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Facts
The Revenue appealed against the CIT(A)'s deletion of an addition of Rs. 7,00,01,649/- made by the Assessing Officer (AO). The AO treated this amount, representing employees' provident fund contribution, as income under Section 2(24)(x) due to alleged delayed deposit and utilization by the assessee (Delhi Financial Corporation - DFC). The assessee contended that this amount was accumulated PF from previous years and a definitive liability, while the actual employees' contribution for the current year (Rs. 35,31,056/-) was deposited on time.
Held
The Tribunal found that the Rs. 7,00,01,649/- was indeed accumulated provident fund from prior years and a definite liability of the assessee, not the employees' contribution for the relevant A.Y. 2017-18. It was confirmed that the actual employees' contribution for the assessment year (Rs. 35,31,056/-) was deposited on time, in compliance with Section 36(1)(va) of the Act. Therefore, the Tribunal upheld the CIT(A)'s order deleting the addition.
Key Issues
Whether an addition under Section 2(24)(x) for delayed deposit of employees' provident fund contribution was justified when the disputed amount was accumulated from prior years and the current year's contribution was timely paid.
Sections Cited
2(24)(x), 36(1)(va)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘B’ BENCH,
Before: SHRI SAKTIJIT DEY, & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
This appeal by the Revenue is preferred against the order of the NFAC, Delhi dated 27.03.2023 pertaining to A.Y. 2017-18.
The solitary grievance raised vide three grounds of appeal by the Revenue relates to the deletion of the addition of Rs. 7,00,01,649/- made by the Assessing Officer on account of delayed deposit of Employees Contribution to ESI/PF and deleted by the ld. CIT(A).
Briefly stated, the facts of the case are that the assessee (DFC) is engaged in financing activity and is owned jointly by the Delhi Government and Chandigarh Administration established under the Act of Parliament. The Assessing Officer noticed that the employee’s contribution towards provident fund of Rs. 7,00,01,649/- has been utilized by the assessee and therefore, should be the income of the assessee u/s 2(24)(x) of the Act. Since the assessee has not deposited the employees’ contribution in the relevant fund and has used it for its business purposes, the Assessing Officer treated Rs. 7,00,01,649/- as income of the assessee u/s 2(24(x) of the Act.
Aggrieved, the assessee went in appeal before the ld. CIT(A) who deleted the addition made by the Assessing Officer holding the Assessing Officer in error.
Aggrieved, the Revenue is in appeal before us.
The ld. DR relied upon the order of the Assessing Officer.
Per contra, the ld counsel of the assessee submitted that the provisions of Provident Funds Act 1925 are applicable to Delhi Financial Corporation (ie. the assessee-company) for Provident Fund established for the benefits of employees of Delhi Financial Corporation in terms of Gazette Notification dated 27 November 1967 bearing No. F.7 (28)/67-Ind(1) & No. F.7 (28)/67-Ind(ii). The Fund is administered by the 'Administrators of the Fund' as provided in the Delhi Financial Corporation Employees Provident Fund Regulations.
The ld. counsel for the assessee continued by saying that the Assessing Officer failed to appreciate the fact that Rs. 7,00,01,649/- was not employees' contribution to Provident Fund for the AY. 2017-18 but it was accumulated amount of Provident Fund established for the benefits of the employees of Delhi Financial Corporation as on 31.3.2017and was a definitive liability of the assessee - company.
The ld. counsel for the assessee further stated that during the AY. 2017-18, corporation had deducted only an amount of Rs. 35,31,056/- towards employees' contribution to Provident Fund from their respective salaries of the employees and paid such amounts on time to the Provident Fund established for the benefits of the employees of Delhi Financial Corporation.
The ld. counsel for the assessee further contended the fact of timely payment of such amounts to the Provident Fund established for the benefits of the employees of Delhi Financial Corporation, can be verified from the clause 20(b) of the Tax Audit Report, where factual dates are mentioned. From the tax audit report it is clear that there were no delays in deposit of such Provident Fund and provisions of section 36(1)(va) of the Act has been fully complied with.
It was also submitted that the judgement of the Hon'ble Supreme Court in the case of Checkmate Services Pvt Ltd Vs. CIT in CA No 8233 of 2016 dated 12.10.22 is rather in favour of the assessee -company.
The ld AR finally concluded that the Ld. AO illegally overstepped his jurisdiction to earlier previous years by making addition of Rs.7,OO,01,649/- which represents accumulated amount of Provident Fund established for the benefits of the employees of Delhi Financial Corporation as at 31.3.2017 and was a liability in spite of the fact on record that during the A. Y. 17-18. In fact, the Respondent-Company received only Rs. 35,31,056/- as employees' contribution to Provident Fund and therefore, due to default in compliance of provisions of section 2(24)(x) read with section36(1)(va), there could have been maximum addition of the same amount i.e. Rs. 35,31,056/-
We have heard the rival submissions and have perused the relevant material on record. We find that DFC is authorized to maintain its own provident fund and collect Provident Fund from its employees vide Gazette Notification dated 27 November 1967 bearing No. F.7 (28)/67-Ind(1) & No. F.7 (28)/67-Ind(ii). We note that the amount of Rs.7,00,01,649/- was not employees' contribution to Provident Fund for the AY. 2017-18 but represented the accumulated amount of Provident Fund established for the benefits of the employees of Delhi Financial Corporation as on 31.3.2017 and was definite liability of the assessee.
The amount of provident fund collected during the year towards employees' contribution to Provident Fund from the salaries of the employees was only Rs. 35,31,056/-. This amount of Rs. 35,31,056/- was paid on time to the Provident Fund established for the benefits of the employees of Delhi Financial Corporation as is evident from clause 20(b) of the Tax Audit Report. We also find from the tax audit report that there were no delays in deposit of such PF and the assessee is in complete compliance with the provisions of section 36(1)(va)of the Act.
We find force in the submission of the ld. AR for the assessee that the judgement of the Hon'ble SC in the case of Checkmate Services [supra] is rather in favour of the assessee -Company.
In view of our above discussion and arguments before us, we are in agreement with the submissions of the ld. counsel for the assessee and find no reason to interfere with the order of the CIT(A).
In the result, the appeal of the Revenue in is dismissed.
The order is pronounced in the open court on 13.06.2024.