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Facts
The assessee company's appeal pertains to an order upholding the disallowance of Rs. 4,66,694/- for delayed deposit of employee's PF contributions. The disallowance was made by the CPC via an adjustment in the intimation under Section 143(1) of the Income Tax Act. The assessee argued that the payment was made before the due date for filing the return of income and that the disallowance was a debatable legal issue, precluding a Section 143(1) adjustment.
Held
The Tribunal held that the disallowance of employee's contribution to provident fund paid after the due date under the relevant Act is an invalid claim, liable to be disallowed. Reliance was placed on the Supreme Court decision in Checkmate Services Pvt. Ltd. v. CIT, which held that such payments made after the due date are not allowable as deductions.
Key Issues
Whether the disallowance of employee's PF contribution due to delayed payment is valid, and whether such an adjustment can be made under Section 143(1).
Sections Cited
36(1)(va), 143(1)(a)(ii), 139(1), 43B
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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
PER OM PRAKASH KANT, AM
This appeal has been taken up for adjudication in compliance to the order of the ITAT (in short the ‘Tribunal’) dated 15.12.2023 in Miscellaneous Application No. 363/Mum/2023, wherein the Tribunal has recalled its earlier order dated 10.08.2022 and appeal was restored to its original number. The original appeal was filed by the assessee against the order dated 23.06.2022 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi for assessment year 2018-19. The grounds raised by the assessee are reproduced as under:
Concerto Software and Systems Pvt. Ltd. Concerto Software and Systems Pvt. Ltd. 2 ITA No. 1854/Mum/2022
Disallowance u/s.36(1)(va) of employees' contributions to PF 1. Disallowance u/s.36(1)(va) of employees' contributions to PF 1. Disallowance u/s.36(1)(va) of employees' contributions to PF Rs.4,66,694/-: On the facts and in the circumstances of the case, and in law, the Ld. On the facts and in the circumstances of the case, and in law, the Ld. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in confirming the disallowance of Rs.4,66,694/ CIT(A) erred in confirming the disallowance of Rs.4,66,694/ CIT(A) erred in confirming the disallowance of Rs.4,66,694/ - u/s.36(1)(va) of the Act made by the Ld. AO u/s.36(1)(va) of the Act made by the Ld. AO, CPC, in respect of , CPC, in respect of employees' contribution to PF, by way of adjustment in the Intimation employees' contribution to PF, by way of adjustment in the Intimation employees' contribution to PF, by way of adjustment in the Intimation issued u/s.143(1) of the Act, because issued u/s.143(1) of the Act, because - (a) the Ld. CIT(A) did not appreciate that the aforesaid disallowance, (a) the Ld. CIT(A) did not appreciate that the aforesaid disallowance, (a) the Ld. CIT(A) did not appreciate that the aforesaid disallowance, being a debatable legal issue, no adjustment could hav being a debatable legal issue, no adjustment could have been made to e been made to the total income computed u/s. 143(1). the total income computed u/s. 143(1). (b) the Ld. CIT(A) did not appreciate that the appellant having made (b) the Ld. CIT(A) did not appreciate that the appellant having made (b) the Ld. CIT(A) did not appreciate that the appellant having made payment of the employees' contribution to PF on 17.10.2017 (as against payment of the employees' contribution to PF on 17.10.2017 (as against payment of the employees' contribution to PF on 17.10.2017 (as against the due date of 15.10.2017), which was much before the due dat the due date of 15.10.2017), which was much before the due dat the due date of 15.10.2017), which was much before the due date specified u/s.139(1) of the Act, the disallowance was not justified. specified u/s.139(1) of the Act, the disallowance was not justified. specified u/s.139(1) of the Act, the disallowance was not justified. (c) The Ld. CIT(A) held that the amendments made in Section 36(1)(va) (c) The Ld. CIT(A) held that the amendments made in Section 36(1)(va) (c) The Ld. CIT(A) held that the amendments made in Section 36(1)(va) and Section 43B by the Finance Act, 2021 apply retrospectively, even and Section 43B by the Finance Act, 2021 apply retrospectively, even and Section 43B by the Finance Act, 2021 apply retrospectively, even though the same came into force on 1.4.2021. though the same came into force on 1.4.2021. Your appellant, therefore, prays that the aforesaid disallowance of Rs. Your appellant, therefore, prays that the aforesaid disallowance of Rs. Your appellant, therefore, prays that the aforesaid disallowance of Rs. 4,66,694/- be deleted. be deleted. 2. Before us, on behalf of the assessee employee of the company Before us, on behalf of the assessee employee of the company Before us, on behalf of the assessee employee of the company Shri Dyaneshwar Patil Shri Dyaneshwar Patil appeared and submitted that the assessee and submitted that the assessee rely on the submission made before rely on the submission made before the Ld. CIT(A).
