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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 28/05/2024 Date of Order – 28/05/2024
O R D E R PER V. DURGA RAO, J.M.
The present appeal has been filed by the assessee challenging the impugned order of dated 27/06/2023, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2018–19.
The assessee has raised following grounds of appeal:–
“GROUNDS OF APPEAL 1] On the facts and circumstances of the case and law applicable thereto the learned C.I.T.(A) erred in disallowing the deduction of Rs.18,85,859/- in respect of Employee's Contribution to Provident Fund paid before due date of filing of return.
Dhandhania Infotech Pvt. Ltd. ITA no.295/Nag./20223 2] Learned C.I.T.(A) failed to appreciate that Explanation-2 to sec.36(1)(va) came on the statute book w.e. from 01.04.2021 and hence had no application for the year in question viz. A.Y.2018-19. 3] Assessee craves leave to urge additional grounds at the time of hearing as may be necessary. Prayer: It is prayed that deduction of ` 18,85,859, as claimed be allowed.”
Facts in brief:– The assessee is a company and is engaged in the business of providing I.T. enable services. The assessee filed its return of income for the year under consideration on 07/10/2018, declaring total income of ` 85,09,622. The return of income was processed u/s 143(1) Income Tax Act, 1961 ("the Act") while assessing income at ` 1,03,95,485, after making the adjustment of ` 18,85,859 under section 36(1)(va) of the Act on account of delayed payment of employees' contribution to Provident Fund into Govt. A/c. Against intimation under section 143(1) of the Act, the assessee has filed rectification application, which was rejected on 04/01/2023 by the Central Processing Centre. The assessee being aggrieved with the order passed under section 154 of the Act, the assessee filed appeal before the learned CIT(A).
The learned CIT(A), relying upon the Hon’ble Supreme Court in of Checkmate Services Private Limited v/s CIT, in Civil Appeal No. 2833 of 2016 dated 12.10.2022, dismissed the appeal of the assessee.
We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. We find that it is undisputed fact that payment of PF & ESI amounting to ₹ 50,040, was not made within the due date prescribed under the PF & ESI Act, but payment has been made much before the due date of filing the return of income. Page | 2
Dhandhania Infotech Pvt. Ltd. ITA no.295/Nag./20223 However, the Hon’ble Supreme Court in Checkmate Services Private Limited v/s CIT, in Civil Appeal No. 2833 of 2016 dated 12.10.2022, has decided this issue against the Assessee. The relevant portion of the judgment vide Para– 53–55 are reproduced below:– “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.
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.
Dhandhania Infotech Pvt. Ltd. ITA no.295/Nag./20223 55. 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.”
We respectfully following the above judgment of the Hon'ble Supreme Court, the grounds raised by the assessee are dismissed.
In the result, appeal filed by the assessee is dismissed.
Order pronounced in the open Court on 28/05/2024