KAIRALI EXPORTS,KILIMANOOR vs. ACIT CIRCLE 1(2), TRIVANDRUM

This appeal at the instance of the assessee is directed against the Commissioner of Income-tax (Appeals)’s [“CIT(A)]” for short] order dated 15.12.2022 passed u/s 250 of the Income-tax Act, 1961 (“the Act” for short). The relevant assessment year is 2014-2015.

In the instant appeal, the sole ground taken out for challenge to the impugned appellate order as well as assessment order is that the Assessing Authority had disallowed Rs.17,49,196 being the amount of employees’ contribution remitted after the due date as prescribed u/s.36(1)(va) of the Act, and appellate authority upheld said disallowance.

Since, the only issue involved in the instant case is covered by the judgment of the Hon’ble Supreme Court and is purely legal in nature, we decided to dispose ofinstant appeal on merits.

It is apparent from the assessment order dated 26.12.2016 that a sum of Rs.17,49,196/- was added back to the returned income by invoking the provisions of section 36(1)(va) of the Act on the ground that the assessee remitted the said amount beyond the due date prescribed. In appeal, the learned CIT(A) upheld such addition vide order dated 26.12.2016.

Being aggrieved by the said appellate order, theappellant instituted the instant appeal by challenging such addition.

As it is no longer res integra that, if the employees contribution is remitted after the due date, the deduction as provided under section 36(1)(va) of the Act is not admissible.

In this regard, it is noteworthy to quote the relevant observation made in the judgment delivered in the case of M/s.Kairali Exports Checkmate Services P.Ltd. (supra) by the Hon’ble Supreme Court in Checkmate Service P.Ltd., and relied upon by the Ld.D.R., as hereunder:

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 nonobstante 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.

As it is an admitted fact that the assessee had remitted Rs.17,49,196 being the amount of employees’ contribution. after the prescribed due date, we are constrained to hold that the authorities below had rightly disallowed the deduction of said sum of Rs.17,49,196 u/s.36(1)(va) of the Act.

With these observations, the instant appeal is dismissed.