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Facts
The assessee's return was processed disallowing employees' contribution to PF/ESI deposited after statutory due dates but before the due date of filing the return of income. The assessee appealed against this disallowance.
Held
The Tribunal, following the Supreme Court's decision in Checkmate Services (P) Ltd. v. CIT, held that employees' contributions to PF/ESI, if not deposited within the statutory due dates, are not allowable as deductions. Therefore, the disallowance was upheld.
Key Issues
Whether employees' contribution to PF/ESI, deposited after the statutory due date but before the due date of filing the return of income, is allowable as a deduction.
Sections Cited
143(1), 43B, 36(1)(va), 139(1)
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Order PER LALIET KUMAR, J.M This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt. 31/07/2021 pertaining to Assessment Year 2018-19.
At the outset the Registry has pointed out that the above appeal is barred by limitation by 368 days.
After considering the condonation application filed by the assessee in the above appeal, we condone the delay for which sufficient cause is shown, and admit the appeal for adjudication.
In the present appeal, the solitary ground raised by the assessee is against the disallowance of Rs. 29,87,930/- on account of employees’ contribution towards PF/ESI, which was deposited after the due date as prescribed under the respective Acts but before the due date of filing the return of income under section 139(1) of the Income-tax Act, 1961.
2 5. The facts in brief are that the return of income was processed under section 143(1) of the Act by the CPC, Bangalore, disallowing employees’ contribution to PF/ESI to the extent of Rs. 29,87,930/-, relying upon the dates of actual payment furnished in the tax audit report, which indicated that the payments were made beyond the statutory due dates.
Before the CIT(A), the assessee contended that since the amounts were deposited before the due date of filing the return of income, the disallowance was not justified in view of section 43B read with judicial precedents. However, the Ld. CIT(A) upheld the disallowance, relying on the decision of the Hon’ble Gujarat High Court in the case of Gujarat State Road Transport Corporation [(2014) 41 taxmann.com 100] and the amendment introduced by the Finance Act, 2021, which inserted Explanation 2 to section 36(1)(va), clarifying that the provisions of section 43B do not apply to employees’ contributions.
We have heard the rival contentions and perused the material available on record. The issue involved in the present appeal is now no longer res integra in view of the authoritative pronouncement of the Hon’ble Supreme Court in the case of Checkmate Services (P) Ltd. v. CIT [(2022) 448 ITR 518 (SC)], wherein it has been held that employees’ contributions to PF/ESI, if not deposited within the due dates prescribed under the respective statutes, are not allowable as deductions, irrespective of the fact that such payments were made before the due date of filing the return of income.
7.1 The Hon’ble Supreme Court has categorically held that section 43B applies only to employer’s contributions and that section 36(1)(va) governs the employees’ share, and the same must be deposited within the time prescribed under the relevant welfare Acts.
7.2. Respectfully following the binding decision of the Hon’ble Apex Court, we find no infirmity in the order passed by the CIT(A). Accordingly, the ground raised by the assessee is dismissed.
In the result, appeal of the Assessee is dismissed.
(Order pronounced in the open Court on 20/05/2025)