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Facts
The assessee appealed against the CIT(A)'s order confirming the CPC's disallowance of Rs.161.54 Lacs for Assessment Year 2019-20. The disallowance was made under Section 36(1)(va) r.w. Section 2(24)(x) due to late payment of employees' contribution to PF/ESI, as reported in the Tax Audit Report.
Held
The Tribunal noted that the issue regarding the non-deductibility of late employees' contributions is settled by the Supreme Court in *Checkmate Services*. However, it directed the AO to verify the assessee's claim of incorrect reporting by the Tax Auditor and restrict the disallowance only to the extent of actual late payments after examining the challans.
Key Issues
Whether late payment of employees' contribution to PF/ESI is disallowable under Section 36(1)(va) r.w. Section 2(24)(x), and if the quantum of such disallowance needs re-verification based on actual payment dates.
Sections Cited
143(1), 36(1)(va), 2(24)(x), 36(1)(iv), 43B
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Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH
Before: HON’BLE SHRI LALIET KUMAR, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा�रण वष� / Assessment Year: 2019-20) M/s Sunrise Facilitators Pvt. Ltd. DCIT Circle बनाम/ Vs. 2238/5B, Shanti Nagar Aaykar Bhawan, Manimajra, Chandigarh. Sector 2, Panchkula �थायीलेखासं./जीआइआरसं./PAN/GIR No. AAICS-0850-M (अपीलाथ�/Appellant) : (��थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Shri Parikshit Aggarwal (CA) – Ld. AR ��थ�कीओरसे/Respondent by : Smt. Priyanka Dhar (Addl. CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 06-08-2025 घोषणाकीतारीख /Date of Pronouncement : 18-08-2025. आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2019-20 arises out of an order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 18-08-2022 in the matter of an intimation issued by CPC u/s 143(1) on 15-09-2020 disallowing late payment of Employees’ Contribution to PF / ESI for Rs.161.54 Lacs u/s 36(1)(va) r.w.s. 2(24)(x) as reported by Tax Auditor in Tax Audit Report. The Ld. CIT(A) confirmed the same in terms of clarificatory amendment made by Finance Act, 2021 to these provisions. Aggrieved, the assessee is in further appeal before us.
It is undisputed fact that the impugned issue stood covered against the assessee by the decision of Hon’ble Apex Court in the case of Checkmate Services P. Ltd Vs. CIT (2022) 143 Taxmann.com 178(SC) wherein it has finally been held that there is clear distinction between 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 from its employees’ [in terms of Sec. 36(1)(va)]. 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) and therefore, subjected to conditions spelt out by Explanation to Section 36(1)(va) i.e., 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 contributions – the employer’s liability is to be paid out of its income whereas the second is deemed to be 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 borne while interpreting the obligation of every assessee under Section 43B. If the same is not deposited as per mandate of Sec .36(1)(va), the deduction of the same would not be available to the assessee. Thus, this issue has been decided in favor of the revenue.
The Ld. AR has urged that the assessee has suffered higher disallowance due to wrong reporting of respective payment dates by Tax Auditor. In support, tabular charts have been placed before us separately identifying payments which have been made within time and payments which have been deposited beyond due date. The Ld. AR stated that payments of Rs.58,58,015/- have been deposited beyond due dates whereas remaining payments are within time. The copies of the challans have also been placed on record. The same being factual aspect, we direct Ld. AO to verify the same and restrict the disallowance only to the extent of late payment only. No other ground has been urged in the appeal.
The appeal stand party allowed for statistical purposes. Order pronounced on 18-08-2025.