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Facts
The assessee filed appeals against CIT(A) orders for AY 2019-20 and 2020-21, where the CPC and CIT(A) disallowed employees' PF/ESI contributions deposited after the due date under welfare acts but before the Income Tax Act filing due date. For AY 2019-20, the assessee also challenged the non-allowance of brought-forward losses, which the CIT(A) partly remanded. The Tribunal condoned a 425-day delay in filing these appeals.
Held
The Tribunal upheld the disallowance of employees' PF/ESI contributions under Section 36(1)(va) for both assessment years, citing the Supreme Court's decision in Checkmate Services (P) Ltd. v. CIT. However, for AY 2019-20, the issue concerning the claim of carry-forward losses was remanded back to the Assessing Officer for fresh verification and adjudication.
Key Issues
The key issues were the allowability of employees' PF/ESI contributions deposited late under welfare acts and the correct adjustment of brought-forward losses.
Sections Cited
143(1), 36(1)(va), 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, JM
BEFORE SHRI INTURI RAMA RAO, AM AND SHRI SONJOY SARMA, JM & 305/COCH/2025 Assessment Years : 2019-20 &2020-21 Shastha Enterprises .….……….Appellant Beach Road, Thamarakulam Kollam, Kerala – 691001 [PAN:AAGFS8389A] vs. ITO, Ward-3, Kollam .….……….Respondent Appellant by: Shri Sabu, CA Reapondent by: Smt. Leena Lal, Snr DR, Date hearing : 05.06.2025 Date of pronouncing: 13. 06.2025 ORDER Per : Sonjoy Sarma, Judicial Member: These two appeals filed by the assessee are directed against separate orders of the Commissioner of Income Tax (Appeals), both dated 26.12.2023, for the Assessment Years 2019–20 and 2020–21 respectively.
Since the issues involved in both appeals are common except for assessment years and figures, they were heard together and are being disposed of by way of this consolidated order.
&305/COCH /2025 Shastha Enterprises, Kollam 3 There is a delay of 425 days in filing these appeals. The assessee filed an application for condonation of delay along with an affidavit explaining the reasons for the delay, including administrative and technical difficulties. 4 After considering the application and submissions, and being satisfied with the reasonable cause shown, we hereby condone the delay in filing the appeals and proceed to dispose of the matters on merits.
(A.Y. 2019–20) 5. The assessee filed its return of income for A.Y. 2019–20. The intimation under Section 143(1) of the Act was issued by the CPC, Bengaluru on 22.02.2020, wherein the employees’ contribution to PF and ESI amounting to Rs.19,02,852 was disallowed under Section 36(1)(va) of the Act, although the same had been deposited before the due date for filing return under Section 139(1), but after the due date under the respective PF/ESI Acts.
The assessee contended that the delay was only for a few days and was due to technical issues during online remittance, not intentional. However, the CPC made the disallowance and the ld. CIT(A) upheld the same following the judgment of the Hon’ble Supreme Court in Checkmate Services (P) Ltd. v. CIT (2022) 448 ITR 518 (SC).
The assessee also challenged non-allowance of brought-forward losses and adjustment of the same in the computation, contending that loss set-off had not been properly granted. The CIT(A) allowed this ground in part, by remanding the issue for verification regarding allowance of loss adjustment subject to correctness of claim.
I.T.A. Nos.304 &305/COCH /2025 Shastha Enterprises, Kollam 8. We have heard both the parties and perused the materials available on record. The issue of disallowance of employees’ PF/ESI contributions paid after the due date under the relevant welfare Acts is already settled by the Hon’ble Supreme Court in Checkmate Services (P) Ltd. (supra), holding that such contributions are not allowable under Section 36(1)(va) if not deposited within the due date under the respective Acts. Accordingly, we uphold the disallowance of Rs.19,02,852/- made under Section 36(1)(va) by following the decision of the Hon’ble Supreme Court in the case of Checkmate Services (P) Ltd. v. CIT (supra).
However, with respect to the claim of loss carry forward, we find that the ld. CIT(A) has directed verification by the AO in this order. We affirm this direction and remand the issue back to the file of the AO to verify the correctness of the assessee’s claim of carry-forward losses and grant necessary relief, if eligible.
(A.Y. 2020–21) 10. In this year, the assessee has challenged the disallowance of Rs.24,84,081/- made under Section 36(1)(va) on account of late deposit of employees’ PF and ESI contributions. 11. The ld. CIT(A), following the same legal position and relying on the Supreme Court’s decision in the case of Checkmate Services (P) Ltd. v. CIT (supra) confirmed the disallowance.
I.T.A. Nos.304 &305/COCH /2025 Shastha Enterprises, Kollam 12.
As the facts and issue are identical, and the law is well settled by the Hon'ble Apex Court in the case of Checkmate Services (P) Ltd. v. CIT (supra), we find no reason to interfere with the order of the CIT(A). The disallowance is sustained and the appeal is dismissed. 13 ITA No. 304/Coch/2025 is partly allowed for statistical purposes. The disallowance of PF/ESI under Section 36(1)(va) is upheld, but the issue relating to carry forward of losses is restored to the AO for verification and adjudication.
ITA No. 305/Coch/2025 is dismissed in light of the Supreme Court decision in Checkmate Services (P) Ltd. v. CIT (supra).