SATISH KUMAR RANA,KANGRA vs. INCOME TAX OFFICER, KANGRA HIMACHAL PRADESH

From case records, it emerges that CPC disallowed late payment of Employees’ Contribution to PF / ESI for Rs.7.16 Lacs u/s 143(1). The disallowance was in terms of Sec.43B r.w.s. 36(1)(va) as well as Sec.2(24)(x). The Ld. CIT(A), considering the statutory provisions, confirmed the adjustment against which the assessee is in further appeal before us.

Indeed, the impugned issue stand 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). It has finally been held by Hon’ble Court 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 law laid down by Hon’ble Court would prevail over all the other decisions favoring the assessee and it is to be construed that the law was always like that since its inception. Therefore, the adjudication of Ld. CIT(A) could not be faulted with. The assessee has raised the issue that wrong Assessment Year has been quoted by Ld. CIT(A) in the impugned order. We find that the same is nothing more than a typographical error.