We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. In the case, the Central Processing relevant material on record. In the case, the Central Processing relevant material on record. In the case, the Central Processing Centre (CPC), Bangalore Centre (CPC), Bangalore processed the return of income filed by the processed the return of income filed by the assessee u/s 143(1) of the Income assessee u/s 143(1) of the Income-tax Act, 1961 (in short ‘the Act’) tax Act, 1961 (in short ‘the Act’) wherein the employees contribution of wherein the employees contribution of provident fund ( provident fund (PF) of Rs.4,66,694/- was disallowed and accordingly return of income was was disallowed and accordingly return of income was was disallowed and accordingly return of income was adjusted on a higher figure. The assessee challenged the igher figure. The assessee challenged the igher figure. The assessee challenged the adjustment made by the CPC before the Ld. CIT(A) on the ground adjustment made by the CPC before the Ld. CIT(A) on the ground adjustment made by the CPC before the Ld. CIT(A) on the ground that said payment of employees contribution to provident fund was that said payment of employees contribution to provident fund was that said payment of employees contribution to provident fund was paid to the respective authority on or before the due date for filing paid to the respective authority on or before the due date for filing paid to the respective authority on or before the due date for filing
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of return of income u/s 139(1) of the Act and therefore, in view of come u/s 139(1) of the Act and therefore, in view of come u/s 139(1) of the Act and therefore, in view of the decision of the Hon’ble Bombay High Court in the case of CIT v. the decision of the Hon’ble Bombay High Court in the case of CIT v. the decision of the Hon’ble Bombay High Court in the case of CIT v. Ghatge Patil Transport Ltd. 368 ITR 749 (Bom), the assessee was Ghatge Patil Transport Ltd. 368 ITR 749 (Bom), the assessee was Ghatge Patil Transport Ltd. 368 ITR 749 (Bom), the assessee was eligible for said deduction. However, the Ld. CIT(A) relying upon the eligible for said deduction. However, the Ld. CIT(A) relying upon the eligible for said deduction. However, the Ld. CIT(A) relying upon the amendment to the provisions which he held as retrospective in mendment to the provisions which he held as retrospective in mendment to the provisions which he held as retrospective in nature, upheld the adjustment made by the CPC observing as upheld the adjustment made by the CPC observing as upheld the adjustment made by the CPC observing as under:
“5.46. I have carefully considered the arguments of the appellant as 5.46. I have carefully considered the arguments of the appellant as 5.46. I have carefully considered the arguments of the appellant as well as various decisions cited by the appellant. In the inst well as various decisions cited by the appellant. In the inst well as various decisions cited by the appellant. In the instant case, disallowance has been made u/s 36(1)(va) r.w.s. 2(24)(x) of the Act on disallowance has been made u/s 36(1)(va) r.w.s. 2(24)(x) of the Act on disallowance has been made u/s 36(1)(va) r.w.s. 2(24)(x) of the Act on the ground that the employees' the ground that the employees' contribution to ESIC were deposited contribution to ESIC were deposited much after the specified dates mentioned in the said Act and the same much after the specified dates mentioned in the said Act and the same much after the specified dates mentioned in the said Act and the same is clearly mentioned in the Tax Audit is clearly mentioned in the Tax Audit Report. 