COGNEESOL PRIVATE LIMITED,MOHALI vs. ADDLJCIT (A), AURANGABAD

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ITA 526/CHANDI/2024Status: DisposedITAT Chandigarh24 September 2025AY 2017-183 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the appeal lacked merit and confirmed the disallowance made by the lower authorities. Regarding the primary issue concerning the disallowance of employees' contribution to ESI/PF accounts, the Tribunal found that the assessee failed to demonstrate that these contributions were paid within the due date. Consequently, the deduction could not be allowed as business expenditure. The Tribunal explicitly relied on the Hon'ble Supreme Court's judgment in the case of Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. (2022) 448 ITR 518 (SC) to uphold the disallowance. The Tribunal did not provide specific reasoning on the retrospective application of explanations or the club expenditure issue, implying these were subsumed by the overall dismissal of the appeal based on the primary ground. The operative direction was to confirm the order of the Addl. CIT(A) and dismiss the assessee's appeal.

What were the facts?

The assessee, Cognesol Private Limited, is in appeal before the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, against the order of the Additional Commissioner of Income Tax (Appeals) [Addl. CIT(A)], Aurangabad, dated March 5, 2024. The appeal pertains to Assessment Year 2017-18. The core issue is the disallowance of employees' contribution to ESI/PF accounts, which the assessee failed to pay within the statutory due date. The Addl. CIT(A) confirmed this disallowance, relying on the Supreme Court's judgment in the case of Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. The assessee's grievance is that the CIT(A) erred in interpreting Section 36(1)(va) and Section 43B of the Income Tax Act and in deeming the impact of Explanations to these sections as retrospective. Additionally, a ground regarding additions of Rs. 57,390/- on account of business expenditure at clubs was raised.

What were the issues?

1. Whether the Ld. CIT(A) erred in interpreting Section 36(1)(va) of the Income Tax Act independently without considering the provisions of Section 43B of the Act? (Question of law) 2. Whether the Ld. CIT(A) erred in deeming the impact of Explanation 2 to Section 36(1)(va) and Explanation 5 to Section 43B as retrospective? (Question of law) 3. Whether the Ld. CIT(A) erred in making additions of Rs. 57,390/- on account of business expenditure incurred at clubs as per Section 37 of the Act? (Question of mixed law and fact) Assessee's Contentions: The assessee argued that the CIT(A) misinterpreted Section 36(1)(va) by not considering Section 43B and incorrectly treated the Explanations to these sections as retrospective. The assessee also challenged the addition made for club expenditure. Revenue's Contentions: The revenue contended that the disallowance made under Section 36(1)(va) was correct, as the employees' contribution to ESI/PF was not paid within the due date. The revenue relied on the Supreme Court's judgment in Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. The judgment does not record specific arguments from the revenue on the other grounds.

Which sections of the Income-tax Act were involved?

Section 36(1)(va),Section 43B,Section 37

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Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH

Before: SHRI LALIET KUMAR & SHRI MANOJ KUMAR AGGARWAL

For Appellant: Shri Deepak Aggarwal, Advocate
Hearing: 24.09.2025Pronounced: 24.09.2025

The assessee is in appeal before the Tribunal against the order of the ld. Addl. / JCIT (A), Aurangabad dated 05 .03.2024 passed for assessment year 2017-18. 2. The grounds of appeal are as under:

1.

That the Ld. CIT(A) has erred in interpreting section 36(1)(va) of the Act independently without considering the provisions of section 43B of the Act.

2.

That the Ld. CIT(A) has erred in deeming the impact of Explanation 2 to Section 36(1)(va) and Explanation 5 to Section 43B as retrospective.

3.

That the Ld. CIT(A) has erred in making additions of Rs.57,390/- on account of business expenditure incurred at clubs being entrance fees and subscription as per section 37 of the Act.

2.

The assessee has taken three grounds of appeal, however, its grievance revolves around a single issue namely, Ld. CIT(A) has erred in confirming the disallowance which was made under Section 36(1)(va) of the Income Tax Act. The assessee was unable to pay employees' contribution to respective ESI/PF Accounts within the due date, therefore, following the judgement of Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. (2022) 448 ITR 518 (SC), addition has been confirmed.

3.

On due consideration of the record with the assistance of ld. Representative, we do not find any merit in this appeal. The Ld. CIT(A) has rightly confirmed the disallowance. It has not been demonstrated before us as to how employees' contribution was paid to respective ESI/PF accounts within due date and if it was not paid within due date, then deduction cannot be allowed as business expenditure.

4.

The Ld. CIT(A) has rightly placed reliance upon the judgement of Hon'ble Supreme Court in the case of Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. (2022) 448 ITR 518 (SC). Accordingly, the order of the Ld. Addl. / JCIT(A) is confirmed and the appeal filed by the Assessee is dismissed.

6.

In the result, appeal of the assessee is dismissed.

Order pronounced on 24.09.2025. (MANOJ KUMAR AGGARWAL) ACCOUNTANT MEMBER (LALIET KUMAR) JUDICIAL MEMBER

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