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Facts
The assessee's income tax return was processed by CPC, disallowing Rs. 15,12,085/- under section 36(1)(Va) for alleged late payment of employee contributions (P.F., ESI, etc.). The CIT(A) upheld this disallowance, relying on the Supreme Court's decision in Checkmate Services Pvt. Ltd. The assessee appealed, arguing that payments made on the next working day after a holiday/Sunday should be considered timely under Section 10 of the General Clauses Act.
Held
The Tribunal deleted the disallowance for four of the six delayed payments, totaling Rs. 10,50,265/-, finding that their due dates fell on holidays and payments were made on the next working day, thus applying Section 10 of the General Clauses Act. For the remaining two payments (totaling Rs. 4,42,298/-), the matter was remanded to the Assessing Officer to verify the actual due dates and decide afresh in accordance with legal precedents.
Key Issues
Whether the disallowance of employee contributions (PF/ESI) under Section 36(1)(Va) of the Income Tax Act is valid when the statutory due date falls on a holiday and the payment is made on the immediate next working day, considering Section 10 of the General Clauses Act.
Sections Cited
Income Tax Act: 36(1)(Va), Income Tax Act: 143(1), Income Tax Act: 154, Income Tax Act: 44AB, General Clauses Act: 10, Employees Provident Fund Scheme: Clause 38, Indian Limitation Act: 1887
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SH. PRADIP KUMAR KEDIA & SHRI YOGESH KUMAR U.S.
This appeal is filed by the assessee for the Assessment Year 2020-21 against the order of the Ld. CIT(A)/National Faceless Appeal Centre (‘NFAC’ for short), Delhi dated 16/10/2023.
“1. The Ld. CIT(A) was wrong in confirming addition of Rs. 15,12,080/- u/s 36(1)(Va) of the I.T. Act, 1961 without any base.”
Brief facts of the case are that, the assessee filed return of income showing income of Rs. 17,02,170/-, CPC processed the return of income at Rs. 32,14,250/- by disallowing Rs. 15,12,085/- u/s 36(1) (Va) of the Act in regards to any sum received from Employees as contribution of P.F, ESI etc. Aggrieved by the order of the CPC dated 03/11/2021 passed u/s 143(1) of the Act, the assessee preferred an Appeal before the CIT(A). The Ld. CIT(A) vide order dated 16/10/2023 dismissed the Appeal filed by the assessee by relying on the Judgment of Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax-1, in Civil Appeal No. 2833/2016 dated 12/10/2022. Aggrieved by the order of the Ld. CIT(A) dated 16/10/2023, the assessee preferred the present Appeal on the Grounds mentioned above.
The Ld. Counsel for the assessee apart from oral arguments submitted the written submissions in following manners:-
“Sir,
With due respect, the assessee submits that late payments of Provident Fund amounts of Rs. 14,92,564.00 was added u/s 143(1) by CPC which are as under:-
S.No. Rs. Due Date Due Day Paid Date Paid Reasons Day 1 1,75,564.00 15/05/2019 Wednesda 16/05/2019 Thursda No y y
15/06/2019 17/06/2019 2 2,29,176.00 Saturday Monday Saturday and Sunday were office holidays in Central Govt. offices.
15/08/2019 16/08/2019 3 2,60,465.00 Thursday Friday Due date was Independenc e Day
15/09/2019 16/09/2019 4 2,80,196.00 Sunday Monday Due date was Sunday
15/10/2019 16/10/2019 5 2,66,734.00 Tuesday Wednes No day
15/12/2019 16/12/2019 6 2,80,428.00 Sunday Monday Due Date was Sunday Total 14,92,563/-
The assessee submits that above payments at S.No. 2,3,4 and 6 i.e. Rs. 2,29,176.00, 2,60,465.00, Rs. 2,80,196.00 and Rs. 2,80,428.00 (Total Rs. 10,50,265.00), are covered by S-10 of the General Clauses Act, 1987. As per Section 10 of General Clauses Act, 1897, if last day of the prescribed period i.e. last date for depositing of payment of any dues is a national holiday and payment was made on the next working date, the same is valid. Section 10 of the General Clauses Act, is as under: -
“10. Computation of Time
Where, by any (Central Act) or Regulation made after the commencement of this Act, any act or proceeding is directed or allowed to be done or taken in any Court or office on a certain day or within a prescribed period, then, if the Court or office is closed on that day or the last day of the prescribed period, the act or proceeding shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the Court or office is open :
Provided that nothing in this section shall apply to any act or proceeding to which the Indian Limitation Act, 1887 (XV of 1887) applies:
(l) This section applies also to all (Central Acts) and Regulations made o or after the fourteenth day of January, 1887.”