5.47. Hon'ble Delhi High Court in the case of CIT vs. Bharat Hotels Ltd., 5.47. Hon'ble Delhi High Court in the case of CIT vs. Bharat Hotels Ltd., 5.47. Hon'ble Delhi High Court in the case of CIT vs. Bharat Hotels Ltd., reported in (2019) 410 ITR 417 has held that Employees' State reported in (2019) 410 ITR 417 has held that Employees' State reported in (2019) 410 ITR 417 has held that Employees' State Insurance Corporation and Provident Fund dues paid beyond Insurance Corporation and Provident Fund dues paid beyond Insurance Corporation and Provident Fund dues paid beyond prescribed period is not an allowable deduction. Rece prescribed period is not an allowable deduction. Recently, Hon'ble ITAT ntly, Hon'ble ITAT Delhi vide their order dated 18.02.2021 in the cases of Dabur India Delhi vide their order dated 18.02.2021 in the cases of Dabur India Delhi vide their order dated 18.02.2021 in the cases of Dabur India Ltd., Vs Addi. CIT, Range Ltd., Vs Addi. CIT, Range-10 Delhi in ITA Nos.3241 & 6525/Del/2014 10 Delhi in ITA Nos.3241 & 6525/Del/2014 Assessment Years: 2007 Assessment Years: 2007-08 & 2008-09 and ITA Nos.3114 & 09 and ITA Nos.3114 & 6256/Del/2014 Assessment Years: 2007 6256/Del/2014 Assessment Years: 2007-08 & 2008-09 has upheld the 09 has upheld the same view and confirmed addition made by the AO. Also, the relevant same view and confirmed addition made by the AO. Also, the relevant same view and confirmed addition made by the AO. Also, the relevant sections (S.36(1)(va) and S.43B of the Act) has been amended sections (S.36(1)(va) and S.43B of the Act) has been amended sections (S.36(1)(va) and S.43B of the Act) has been amended retrospectively by the Finance Act 2021. retrospectively by the Finance Act 2021. 5.48. From the above judicial decisions and also from the unambiguou 5.48. From the above judicial decisions and also from the unambiguou 5.48. From the above judicial decisions and also from the unambiguous wording of the now amended provisions of section 36(1) and 43B, it is wording of the now amended provisions of section 36(1) and 43B, it is wording of the now amended provisions of section 36(1) and 43B, it is clear that the employee's contribution can be allowed as a deduction clear that the employee's contribution can be allowed as a deduction clear that the employee's contribution can be allowed as a deduction only if it had been paid within the prescribed due dates under the only if it had been paid within the prescribed due dates under the only if it had been paid within the prescribed due dates under the relevant welfare funds and this position of law relevant welfare funds and this position of law is and has always been is and has always been the case and the clarifications brought about by the amendment clearly the case and the clarifications brought about by the amendment clearly the case and the clarifications brought about by the amendment clearly apply retrospectively. The case laws relied on by the appellant which apply retrospectively. The case laws relied on by the appellant which apply retrospectively. The case laws relied on by the appellant which were rendered prior to the clarificatory amendments, therefore are not were rendered prior to the clarificatory amendments, therefore are not were rendered prior to the clarificatory amendments, therefore are not applicable to the pre applicable to the present case. As regards letter of the GIT(L&R) is sent case. As regards letter of the GIT(L&R) is concerned, that is also before the date of amendment and therefore not concerned, that is also before the date of amendment and therefore not concerned, that is also before the date of amendment and therefore not applicable as such. applicable as such. 6. It is therefore, held that the disallowance of Rs 6. It is therefore, held that the disallowance of Rs.4,66,694/ 4,66,694/- made u/s. 143(1) by CPC on account of appellant's fai 143(1) by CPC on account of appellant's failure to pay the employee's lure to pay the employee's contribution of PF/ESI within the prescribed due dates as per section contribution of PF/ESI within the prescribed due dates as per section contribution of PF/ESI within the prescribed due dates as per section 36(1)(va) is strictly in accordance with law and clearly comes under the 36(1)(va) is strictly in accordance with law and clearly comes under the 36(1)(va) is strictly in accordance with law and clearly comes under the prima facie adjustments as envisaged u/s. 143(1)(a)(v). The order/u/s. prima facie adjustments as envisaged u/s. 143(1)(a)(v). The order/u/s. prima facie adjustments as envisaged u/s. 143(1)(a)(v). The order/u/s.
