DCIT,BANGALORE vs. M/S DUSTER TOTAL SOLUTIONS SERVICES PVT. LTD., BANGALORE

This is an appeal filed by the Revenue against the order of the CIT (A), Bengaluru-2, Bengaluru, dt.09.07.2015, for A. Y. 2012-13.

The assessee, a private limited company, engaged in rendering facility management services. While doing the assessment, the AO noted that though it had made deductions from the salary payments of its employees towards contributions to PF and ESI aggregating to Rs.4,28,54,679/-, it had remitted the same to the government account ITA.1266/Bang/2015 Page - 2 beyond the dates prescribed by the respective laws and therefore, he disallowed the deduction claimed u/s 43B (b) on the ground that the retention of the amounts with it beyond the dates due for their remittance to the government account constituted its income for the respective assessment years in terms of section 2(24)(x) read with section 36(1)(va) as it is independent of section 43B. In doing so, the AO rejected the assessee's contention that irrespective of whether the belated remittance of PF /ESI contributions included the contributions made by the employees of the assessee, the deduction claimed was allowable if the deductions had been remitted to the government account within the time allowed for filing the return of income u/s 139(1) of the Act. Thus, according to the AO, only the delay in remitting the contributions of the employer to the government account within the time prescribed for filing the return u/s 139(1) was allowable and not the contributions made by the employees withheld by the employer until the date due for filing the return of income u/s 139(1) . Accordingly, he disallowed Rs.4,28,54,679/- representing the amount consisting of the contribution of both the employer and the employees, which had been belatedly remitted to the government account. Aggrieved, the assessee filed an appeal before the CIT (A), Bengaluru-2. The CIT (A), inter alia, relying the Jurisdictional High Court decision in the case of M/s. Essae Teraoka P. Ltd v. DCIT (ITA No.480/2012), reported in [2014] 43 Taxmann.Com 33 (Kar) held that the disallowance is unwarranted.

The relevant portion of the Jurisdictional High Court’s decision in the case of M/s. Essae Teraoka P. Ltd v. DCIT, re po rte d in [ 2014] 266 C TR 0246 is e xtrac ted as u n de r:

From bare perusal of sub-para (1) of paragraph- 30, it is clear that the word contribution is used not only to mean contribution of the employer but also contribution to be made on behalf of the member employed by the employer directly.

Paragraph-38 of the PF Scheme provides for Mode of payment of contributions. As provided in sub-para(1), the employer shall, before paying the member, his wages, deduct his contribution from his wages and deposit the same together with his own contribution and other charges as stipulated therein with the provident fund or the fund under the ESI Act within fifteen days of the closure of every month pay. It is clear that the word contribution' used in Clause (b) of Section 43-B of the IT Act means the contribution of the employer and the employee. That being so, if the contribution is made on or before the due date for furnishing the return of income under sub-section(1) of Section 139 of the IT Act is made, the employer is entitled for deduction. 21. The submission of Mr. Aravind, learned counsel for the revenue that if the employer fails to deduct the ITA.1266/Bang/2015 Page - 4

In the result, the Revenue’s appeal is dismissed.