The assessee relies upon the ruling’s of Delhi High Court and ITAT, Delhi held in the following cases:- 1- M/s G.D. Foods and Manufacturing (India) Pvt Ltd. Delhi vs. Asstt Director of I.T. A.Y. 2019-20 (ITA No. 221/Del/2023 Date of order 10- 07-2013 (202 - ITD - 837 - Delhi).
“11. Thus, in our opinion, considering the fact that the due date for depositing the contribution of ESIC & EPF falls on Sunday and gazetted holiday, the said delay of one day deserves to be condoned as per Section 10 of General Clauses Act. Further it is also observed that the assessee has no intention not to deposit the contribution of ESI & EPF well within the time, depositing the contribution very next day of Holiday proves the bona-fide of the Assessee. Therefore, in our opinion, the authorities have committed error in disallowing the deposit made with one day delay where the due date under respective acts falls either on Sunday or on gazetted holiday.” 2- Radio International vs DCIT Delhi A.Y. 2020- 21 - Date of Order 18-07-2023
“Upon careful consideration and after hearing both the parties, we agree with the submissions that if the last date for depositing of payment is a holiday and the payment is made on the next date, the same should be allowed, as has been decided in the above said case of ITAT. We also feel it appropriate to remit the issue back to the file of AO for examining the payments made on day next to due date, being holiday on due date and allow the deduction accordingly.” 3. Pr CIT vs, Pepsico India Holding Pvt Ltd. ITA-No:- 12/2023 Date 05-09-2023 - (Delhi - High Court): -
“7. According to us, the submission advanced by Mr Rai cannot be accepted. Since the due date fell on a date which was a National Holiday, the deposit could have been made by the respondent/assessee only on the date which followed the National Holiday.
Mr Chopra, as noticed on 12.01.2023, is right that Section 10 of the General Clauses Act would help the respondent/assessee to tide over the objections raised on behalf of the appellant/revenue.” Thus the above payments of Rs. 10,50,265.00 made in Provident Fund account are on the next working date i.e. within time and hence allowable.”
Per contra, the Ld. Departmental Representative submitted that the provision of Section 36(1)(Va) of the Act has to be strictly followed and by relying on the Judgment of Hon'ble Supreme Court in the case of Checkmate Services (supra), thus, sought for dismissal of the Appeal filed by the assessee.
We have heard both the parties and perused the material available on record. The CPC while processing the return u/s 143(1) of the Act, made disallowed u/s 36(1)(Va) of the Act for late payment of Provident Fund. It is the case of the assessee that out of six payments, four payments were done very next day of official holiday/s of the Central Government, therefore, there is no delay in depositing the same. For the purpose of examination, and for the sake of convenience, the details of the payments made by the assessee which are subject to the disallowance are as under:
S.No. Rs. Due Date Due Day Paid Date Paid Day Reasons 1 1,75,564.00 15/05/2019 Wednesday 16/05/2019 Thursday No 15/06/2019 17/06/2019 2 2,29,176.00 Saturday Monday Saturday and Sunday were office holidays in Central Govt. offices.
15/08/2019 16/08/2019 3 2,60,465.00 Thursday Friday Due date was Independence Day
15/09/2019 16/09/2019 4 2,80,196.00 Sunday Monday Due date was Sunday
15/10/2019 16/10/2019 5 2,66,734.00 Tuesday Wednesday No 15/12/2019 16/12/2019 6 2,80,428.00 Sunday Monday Due Date was Sunday Total 14,92,563,00
It is seen from the above chart except Serial No. 1 & 5 to all other payments were made on the next day of the official/gazetted holiday of the Central Government, such as Saturday, Sunday and the Independence Day. The Co-ordinate Bench of the Tribunal while deciding the similar issue as to whether contribution of ESI and EPF made by the assessee with one day delay is allowable when the due date of payment of ESI and EPF Contribution prescribed in respective acts falls on Sunday or gazette holiday, held that the authorities have committed error in disallowing the deposit made with one day delay, wherein the due date under the respective Acts fall either on Sunday or gazette holiday in following manners:-
“7. We have heard both the parties and perused the material available on record. The only issue remains for consideration in the present Appeal that whether the contributions of ESIC and EPF made by the Assessee with one day delay is allowable when the due date for payment of ESIC and EPF contributions prescribed in the respective acts of ESI & PF falls on Sunday or gazetted holiday?.
It is not in dispute that the assessee had deposited ESI & EPF with one day delay and it is also not in dispute that the due date under the respective Acts falling either on Sunday or gazetted holiday. The details of the payments are as under:- ESI for AY 2019-20
Month of Amount of Due date of payment Actual date of Remarks deduction pertain employee payment to/Bok Entry date contribution (amount Rs.) June 2018 1,94,673/- 15.07.2018 16.07.2018 1 Day due to (Sunday) previous day- Holiday July 2018 1,94,413/- 15.08.2018 16.08.2018 1 Day due to (Holiday previous day- Holiday EPF for AY 2019-20
Month of Amount of Due date of payment Actual date of Remarks deduction pertain employee payment to/Bok Entry date contribution (amount Rs.) June 2018 780547 15.07.2018 16.07.2018 1 Day due to (Sunday) previous day- Holiday July 2018 767368 15.08.2018 16.06.2018 1 Day due to (Holiday previous day- Holiday
The Ld. Ld. Departmental Representative, the Revenue neither
disputed the above facts nor produced any material contrary to the above data given by the Assessee.
The Section 10 of the General Clause Act, 1897 reads as under:-
“Section 10 in The General Clauses Act, 1897
10 Computation of time. —
(1) Where, by any 19 [Central Act] or Regulation made after the commencement of this Act, any act or proceeding is directed or allowed to be done or taken in any Court or office on a certain day or within a prescribed period, then, if the Court or office is closed on that day or the last day of the prescribed period, the act or proceeding shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the Court or office is open: Provided that nothing in this section shall apply to any act or proceeding to which the Indian Limitation Act, 1877 20, applies .
2). This Section applies also to all 19 [Central Acts] and Regulations made on or after the fourteenth day of January, 1887.”
Thus, in our opinion, considering the fact that the due date for depositing the contribution of ESIC & EPF falls on Sunday and gazetted holiday, the said delay of one day deserves to be condoned as per Section 10 of General Clauses Act. Further it is also observed that the assessee has no intention not to deposit the contribution of ESI & EPF well within the time, depositing the contribution very next day of Holiday proves the bona-fide of the Assessee. Therefore, in our opinion, the authorities have committed error in disallowing the deposit made with one day delay where the due date under respective acts falls either on Sunday or on gazetted holiday.
In view of the above discussion, we allow Ground No. 3 of the assessee and delete the disallowance of delay deposit of one day on account of public holiday/Sunday on ESIC of Rs. 3,89,086/- and EPF of Rs. 15,47,915/-. Since the assessee has restricted Appeal to Ground No. 3 and the to the amount mentioned above, the Ground No. 1,2, 4 to 9 are dismissed as not pressed.
Considering the above settled position of law, the payment of contribution mentioned at Serial No. 2, 3 & 4 of Rs. 2,29,176/-, 2,60,465/- and 2,80,196/- which are made immediately after the due date followed by Saturday, Sunday and independence day, therefore, the disallowance made in respect of the those payments are hereby deleted.
The other two more deposits made by the assessee are Rs.
1,75,564/- and Rs. 2,66,734/- (Serial No. 1 & 5) which are disallowed on the ground that same are made with one day delay.
The Co-ordinate Bench of the Tribunal in the case of Rakesh and connected matters, vide order dated 09/10/2023 in the similar circumstances, remanded the matter to the file of the A.O. to verify the ‘due date’ specified in the respective acts and decide the issue afresh in following manners:-
“8. Now the issue in dispute in the present Appeals is in respect of the actual ‘due date prescribed’. It is the case of the Assessees that the salary/remuneration payment to staff for the month was paid in subsequent months preferably in the first week of the next month. For example, the salary for the month of September, 2023 will be paid in the first week of October, 2023, thus, the Employer is required to deposit the PF/ESI Contribution within 15 days of the close of every month. As per the assessee, the due date has to be calculated within 15 days from the close of the month in which ‘payment is made to the employee’. But according to the Revenue, the Contribution has to be deposited within 15 days from the close of the month for which salary/wages of the employee is due.