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143(1) issued b 143(1) issued by CP is therefore, confirmed fully. Appellant's Ground on llant's Ground on the issue fails.” the issue fails.” 3.1 Before us, the assessee has challenged the addition on three Before us, the assessee has challenged the addition on three Before us, the assessee has challenged the addition on three grounds firstly, the disallowance was being of debatable legal grounds firstly, the disallowance was being of debatable legal grounds firstly, the disallowance was being of debatable legal nature and therefore, no adjustment could have been made u/s nature and therefore, no adjustment could have been nature and therefore, no adjustment could have been 143(1) of the Act. We are of the opinion that the Hon’ble Supreme 143(1) of the Act. We are of the opinion that the Hon’ble Supreme 143(1) of the Act. We are of the opinion that the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. v. CIT 448 ITR Court in the case of Checkmate Services Pvt. Ltd. v. CIT 448 ITR Court in the case of Checkmate Services Pvt. Ltd. v. CIT 448 ITR 518 unambiguously held 518 unambiguously held that employees contribution towards employees contribution towards PF paid after the due date specified under the provident fund after the due date specified under the provident fund Act is not after the due date specified under the provident fund allowable as deduction. The decision of the Hon’ble Supreme Court allowable as deduction. The decision of the Hon’ble Supreme Court allowable as deduction. The decision of the Hon’ble Supreme Court operates from the date of introduction of the relevant provisions operates from the date of introduction of the relevant provisions operates from the date of introduction of the relevant provisions under the Act and therefore, the issue is no longer debatable. under the Act and therefore, the issue is no longer debatable. under the Act and therefore, the issue is no longer debatable. Secondly, the assessee has contested that payment of the Secondly, the assessee has contested that payment Secondly, the assessee has contested that payment employees contribution to provident fund was made on or before employees contribution to provident fund was made on or before employees contribution to provident fund was made on or before the due date specified u/s 139(1) of the Act. This contention is no the due date specified u/s 139(1) of the Act. This contention is no the due date specified u/s 139(1) of the Act. This contention is no longer valid in view of the decision of the Hon’ble Supreme Court in longer valid in view of the decision of the Hon’ble Supreme Court in longer valid in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services India Pvt. Ltd. (s the case of Checkmate Services India Pvt. Ltd. (supra) and payment upra) and payment of the employees contribution of the employees contribution to provident fund has to be seen vis provident fund has to be seen vis- a-vis the date of deposit provided under relevant provident fund Act vis the date of deposit provided under relevant provident fund Act vis the date of deposit provided under relevant provident fund Act provisions. Thirdly, the assessee has contested that amendment in provisions. Thirdly, the assessee has contested that amendment in provisions. Thirdly, the assessee has contested that amendment in section 36(1)(va) and section 43B by th section 36(1)(va) and section 43B by the Finance Act, 2021 should e Finance Act, 2021 should operate prospectively from the date on which came into force i.e. operate prospectively from the date on which came into force i.e. operate prospectively from the date on which came into force i.e. 01.04.2021. In our opinion, once the Hon’ble Supreme Court in the 01.04.2021. In our opinion, once the Hon’ble Supreme Court in the 01.04.2021. In our opinion, once the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra) has interpreted the case of Checkmate Services Pvt. Ltd. (supra) has interpreted the case of Checkmate Services Pvt. Ltd. (supra) has interpreted the pre-amended provisions and held amended provisions and held that employees contribution to that employees contribution to
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provident fund paid after the due date sp provident fund paid after the due date specified under the relevant ecified under the relevant Act as not allowable s not allowable, the issue whether the amendment made in the issue whether the amendment made in section 36(1)(va) of the Act is prospective or retrospective is section 36(1)(va) of the Act is prospective or retrospective is section 36(1)(va) of the Act is prospective or retrospective is rendered only as an academic is academic issue.
3.2 In view of aforesaid discussion , w n view of aforesaid discussion , we are of the opinion that the e are of the opinion that the claim of deduction of employee claim of deduction of employee’s contribution to provident fund paid s contribution to provident fund paid after due date under the relevant Act is a invalid claim and after due date under the relevant Act is a invalid claim and after due date under the relevant Act is a invalid claim and therefore, same is liable to be disallowed or adjus therefore, same is liable to be disallowed or adjusted invoking the ted invoking the provisions of section 143(1)(a)(ii) of the Act. The grounds of the provisions of section 143(1)(a)(ii) of the Act. The grounds of the provisions of section 143(1)(a)(ii) of the Act. The grounds of the appeal of the assessee are accordingly dismissed. appeal of the assessee are accordingly dismissed.
In the result, the appeal of the assessee is dismissed. In the result, the appeal of the assessee is dismissed. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open Court on nounced in the open Court on 24/01/2024. /01/2024. Sd/ Sd/- Sd/ Sd/- (RAHUL CHAUDHARY CHAUDHARY) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 24/01/2024 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai