit of employee contributions to Provident Fund and ESI, after the due date prescribed by the respective provident fund and ESI acts, is liable for disallowance under Section 36(1)(va) of the Income-tax Act, 1961, even if deposited before the due date for filing the income tax return.
Sections Cited
154, 143(1), 36(1)(va), 2(24), 2(24)(x), 43B, 37(1)
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Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: Dr. MANISH BORAD & SHRI VISWANETHRA RAVI
आदेश/ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
This captioned appeal filed by the assessee is directed against the order of Ld. CIT(A)/JCIT(A) dated 08.02.2024 u/s 154 of the Income-tax Act, 1961 which is arising out of Assessment Order passed u/s.143(1) of the Act dated 16.12.2021.
Assessee has raised following grounds of appeal:-
1. The CPC ought not to have made the addition of Rs. 8,22,528/-, being employees contribution to Provident fund of Rs. 8,21.996/- and to ESI of Rs. 532/- under section 35(1)(va) of the Income tax Act, 1961 and ignoring the fact that of the Act. u/s 43B of the Act
2. The CPC ought not to have made the addition of Rs 1,103/-, being any sum payable by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, which is already dis allowed and considered as income.
3. The CPC erred in making adjustment with regard to the employees contribution u/s 36(1)(va) in the intimation u/s 143(1) when the same is a debatable issue.
4. The CPC ought to have appreciated the fact that the entire amount of Rs. 8,22,528/-, was paid within the financial year or before the due date of fling the retum of income. Hence, the same should be allowed as a deduction.
5. The CPC erred in not treating the expenditure as allowable u/s 37(1) of the Income tax Act, 1961, as the payment of Employees and employers contribution to PF and ESI was incurred in the course of business and for the purposes of business 6. CPC without application of mind ignoring the fact that payments have been made within the financial year or within the due date of fling the return and settled legal position, ought not to have made adjustment to the returned income. 7. Your appellant submits that the income from FD with Central Bank of India was offered to tax in the revised retum of income, however had entered wrong TAN number inadvertently for claiming TDS credit of Rs. 68,941/-, request you to grant the credit of TDS as per form 26AS 8. For this and any other ground of appeal that may be taken up during the course of hearing, your appellant requests that the addition of Rs. 8,22,528/- may be deleted and the retumed income may be accepted."
3. When the case was called for none appeared on behalf of the assessee. Perusal of the grounds indicate the only issue relates to disallowance made u/s 36(1)(v)(a) r.w.s. 2(24) of the Act at Rs. 8,22,528/- on account of delay in deposit of employees contribution to Provident Fund and ESI.
Ld. DR at the outset submitted that the issue stands squarely covered against assessee by the judgement of Honourable Supreme Court of India in the case of Checkmate Services (P) Ltd. Vs CIT(1), Civil appeal No. 2833 of 2016 dated 12.10.2022.
We have heard Ld. DR and perused the record placed before us. After going through the submissions of the assessee before Ld. CIT(A) and the statement of facts and grounds of appeal as well as the annexure to audit report on Form 3CD, it remains undisputed fact that the sum of Rs. 8,22,528/- received by the assessee from employees towards their contribution to Provident Fund and ESI on various dates during the Financial Year 2019-2020 have been deposited after the due date of payment prescribed under the relevant Act governing Provident Fund and ESI. Under the given facts and circumstances the judgement of Hon'ble Apex Court in the case of Checkmate Services Private Limited, (Supra) is squarely applicable against the assessee as Hon'ble court has held that in case of delay in depositing the employees contribution given towards Provident Fund and ESI after the prescribed due date then such contribution deserves to be disallowed u/s 36(1)(V)(a) of the Act and is to be treated as income u/s 2(24)(x) of the Act.
We therefore fail to file any inconsistency in the finding of Ld. CIT(A). Grounds of appeal raised by the assessee are dismissed.
In the result appeal of the assessee is dismissed.
Order pronounced on this 28th day of March, 2025.