In the case of Master Polishers Vs. ADIT (supra), the Mumbai Tribunal held as under:- “2. In the ground No. 1 and 2 of the appeal, the assessee is aggrieved with the disallowance upheld by the Ld. CIT (A) in respect of employee's
contribution to ESI/PF, which was made by the CPC as an adjustment and further sustained in rectification order u/s 154 of the Act. The Ld. CIT(A) has upheld the disallowance in view of binding precedent of Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. v. CIT in Civil Appeal No. 2833 of 2016, observing as under:
"4. Having pursued the rectification order, the grounds of appeal and the written submissions the issue of admissibility of payment of employees' contribution of SIC/PF beyond the due date as per the relevant Statute, raised through ground number 1 is hot tenable in view of decision of the Hon'ble Supreme Court in the case of Checkmate Services pvt. Ltd. VS CIT in Civil Appeal No2833 of 2016 with CA No2830/2016, CA No. 159/2019, CA No.2832/2016 and CA No: 2831/2016 vide judgment dated 12.10.2022, wherein it was held that deduction us 36(1)(va) of the IT Act is admissible only of the amount so received from employees for PF/ESIC is credited in specified account within the due date as per the relevant Statute. In the instant appeal, it is an admitted position of the appellant that there was delay in crediting the contribution so collected in the specified account within the due date as per the relevant Statute."
The Hon’ble Calcutta Tribunal in the case of Konai Paper and Industries Ltd. Vs. ACIT reported in (2002) 75 TTJ Cal 448 held as under:- "6. Clause 38 of the Employees Provident Fund Scheme, 1952, fixes the time limit for making payment in respect of contribution to the provident fund to be 15 days from the close of the month concerned. However, the issue here is whether the "month" should be considered to be the month to which the wages relates or the month in which the actual disbursement of the wages is made, we are of the considered opinion that the expression "month" should mean here the month during which the wages/salary is actually disbursed irrespective of month to which the same relates. Thus the scheme of the government
in this regard is that once a deduction is made in respect of the employees contribution to the provident fund from the salary/wages of the employee or the employer also makes his contribution, factually at the time of disbursement of the salary the payment in respect of such contribution should be made forthwith. If for some reason or other the payment of salary for a particular month be held up for considerable period of time it cannot be said that the employer would be liable to make payments in respect of the "employer's" as well as "employees" contribution in respect of wages for such period within a period of 15 days from the close of the month to which the wages relates. On the other hand, in our view, most appropriate interpretation would be that the employer would be at liberty to make payment of the contribution concerned within 15 days (subject however to the further grace period) from the end of the month during which the disbursement of the salary is actually made and the contribution of the, provident fund are, thus, generated, inasmuch as, the provision relating to the disallowance of such contribution on account of delay is rather an artificial provision. In our view, a liberal approach has got to be made to this issue. Ultimately, therefore we reverse the order of the lower authorities and direct the assessing officer to examine whether the payments of contribution in the present case were made within 15 days (allowed with further grace period of 5 days) from the close of the respective months during which the disbursement of the salary/wages were actually made. The assessing officer should recompute the amount disallowable, if any, on the above basis and take appropriate action accordingly" 5.1 In our opinion, it will be appropriate if the term every month' specified in Provident Fund scheme, whether it is the month for which salary/wages are due or month of the payment is referred to Relevant Authorities for finding out with reference to any judicial precedent in respect of provisions of the relevant Act. Accordingly, we restored this issue back to the file of the Ld. Assessing Officer with the direction to find out from the relevant PF authorities about the term every month' as mentioned in clause 38 of the employees provident fund scheme. Similarly, he may find out from the ESI Authorities. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. The grounds of appeal of the assessee are accordingly allowed for statistical purposes.”
The assessee placing the reliance on the above decisions, sought for direction to the A.O. to verify the ‘due date’ specified in the respective Acts and decide the issue afresh. Considering the above facts and circumstances and also the decision of the Mumbai Tribunal in the case of Master Polishers (supra), we restore the issue to the file of the A.O. to decide the same afresh keeping in view the directions of the Mumbai Bench of the Tribunal in the case of Master Polishers Vs. ACIT (supra) along with the Tax Audit Report filed by the Assessee and the return of income filed u/s 44AB of the Act. Needless to say, the Assessee shall be provided with reasonable opportunity of being heard. Accordingly, we partly allow/dispose off the above Appeals/C.Os. for statistical purpose.
By respectfully following the ratio laid down in the case of Rakesh Janghu (supra) we remand the matter in so far as deposit of 1,75,564/- and Rs. 2,66,734/-(serial No. 1 & 5) are concerned to the file of the A.O. to decide the same afresh by following the ratio laid down by the Tribunal in the case of Rakesh Janghu (supra).
statistical purpose.
Order pronounced in the open court on 11th September, 2024.