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Facts
The assessee filed appeals against the order of the National Faceless Appeal Centre (CIT-A) for A.Ys. 2018-19 & 2019-20, which confirmed additions made on account of employee's contribution to PF & ESI. The contributions were deposited by the assessee beyond the statutory due dates but before the date of filing the return of income.
Held
Citing the Supreme Court's decision in *Checkmate Services Pvt. Ltd Vs. CIT*, the Tribunal held that employee contributions to PF & ESI, if deposited beyond the statutory due dates, are not allowable as a deduction, even if deposited before the income tax return filing date. The claim for deduction by the assessee was deemed an incorrect claim warranting a prima facie adjustment under Section 143(1) of the Act.
Key Issues
Whether employee's contribution to PF & ESI deposited after the statutory due date but before the due date for filing the return of income is allowable as a deduction under the Income Tax Act.
Sections Cited
Section 36(1)(iv), Section 36(1)(va), Section 2(24)(x), Section 43B, Section 143(1)
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Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: SH. SAKTIJIT DEY & SH. M. BALAGANESH
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘B’, NEW DELHI BEFORE SH. SAKTIJIT DEY, VICE PRESIDENT AND SH. M. BALAGANESH, ACCOUNTANT MEMBER & 1285/Del/2024 (Assessment Years : 2018-19 & 2019-20) Dilip Verma Vs. ITO 902, Ramses Tower, Ward – 1(4), Omaxe the Nile, Sector-49, Gurgaon Sohna Road, Gurugram Haryana – 122 018 PAN No. AAHPV 4660 L (APPELLANT) (RESPONDENT) Assessee by -NA- Revenue by Ms. Harpreet Kaur, Sr. D.R. Date of hearing: 07.08.2024 Date of Pronouncement: 29.08.2024 ORDER PER M. BALAGANESH, ACCOUNTANT MEMBER :
These appeals filed by the assessee against the order of the National Faceless Appeal Centre, Addl. JCIT-2, Coimbatore ["Ld. CIT", for short], dated 22.01.2024 and 23.01.2024 for A.Ys. 2018- 19 & 2019-20.
At the outset, we find that the assessee had preferred an adjournment application before us. But we find from the ground raised in the appeal, the only issue to be decided is as to whether the learned CIT(A) was justified in confirming the addition made & 1285/Del/2024 Dilip Verma vs. ITO 2 on account of employee’s contribution to PF & ESI for both the years. Since, this issue is already decided by the Hon’ble Supreme Court in favour of the Revenue, the Bench felt that no purpose would be served in keeping this appeal pending and accordingly, rejected the adjournment application of the assessee and proceeded to dispose of the appeals on hearing the learned DR and based on materials available on record.
We have heard the ld. DR and perused the materials available on record. It is not in dispute that the employees’ contribution to provident fund and ESI were deposited by the assessee to the Government account beyond the due dates prescribed under the respective acts but well before the date of filing the return of income. We find that the recent decision of the Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd Vs. CIT reported in 448 ITR 518 (SC) had settled the entire dispute to rest by deciding it in favour of the revenue by observing as under:- “53. The distinction between an 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 (Section 36(1)(va)) is, thus crucial. 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) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied 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 amounts – the employer’s liability is to be paid out of its income whereas the second is deemed 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.
& 1285/Del/2024 Dilip Verma vs. ITO 3
In the opinion of this Court, the reasoning in the impugned judgment that the non-obstante clause would not in any manner dilute or override the employer’s obligation to deposit the amounts retained by it or deducted by it from the employee’s income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees’ contributions- which are deducted from their income. They are not part of the assessee employer’s income, nor are they heads of deduction per se in the form of statutory pay out. They are others’ income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee’s contribution on or before the due date as a condition for deduction.
In the light of the above reasoning, this court is of the opinion that there is no infirmity in the approach of the impugned judgment. The decisions of the other High Courts, holding to the contrary, do not lay down the correct law. For these reasons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed.”
Pursuant to the aforesaid decision of the Hon’ble Supreme Court, the claim of deduction towards employee’s contribution to PF & ESI made by the assessee becomes an incorrect claim warranting primafacie adjustment u/s.143(1) of the Act.
& 1285/Del/2024 Dilip Verma vs. ITO 4
In view of the aforesaid decision of Hon’ble Supreme Court, the claim of deduction made by the assessee towards employees’ contribution to PF and ESI would become an incorrect claim warranting prima facie adjustment u/s 143(1) of the Act. Accordingly, the grounds raised by the assessee are dismissed.
In the result, appeal of the assessee is dismissed. Order pronounced in the open court on 29.08.2024